As of July 1, 2022, retailers must collect Electronic Cigarette tax on the sale of consumable material (e.g., e-liquid, vape juice, etc.) and vapor products (including open system containers). The Electronic Cigarette tax is imposed on the retail sale of these products at the rate of 15% of the gross retail income received by the retail dealer for the sale.
Definitions
Vapor product (IC 6-7-4-8)
- A device, such as an electronic cigarette, that utilizes a mechanical heating element, battery or electronic circuit, regardless of shape or size, that can be used to produce vapor from consumable material that may or may not be sold with the device.
- Any open system container of a consumable material in a solution or other form that is intended to be used with or in a device described above.
Open system container (IC 6-7-2-0.5)
All containers of consumable material for intended use in a vapor product and for which the container is intended to be refillable. The term does not include closed system cartridges.
Consumable material (IC 6-7-4-2)
Any liquid solution or other material (whether or not it contains nicotine, CBD or any other substance) used in an open system container that is depleted as the vapor product is used. This does not include closed system cartridges.
Taxability Matrix
The table below shows examples of different types of products and whether the products are subject to the Electronic Cigarette tax or the Closed System Cartridge tax, which is collected by distributors.
| Item Type | Description | Closed System Cartridge Tax | Electronic Cigarette Tax | Sales Tax on Retail Sales | Explanation |
|---|---|---|---|---|---|
| Closed System Cartridges (CSC)(sold separately) | Cartridges containing consumable material to be inserted into a vapor product to produce vapor. | Yes | Yes | Meets the definition of a closed system cartridge. | |
| Closed System Cartridges Sold with Battery Device(sold for one price) | Cartridges containing consumable material sold with a battery device (a type of vapor product) into which they are intended to be inserted. | Yes (whole amount subject to closed system cartridge tax) | Yes | The law provides that if a closed system cartridge is sold in the same package as a vapor product device, the CSC tax only applies to the wholesale price of the closed system cartridge if the wholesale cost of the closed system cartridge can be isolated from the vapor product device on the invoice. | |
| Closed System Cartridges Sold with Battery Device(items listed separately on bill) | Cartridges containing consumable material sold with a battery device (a type of vapor product) into which they are intended to be inserted. | Yes | Yes | Because the cartridge price is broken out from the vapor product within the package, only the cartridge is subject to the closed system cartridge tax. | |
| Disposables | A single use, self-contained device that includes a battery, atomizer, & e-liquid. It cannot be refilled or serviced. | Yes | Yes | Contains a closed system cartridge permanently affixed to a vapor product (the atomizer/battery). Because the cost of the closed system cartridge is not broken out from the vapor product, the entire amount is subject to the CSC tax. | |
| Disposable Atomizer/Pod | An empty disposable device consisting of a chamber that can be refilled and an atomizer that cannot be serviced. | Yes | Yes | Meets the first part of the definition of "vapor products:” It is a device that employs a mechanical heating element that can be used to produce vapor from consumable material. | |
| E-liquid | A water-soluble solution that may or may not contain nicotine that is intended to be vaporized and inhaled. | Yes | Yes | Meets the definition of consumable material. | |
| Open System Device | A device that can be filled and refilled with consumable material to produce vapor (e.g., electronic cigarettes, pens, etc.). | Yes | Yes | Meets the first part of the definition of "vapor products:" It is a device that employs a mechanical heating element that can be used to produce vapor from consumable material. | |
| Power Supply/”Mod” | A device with a built-in or removable/replaceable battery, or a wired A/C power source, which has a threaded connection. Besides connecting to a vapor product, it could be used to connect with different attachments with functions other than for vaping. | Yes | Does not meet the definition of vapor products or consumable material. | ||
| Loose Batteries/Cells | Any type of battery that can provide power for a power supply/”mod” (e.g., alkaline batteries, lithium batteries, lithium polymer battery packs, etc.). | Yes | Does not meet the definition of vapor products or consumable material. | ||
