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 taxes 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 to tobacco product defined elsewhere.
Rate and base
The tax on nicotine products was introduced at 30% of the manufacturer’s list price on 1 January 2021. The rate is scheduled to rise in annual increments culminating on 1 July 2027 at 62 percent.
The Act also introduced 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 went into effect in 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. The U.S. Food and Drug Administration authorized the marketing of Philip Morris Products S.A.’s “IQOS Tobacco Heating System” as a modified risk tobacco product in July 2020.
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.