With the continued growth of the e-cigarette category in terms of the number of e-cigarette manufacturers, the number of brands on the market, and the increasing consumer demand for electronic cigarettes, state lawmakers have also begun to consider bills to tax e-cigarettes and prevent the sale of the products to underage youth. All of this state legislation is being considered within a potential federal regulatory framework to regulate electronic cigarettes that the U.S. Food and Drug Administration should announce in the near future.
E-Cigarette Tax Bills
So far, Minnesota is the only state that taxes e-cigarettes and assesses the current 70% tobacco products tax on just the wholesale cost of the nicotine cartridges in a starter kit, while applying the tax rate to the entire wholesale cost of a disposable e-cigarette. However, the Minnesota legislature just passed a tax bill raising the OTP tax rate to 95%, and with the Minnesota Governor likely to sign the bill into law, the 95% rate would be applied to the cost of an e-cigarette kit’s nicotine cartridges and also the full wholesale cost of a disposable e-cigarette beginning July 1st.
This legislative year, Hawaii’s legislature considered a bill that would tax e-cigarettes at the same rate as assessed on a cigarette, but the bill did not pass. Also, a bill in Utah would have included e-cigarettes under the definition of tobacco products and applied the state’s 86% OTP tax rate. However, the bill failed in the Utah House of Representatives.
In Oklahoma and South Carolina, a different kind of tax bill is pending that would levy a tax on e-cigarettes at a rate of 5 cents per milliliter of consumable nicotine material, with the tax being no more than 10% of the current state tax on a pack of cigarettes.
E-Cigarette Age Restrictions
In addition to the various tax bills applying to e-cigarettes, many states have considered legislation prohibiting the sale of e-cigarettes to anyone under 18. These states include Alabama, Arkansas (bills signed into law), Arizona, Georgia, Hawaii (bills failed to meet committee deadline for passage), Indiana (bill signed into law), Mississippi (bill signed into law), Missouri, New Hampshire (bill includes e-cigarettes under the definition of “cigarette” which are not sellable to minors), North Carolina, Ohio, South Carolina, Washington and West Virginia (bills pending).