| Battery Charger | Multi-use battery chargers that would be capable of charging any of the battery types listed above in the definition of "loose battery cells." | Yes | Does not meet the definition of vapor products or consumable material. | ||
| Tank | A refillable & serviceable container that is composed of a connector (threaded, mechanical, magnetic, etc.) for attachment to a power supply/”mod,” a chamber (glass, plastic, etc.) to contain e-liquid, a fixed or removable mouthpiece, seals and/or O-rings, and a space for an atomizing head/ heating element. | Yes | Yes | Meets the second part of the definition of "vapor products:" It is an open system container of a consumable material in a solution or other form that is intended to be used with a mechanical heating element/battery to produce vapor. | |
| Rebuildable atomizer (RBA, RTA, RDA, etc.) | A device that is sold unassembled and is intended to be assembled and used by the end user. Consisting of a connector (threaded, mechanical, magnetic, etc.) to attach to a power supply/”mod,” and a positive & a negative terminal for attaching resistance wire to. May or may not include a chamber to hold vapable liquid, or a space for an absorbent material that holds and wicks an e-liquid to the resistance wire. | Yes | Yes | Meets the first part of the definition of "vapor products": It is a device that employs a mechanical heating element that can be used to produce vapor from consumable material. | |
| Replacement Glass or Plastic Tubes | A removable/replaceable glass or plastic tube or cylinder that is a component of a tank and is meant to contain a vapable liquid inside the tank. Can replace broken OEM parts, or upgrade/customize the user's tank. | Yes | Yes | Meets the second part of the definition of "vapor products:" It is an open system container of a consumable material in a solution or other form that is intended to be used with a mechanical heating element/battery to produce vapor. | |
| O-ring/Seals | Used to seal the liquid chamber of a tank. Can come in different colors to customize an end user's tank. | Yes | Does not meet the definition of vapor products or consumable material. | ||
| Mouthpieces | Designed for tanks that have a removable mouthpiece. Can come in different colors and styles for user’s customization, or as a replacement for a broken or lost OEM part. | Yes | Does not meet the definition of vapor products or consumable material. | ||
| Atomizer Head/Heating Element | A semi-durable component consisting of a metal chassis, some form of wicking material (e.g., cotton, tea tree or bamboo fiber, silica wick, porous ceramic, polyester fiber fill), some form of a resistor (e.g., wire, mesh, semiconductive ceramics) for the purpose of creating heat, and a positive and a negative electrical connector. | Yes | Yes | Meets the first part of the definition of "vapor products:" It is a device that employs a mechanical heating element that can be used to produce vapor from consumable material. | |
| Complete Kit (does not include e-liquid) | A kit typically consisting of a tank, power supply/”mod,” and spare parts. | Yes | Yes | Meets the first part of the definition of "vapor products:" It is a device that employs a mechanical heating element that can be used to produce vapor from consumable material. | |
| Silicone Protector/Sleeve/Band | A molded silicone protector used to accessorize and/or protect devices. Can be molded to fit specific power supplies/”mods,” tanks, or replacement glass or plastic tubes. | Yes | Does not meet the definition of vapor products or consumable material. | ||
| Storage Devices (e.g., Carrying Case, Lanyards, etc.) | Made to accessorize, store, or make carrying more convenient. | Yes | Does not meet the definition of vapor products or consumable material. | ||
| Cotton | Common loose cotton used for making wicks for Rebuildable atomizer (RBA, RTA, RDA) | Yes | Does not meet the definition of vapor products or consumable material. | ||
| Spooled Resistance Wire or Mesh | Resistive material created for industrial use that is repurposed for use in rebuildable atomizer (RBA, RTA, RDA). Can be made of alloys such as Kanthal, Nickel Chromium, Stainless Steel, or Mostly Pure metals such as Titanium or Nickel. | Yes | Does not meet the definition of vapor products or consumable material. | ||
| Tool Set for Rebuilding | Set of tools packaged solely for the purpose of servicing rebuildable atomizers (RBA, RTA, RDA) | Yes | Does not meet the definition of vapor products or consumable material. | ||
| Spare Parts (screws, conductive pins, electric connectors etc.) | Can be used to service power supplies/”mods,” tanks, or rebuildable atomizers (RBA, RTA, RDA) | Yes | Does not meet the definition of vapor products or consumable material. |