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Vapor Taxes by State, 2022

Today’s map looks at the design of excise taxes for vaping and tobacco alternatives, which is important in the pursuit of harm reduction from smoking. Higher vapor taxes on products such as E-cigarettes could encourage vapors to go back to smoking cigarettes and will discourage cigarette smokers from switching to vaping products. 

Since vaping entered the market in the mid-2000s, it has grown into a well-established product category and a viable alternative to smokers. So far, 29 states and the District of Columbia have imposed an excise tax on vaping products. While vapor taxes may represent an untapped revenue source for states that have yet to impose an excise tax, substantial revenue is unlikely in the short term.

Vapor taxing methods vary. Authorities tax based on price (ad valorem), volume (specific), or with a bifurcated system that has different rates for open and closed tank systems.

Of those that tax wholesale values, Minnesota tops the list with a 95 percent rate and Vermont follows closely at 92 percent. Delaware, Kansas, Louisiana, North Carolina, and Wisconsin all share the lowest per milliliter rate ($0.05).

The following map shows where state vapor taxes stand as of July 1, 2022. Among the highlights in changes:

  • Indiana was the only state to add a tax to vaping products in 2022: 15 percent of the gross income received by retailers.
  • California added a retail tax of 12.5 percent in addition to raising its tax to 61.74 percent on wholesale transactions.
  • Colorado also increased its tax, from 30 percent to 35 percent on wholesale transactions.

2022 vapor taxes by state vaping tax rates on e-cigarettes and vaping taxes by state

Vapor products can deliver nicotine, the addictive component of cigarettes, without the combustion and inhalation of tar that is a part of smoking cigarettes. While more research relating to the potential harm-reduction qualities of vapor products is needed, for now, the consensus is that vapor products are less harmful than traditional combustible tobacco products. Public Health England, an agency of the English Ministry for Health, concludes that vapor products are 95 percent less harmful than cigarettes.

Given this difference in harm levels, it is important to understand the concept of harm reduction and its relevance for vapor products taxes. Vapor products—even if unhealthy in their own right—are highly attractive as an alternative to smoking. After all, one main reason smokers have a hard time quitting is the addictive nature of nicotine. Harm reduction is the concept that it is more practical to reduce the harm associated with the use of certain goods rather than attempting to eliminate it completely through bans or punitive levels of taxation.

Protecting access to harm-reducing vapor products is intertwined with tax policy because nicotine-containing products are economic substitutes. Low tax rates on vaping encourage consumers to switch from combustibles. High excise taxes on harm-reducing vapor products risk harming public health by pushing vapers back to smoking. A recent publication found that 32,400 smokers in Minnesota were deterred from quitting cigarettes after the state implemented a 95 percent excise tax on vapor products.

If the policy goal of taxing cigarettes is to encourage cessation, vapor taxation must be considered a part of that policy design. For more discussion on the ideal design for vapor taxes and other excise taxes, check out our recent report.

Vapor Taxes by State, 2022

Jurisdiction

State Vaping Tax Rates
Alabama No Tax
Alaska No Tax
Arizona No Tax
Arkansas No Tax
California 61.74% of wholesale; 12.5% of retail
Colorado 35% of manufacturing price
Connecticut 10% of wholesale price
Delaware 0.05 per mL
District of Columbia 80% of wholesale
Florida No Tax
Georgia 7% wholesale + $0.05 per mL
Hawaii No Tax
Idaho No Tax
Illinois 15% wholesale
Indiana 15% retail
Iowa No Tax
Kansas $0.05 per mL
Kentucky 15% wholesale, $1.50/cartridge
Louisiana $0.05 per mL
Maine 43% of wholesale
Maryland No Tax
Massachusetts 75% of wholesale
Michigan No tax
Minnesota 95% of wholesale
Mississippi No tax
Missouri No Tax
Montana No Tax
Nebraska No Tax
Nevada 30% of wholesale
New Hampshire 8% wholesale, $0.30 per mL
New Jersey $0.10 per mL
New Mexico 12.5% wholesale; $0.50 per cartridge
New York 20% retail
North Carolina $0.05 per mL
North Dakota No Tax
Ohio $0.10 per mL
Oklahoma No Tax
Oregon 65% of wholesale
Pennsylvania 40% wholesale
Rhode Island No Tax
South Carolina No Tax
South Dakota No Tax
Tennessee No Tax
Texas No Tax
Utah 56% of wholesale
Vermont 92% of wholesale
Virginia $0.066 per mL
Washington $0.09 per mL open; $0.027 per mL closed
West Virginia $0.075 per mL
Wisconsin $0.05 per mL
Wyoming 15% of wholesale

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