Excise tax update: Wisconsin and Washington D.C.

A new tax on vapor products went into effect on October 1 in the state of Wisconsin. The state’s budget for fiscal year 2020 introduces a tax of 5 cents per milliliter of liquid used in e-cigarettes.

Due to a decline in tobacco use throughout the state, cigarette excise tax receipts are trending downward. Historically, Wisconsin has depended very heavily on tobacco tax collections as a percentage of general revenues ranking 4^th among the 50 states in this respect in 2016, according to a study by the Wisconsin Policy Forum. The imposition of a tax on vapor products is designed to offset in part the loss of tobacco excise revenue.

Initially, Governor Tony Evers sought a much higher tax. His original budget proposal would have extended to e-cigarette devices and fluids the state’s existing tobacco products tax of 71% of the manufacturer’s list price to distributors.

The relatively modest level of the tax and its easy to administer specific structure contrast sharply with multi-tiered excise taxes which also went into effect on October 1 in Connecticut and Washington State.

District of Columbia revises tax

The excise tax on vapor products in Washington D.C. has been adjusted downward according to a formula which links the rate to the combined excise tax and surtax expressed as a percentage of the average wholesale price of a pack of 20 cigarettes. Effective 1 October 2019 the tax on other tobacco products, which under the District’s code include vapor products, is reduced from 96% to 91% of the wholesale price.