Starting on July 1, 2019, electronic cigarettes (e-cigarettes) and other tobacco products will be subject to the existing Tobacco Products Tax, which is a 92% excise tax paid by wholesale dealers and added to the final retail price paid by the consumer. E-cigarettes are not the only new products that are taxable; see the next question for the new products covered under the updated definition of taxable “other tobacco products.”
What new products become taxable starting July 1, 2019?
Act 28 (H.47) of 2019 changed the existing definition of “other tobacco products,” which previously only covered tobacco products intended for human consumption. The new definition of other tobacco products expands the types of items that are subject to the Tobacco Products Tax to include the following.
- Tobacco. Certain tobacco products are taxable in Vermont when manufactured from, derived from, or contain tobacco, and when intended for human consumption. This excludes cigarettes, little cigars, roll-your-own tobacco, snuff, and new smokeless tobacco, which are subject to different taxes and rates.
- Tobacco Substitutes. Taxable tobacco substitutes are products that contain or are designed to deliver nicotine or other substances into the body through the inhalation of vapor and have not been approved by the U.S. Food and Drug Administration for tobacco cessation or other medical purposes. Tobacco substitutes include electronic cigarettes or other electronic or battery-powered devices.
- Liquids. Liquids are taxable whether they contain nicotine or other substances.
- Delivery devices. Delivery devices sold separately for use with a tobacco substitute are taxable.
Examples of newly taxable products are e-cigarettes, vaping liquid of any substance even if it does not contain nicotine, and vaping apparel such as hoodies. Repair parts, accessories, and charging devices that can only be used in vaping devices or are custom made for vaping devices are taxable. The content of vaping liquid is immaterial for the purposes of taxation. If a product is sold to be vaped, then it is taxable. Even CBD products are taxable if sold for vaping. Likewise, vaping devices sold for use with legal cannabis are taxable. Products manufactured from, derived from, or containing tobacco that are intended for human consumption continue to be taxable.
Examples of nontaxable products are generic items that could be used for other purposes, such as batteries, chargers, protection equipment, carrying cases, and cleaning products. Generally, if accessories or repair parts can be used in non-vaping products, then they are not taxable.
What forms must be filed and when are the due dates?
The Tobacco Products Tax Form CTT-646, Wholesale Cigarette And Tobacco Dealer Report And Tax Return must be filed and paid monthly by every licensed wholesale dealer, even when no tax is due. The return and tax are due 15 days following the end of the month. To register, file your return, and pay taxes due, go to myVTax. If you have any questions, contact us at (802) 828-2551 or email@example.com.
Does sales tax apply to sales of other tobacco products?
Yes, sales tax applies to retail sales of other tobacco products such as e-cigarettes. Consumers will pay sales tax in addition to the Tobacco Products Tax, which is added to the final price. This is not a change to the current taxation of other tobacco products, which are already subject to sales tax at the point of retail sale.
Will tobacco substitutes, liquids, and devices acquired by before July 1, 2019 be taxable?
This depends on whether the inventory is held by a retail dealer or a wholesale dealer when Act 28 takes effect on July 1, 2019. Retail dealers will not be responsible for the Tobacco Products Tax on their pre-existing inventory, and they may still sell that inventory at retail. However, retailers will need to maintain invoices for three years showing that the inventory purchased tax-free was acquired at wholesale before July 1, 2019.
The legal requirements imposed on other tobacco products will only apply to tobacco substitutes (including e-cigarettes), liquids, and devices when Act 28 takes effect. This means that starting on July 1, 2019, retailers must ensure that they are only purchasing other tobacco products from licensed wholesale dealers, and that the tax has been paid. If, on or after July 1, 2019, a retailer acquires other tobacco products on which the licensed wholesale dealer has not paid the tax, then the retailer will become responsible for paying the tax. Retailers should know whether the Tobacco Products Tax has been paid, because licensed wholesale dealers are required to state on the invoice whether the price includes the tax. The amount of tax paid by either the wholesaler or the retailer must be added and collected as part of the retail sales price of the tobacco products sold to the consumer.
Wholesale dealers become liable for collecting and remitting tax in Vermont on any tobacco substitutes (e-cigarettes), liquids, and devices imported, manufactured, furnished, sold, shipped, or delivered by them to retailers on or after July 1, 2019. Wholesale dealers who hold both wholesale and retail dealer licenses, and sell directly to consumers, must calculate the tax on the wholesale price when they acquired the products at wholesale.