In 2014, the General Assembly enacted omnibus tax legislation that included a new excise tax on vapor products.
In 2014, the General Assembly enacted omnibus tax legislation that included a new excise tax on vapor products.
S.L. 2014-3 (H 1050) begins by defining terms important to understanding what is being taxed and at what rate. It defines a “vapor product” as “any nonlighted, noncombustible product that employs a mechanical heating element, battery, or electronic circuit … and that can be used to produce vapor from nicotine in a solution, ” specifically including vapor cartridges and other nicotine containers that are used in electronic cigarettes and similar products. (However, products regulated by the FDA as drugs or devices under Chapter V of the federal Food, Drug and Cosmetic Act are specifically excluded. This exclusion applies apply only to vapor products regulated by the FDA for use as smoking cessation devices.) The legislation also defines the term “consumable product,” which means “[a]ny nicotine liquid solution or other material that is depleted as a vapor product is used.” The definitions are added to existing G.S. 105-113.40A.
The legislation then amends G.S. 105-113.35, which imposes taxes on tobacco products other than cigarettes. The amendment imposes a tax on the consumable product of vapor products—or in other words, it taxes the nicotine solution that is used in e-cigarettes and other vapor products. The tax is set at 5 cents per millileter of consumable product. The tax does not apply to products sold outside North Carolina, products sold to the federal government, or sample products distributed without charge. It becomes effective June 1, 2015.
Vapor product tax revenues must be credited to the state’s General Fund. The fiscal note for the legislation estimated that the tax will generate about $5 million in revenue annually.
