Vape Taxes 101: What Every US Small Business Needs to Know in 2025

If you run a vape shop or sell vaping products online, understanding vape taxes in the us is critical to protecting your margins and staying compliant. For any US small business in this industry, 2025 brings higher tariffs, stricter licensing rules, and more complicated state excise taxes. Since these rules can be overwhelming, many owners turn to tax filing services in the US to stay compliant and avoid costly mistakes. This guide breaks down what you need to know, so you can plan ahead and keep your business running smoothly.

1. No Federal Excise Tax (Yet)

Currently, there’s no federal excise tax on vaping products in the United States. While Congress has proposed several bills over the years, none have been passed into law. This means vape taxes are determined at the state and local levels, where rules can vary dramatically.

• No federal excise tax as of 2025.

• Proposals in Congress have failed to pass.

• Federal oversight is focused on product safety, labeling, and age restrictions.

Why it matters for US small businesses: Your tax obligations come from your state and local government, not the federal government—at least for now.

2. State and Local Vape Taxes

Every state takes a different approach to taxing vape products, and some local governments add their own surcharges. These taxes may be based on wholesale price, retail price, or liquid volume. Knowing your state’s specific rules is crucial to avoid penalties and pricing mistakes.

Excise Taxes

Excise taxes are special taxes applied in addition to sales tax. They’re one of the biggest costs for vape retailers.

• Rhode Island: $0.50 per mL on closed systems; 10% of wholesale on open systems.

• Virginia: $0.11 per mL tax on vape liquids.

• Minnesota: 95% of wholesale cost—the nation’s highest.

• California: 52.92% of wholesale cost.

• Colorado: 56% of manufacturer’s list price.

• District of Columbia: 71% of wholesale cost.

👉 Some states tax only nicotine-containing liquids, while others tax all e-liquids.

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Sales Taxes

In addition to excise taxes, vape products are almost always subject to regular sales tax.

• Applied at the state and local level.

• Online sellers must watch for sales tax nexus rules when shipping across state lines.

Local Surcharges and Fees

Certain cities and counties layer on their own vape taxes, which can create extra challenges for small businesses operating in multiple jurisdictions.

• Local governments may add surcharges beyond state excise tax.

• Fees can differ even within the same state.

3. Licensing, Tariffs, and Compliance

Running a vape business involves more than collecting taxes—you’ll also need to meet strict licensing and reporting requirements. Tariffs on imported products have added to the cost pressures facing many US small businesses.

Licensing and Registration

Most states regulate vape retailers much like tobacco sellers.

• Retailers usually need a tobacco or vapor license.

• Wholesalers and manufacturers may need to register products in state directories.

• Selling without a license can result in fines or business suspension.

Import Tariffs

High import tariffs, especially on products from China, have raised wholesale costs.

• Tariffs can exceed 170%.

• These higher costs often pass directly to consumers.

Compliance and Reporting

Staying compliant requires more than just paying taxes—you must also file reports and maintain strict business practices.

• States often require monthly or quarterly excise tax filings.

• Businesses must keep detailed records of sales, imports, and inventory.

• Regulations include age verification, product tracking, and zoning restrictions on retail locations.

Summary

For US small businesses in the vaping industry, 2025 presents a challenging but manageable environment. While there’s no federal excise tax, states and local governments impose a variety of vape taxes that differ by price, volume, or product type. Import tariffs, licensing requirements, and detailed reporting add to the complexity.

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