Do You Understand E-Cigarette Taxes Across U.S. States?

States and local governments impose taxes on various tobacco products, including cigarettes, chewing tobacco, and smokeless tobacco (often referred to as "other tobacco products") as well as e-cigarette products. Different tobacco products are taxed in different ways: cigarettes are taxed per pack, while other tobacco products are typically taxed as a percentage of the price, and e-cigarette products are taxed either per ounce of e-liquid or as a percentage of the price (depending on the product and state).

All tobacco-related taxes are levied on the manufacturers or sellers of the products during wholesale transactions, rather than being collected by retailers. However, it is assumed that the tax is included in the final purchase price, thus passed on to consumers.

These taxes are sometimes referred to as corrective taxes or "sin taxes" because, unlike general sales taxes, they are used to some extent to deter the use of tobacco (or e-cigarette products), as the choice to use tobacco incurs costs for users and others (e.g., increased healthcare costs). State and local governments also tax alcohol and have begun to tax marijuana and soda in a similar manner.

● How much revenue do state and local governments generate from cigarette and e-cigarette taxes?

In 2020, state and local governments collected $19 billion in tobacco taxes, accounting for 0.5% of state and local general revenue. In 2020, federal taxes accounted for 98% of tobacco tax revenue.

The Census Bureau does not detail tax revenue from different tobacco products, but the vast majority of tobacco tax revenue comes from cigarette taxes. For example, a report from the North Carolina Department of Revenue found that in the 2020 fiscal year, cigarette tax revenue accounted for 81% of the state's tobacco-related tax revenue.

Despite the increased popularity of e-cigarettes in recent years, the tax revenue generated from them remains relatively small compared to that from cigarettes. North Carolina has taxed e-cigarette products since 2015, and in the 2020 fiscal year, e-cigarette tax revenue reached $5 million, accounting for 2% of the state's tobacco-related revenue. Similarly, the National Conference of State Legislatures found that the annual revenue from new state e-cigarette taxes enacted in 2019 and 2020 was estimated to range from $1 million in Vermont to $16 million in Kentucky.

● How much do cigarette tax rates vary by state?

All states and the District of Columbia impose taxes on cigarettes, but the tax rates vary widely. Missouri has the lowest cigarette tax rate at just $0.17 per pack, followed by Georgia ($0.37), North Dakota ($0.44), and North Carolina ($0.45). The District of Columbia has the highest state-level tax rate at $4.50 per pack. Connecticut, New York, and Rhode Island also have cigarette tax rates exceeding $4 per pack.

The capital letters in the box are the abbreviations for U.S. states, which can be looked up online.

However, when local taxes are included, some states have higher cigarette tax rates that consumers pay. For example, Illinois has a state tax rate of $2.98 per pack, but when including the taxes imposed by the city of Chicago ($1.18) and Cook County ($3.00), consumers pay $7.16 per pack.

A total of 10 states allow local governments to impose additional excise taxes on cigarettes: Alabama, Alaska, Colorado, Illinois, Missouri, New York, Ohio, Pennsylvania, Tennessee, and Virginia. Local tax rates range from $0.01 per pack in some areas of Alabama to $4.18 per pack in Chicago, Illinois (city tax plus county tax). New York City imposes a cigarette tax of $1.50 per pack, which, when added to the state tax, results in a total cigarette tax of $5.85 per pack. According to the Campaign for Tobacco-Free Kids, nearly 650 localities in these states impose cigarette taxes. Additionally, San Francisco imposes a "cigarette litter abatement fee" of $1.25 per pack, although cities in California cannot impose sales taxes on cigarettes.

All states also tax non-cigarette tobacco products such as chewing tobacco. Most states tax "other tobacco products" as a percentage of the price, ranging from 5% of the manufacturer's price in South Carolina to 95% of the wholesale price in Minnesota. However, some states impose per-ounce taxes on products like snuff and chewing tobacco.

● How much do e-cigarette tax rates vary by state?

In recent years, many states and localities have increased taxes on e-cigarette products. As of January 2023, 30 states and the District of Columbia impose taxes on e-cigarette products. Additionally, Alaska and Nebraska impose local taxes on e-cigarettes but do not have state taxes. Some states impose a percentage of the price tax on e-cigarette products, while others use unit taxes, and some states use both types of taxes.

The capital letters in the box are the abbreviations for U.S. states, which can be looked up online.

Twenty states and the District of Columbia impose a percentage of the price tax, ranging from 7% in Georgia to 95% in Minnesota. Many of these states have added e-cigarette products to their existing OTP tax definitions, making them subject to the state's existing OTP tax.

Sixteen states impose unit taxes on e-cigarette products. Most state taxes are based on the liquid that provides nicotine to smokers. These tax rates range from $0.05 per milliliter (in four states) to $0.40 per milliliter in Connecticut.

The total of these two types of taxes exceeds the total number of states that tax e-cigarette products because some states impose both types of taxes based on the type of e-cigarette product. Specifically, some states impose a percentage of the price tax on "open" e-cigarette products (which are filled with liquid by the user) and a per-milliliter or per-pack tax on "closed" e-cigarette products, which are pre-filled liquids for immediate use. For example, Kentucky imposes a $1.50 tax per pack on "closed" products and a 15% tax on the wholesale price of open products, while Connecticut imposes a per-milliliter tax on closed products and a 10% tax on open products. Additionally, Maryland imposes different percentage price taxes on "open" and "closed" products, with higher tax rates on e-liquids sold in containers of less than 5 milliliters. Anti-e-cigarette advocates argue that closed products (such as those sold by JUUL) target young people.

Statistics on e-cigarette taxes by state in the U.S.

Summary of e-cigarette taxes in the images:

California: 56.32% of wholesale price + 12.5% of sales price

Colorado: Closed system: $0.40/mL; Open: 10% of wholesale price

Delaware: $0.05/mL

District of Columbia: 79% of wholesale price

Georgia: Closed system: $0.05/mL; Open and disposable: 7% of wholesale price

Illinois: 15% of wholesale price

Indiana: Closed system: 15% of wholesale price; Open and disposable: 15% of total retail revenue

Summary of e-cigarette taxes in the images:

Kansas: $0.05/mL

Louisiana: Open: 15% of net price, Closed: $1.50/pack

Delaware: $0.05/mL

Maine: 43% of wholesale price

Maryland: ≤5mL: 60% of retail price; Others: 12% of retail price

Massachusetts: 75% of wholesale price

Minnesota: 95% of wholesale price

New Hampshire: Open: 8% of wholesale price, Closed: 30% of wholesale price

New Jersey: Liquid nicotine: $0.10/mL; Container e-liquid: 10% of retail price

New Mexico: Open: 12.5% of manufacturing price; Closed: $0.50/pack

New York: 20% of retail price

North Carolina: $0.05/mL

Ohio: $0.10/mL

Oregon: 65% of wholesale price

Pennsylvania: 40% of wholesale price

Summary of e-cigarette taxes in the images:

Utah: 56% of manufacturer's price

Vermont: 92% of wholesale price

Virginia: $0.066/mL

Washington: ≤5mL container: $0.27/mL; >5mL container: $0.09/mL

Wisconsin: $0.075/mL

West Virginia: $0.05/mL

Wyoming: 15% of wholesale price