New Jersey Imposes Sales and Use Tax on Liquid Nicotine

E-cigarettes has been a hot button topic in state tax. Several states have been passing legislation to boost their revenue with yet another tobacco product, e-cigarette liquid. Now, another state, New Jersey, has followed suit. A recent New Jersey law imposes the tobacco products wholesale sales and use tax on liquid nicotine used in electronic cigarettes and similar devices. The law is set to go into effect on September 30, 2018.

The tax will be applied at a rate of $0.10 per fluid milliliter of liquid nicotine and a proportionate rate on fractional parts of a milliliter of liquid nicotine, as listed by the manufacturer. The tax is imposed on the sale, use, or distribution of liquid nicotine within New Jersey by a distributor or wholesaler to a retail dealer or consumer. Distributors and wholesalers who sell liquid nicotine at retail or otherwise use the liquid nicotine are also required to pay a compensating use tax at the same rate.

New Jersey defines liquid nicotine as a solution containing nicotine that is designed or sold for use with an electronic smoking device. Electronic smoking device is defined as a nonlighted, noncombustible device that uses a mechanical heating element, battery, or circuit, to produce vaporized nicotine for inhalation. This definition in effect includes: e-cigarettes; e-cigars; e-pipes; e-hookahs; vape pens; and other products.

Taxation methods of vapor products vary across states and localities as some tax a percentage of the wholesale value while others tax per unit or milliliter of e-liquid. It will be interesting to follow other states that jump on the bandwagon of taxing e-cigarettes and e-liquids to boost their revenue.