Colorado voters approve tax on vapor products

In June 2020 the Colorado State Legislature approved and the Governor signed House Bill 20-1427, the “Cigarette Tobacco and Nicotine Products Tax”. In addition to raising the current excise tax on cigarettes, the Act introduces a new measure that will tax nicotine products in the same manner as tobacco products. 

A nicotine product is defined as “a product that contains nicotine derived from tobacco or created synthetically that is intended for human consumption, whether by vaporizing, chewing, smoking, absorbing, dissolving, inhaling, snorting, sniffing, aerosolizing, or by any other means, and that is not” a cigarette or tobacco products defined elsewhere.

Rate and base

The tax on nicotine products will be introduced at the rate of 30% of the manufacturer’s list price after 1 January 2021 but prior to 1 January 2022. The rate is scheduled to rise in annual increments culminating on 1 July 2027 at 62 percent. 

MRTPs

The Act also introduces a tax upon the sale of nicotine products that are declared by the United States Department of Health and Human Services as modified risk tobacco products. The tax initially goes into effect during 2021 at the rate of 15% of the manufacturer’s list price. Following a series of three scheduled rate increases, the tax reaches 31% of the list price on 1 July 2027.

Ballot issue

The Act seeks the authorization of the state’s electorate to impose a “tax on nicotine liquid used in electronic cigarettes and other vaping products that is equal to the total state tax on tobacco products when fully phased in.”

On Election Day, 3 November 2020, the proposals were presented to Colorado voters in the form of Proposition EE. The ballot was approved by 69% of the voters, compared to 31% who voted against it.