Hawaii Legislature Passes Bill to Impose 70% Wholesale Tax on Vaping Products

According to reports today, last Friday, Hawaii lawmakers passed a tax parity law that applies the same tax rate to vaping products as combustible cigarettes. If Governor Josh Green signs it into law, vaping products will be subject to a 70% wholesale tax—one of the highest rates in the state.

The bill SB975 SD2 HD3 defines vaping as a tobacco product and was negotiated in a marathon session between the state House and Senate before the legislative session's deadline this year. The legislative session adjourned on May 4.

It is still unclear when the bill will be sent to Governor Green or whether he has committed to signing it. If signed into law, the tax will take effect on January 1, 2024. Hawaii currently does not tax vaping products.

While the goal of tax parity is to prevent minors from using vaping products, health economists' research suggests it actually encourages smoking, partly because it eliminates the price advantage that prompts many smokers to try vaping. Cigarettes and vaping act as economic substitutes: when the price of one rises, nicotine users turn to the other.

Earlier in this session, a separate tax bill in Hawaii failed in committee, as did a bill to ban flavored vaping products (and flavored tobacco). Last year, Hawaii passed a flavor ban, but it was vetoed by Governor David Ige, who agreed with anti-vaping and tobacco control organizations that it was not strict enough.

Among U.S. states, Minnesota has the highest vaping tax rate—95%—but it only applies to nicotine products imported from outside the state. Vermont is second—92% of the wholesale price for all products, including those without nicotine. Washington D.C. imposes a 91% tax on vaping. Massachusetts has a 75% wholesale tax on all products and has also implemented a ban on flavored vaping products. California's taxes are close to Hawaii's (with both wholesale and retail taxes). No other state has a wholesale tax of 70% or higher.