Industry Topics for California Electronic Cigarette Excise Tax

General Definitions

The following are general definitions for purposes of the HOPE Act:

An electronic cigarette is:
A device or delivery system sold in combination with any liquid substance containing nicotine that can be used to deliver aerosolized or vaporized nicotine to a person. Examples include, but are not limited to, any of the following items sold with any nicotine liquid or nicotine substance that are packaged together as one unit or sold for a single price: eCigarettes, eCigars, ePipes, vape pens, or eHookahs.
A component, part, or accessory of a device described above that is used during the operation of the device if sold in combination with a liquid substance containing nicotine. Examples include, but are not limited to, any of the following items sold with any nicotine liquid or nicotine substance that are packaged together as one unit or sold for a single price: atomizers, vaping tanks, mods, batteries, or chargers.
A liquid or substance containing nicotine, whether sold separately or sold in combination with any device, that could be used to deliver aerosolized or vaporized nicotine to a person. Some examples include, but are not limited to, eLiquids or eJuices containing nicotine.
An electronic cigarette does not include:
A device or delivery system sold individually or with a liquid or substance containing 0mg nicotine.
A product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product or for other therapeutic purposes if that product is marketed and sold solely for that approved use.

The CECET is Not Subject to Sales and Use Tax

The CECET is not subject to sales and use tax. Sales and use tax only applies to the total selling price of the electronic cigarette product, excluding the CECET. Below are two examples.

Example 1:

Electronic Cigarettes
$20.00
Subtotal
$20.00
CECET ($20.00 x 0.125)
$2.50
Sales Tax ($20.00 x 0.08)
$1.60
Total due:
$24.10

Example 2:

Scenario

If a delivery device with 0mg nicotine is sold for $20.00 and on the same receipt eLiquid containing nicotine is sold for $15.00, would the CECET only apply to the $15.00 item?

Answer

Yes, the CECET would only apply to the $15.00, eLiquid containing nicotine. The delivery device of $20.00 is not subject to the CECET because the item is not packaged with a nicotine liquid or substance as one unit or sold for a single price with a nicotine liquid or substance.

Delivery Device (0mg nicotine)
$20.00
eLiquid (containing nicotine)
$15.00
Subtotal ($20.00 + $15.00)
$35.00
CECET ($15.00 x 0.125)
$1.88
Sales Tax ($35.00 x 0.08)
$2.80
Total due:
$39.68

Notes

  1. Device and eLiquid containing nicotine packaged as one unit or sold for a single price.
  2. Eight percent (8%) sales tax rate is used for demonstration only.

CECET Applies to Handling Charges

The CECET applies to handling charges. Handling charges are considered part of the sales price of electronic cigarettes for the purposes of the CECET and must be included in the measure of the CECET. If a transaction includes a sale of electronic cigarettes that is subject to the CECET and a delivery device that is not subject to the CECET and the handling charge relates to both items sold, the handling charge should be prorated. Below are two examples.

Example 1:

The CECET is applied to the prorated handling charge for the item that is subject to the CECET. The handling charge is separately stated and applies to both items.

Delivery Device (0mg nicotine)
$30.00
eLiquid (containing nicotine)
$20.00
Subtotal
$50.00
Total Handling ($5.00 applies to each item)
$10.00
CECET (($20.00 + $5.00) x 0.125)
$3.13
[Includes $5.00 prorated amount for handling]
Sales Tax ($60.00 x 0.08)
$4.80
Total due:
$67.93

Example 2:

The CECET is applied to the prorated handling charge for the item that is subject to the CECET. The handling charge is not separately stated but is included in the sales price of the item.

Delivery Device (0mg nicotine) [includes a $5.00 handling charge]
$20.00
eLiquid (containing nicotine) [includes a $5.00 handling charge]
$25.00
Subtotal
$45.00
CECET ($25.00 x 0.125)
$3.13
Sales Tax ($45.00 x 0.08)
$3.60
Total due:
$51.73

Notes

  1. Eight percent (8%) sales tax rate is used for demonstration only.

Revocation or Suspension of CECET Permit

If we suspend or revoke your seller's permit, CRL, or CDL, we may also suspend or revoke your CECET permit. We will notify you in writing that action against your CECET permit is being considered. You will have 10 days to explain why your CECET permit should not be revoked.

We will provide you 10 days' written notice requesting you to appear for a hearing at a specified CDTFA office location, date, and time to address any citation of the permit. If you clear the cause of the citation prior to the hearing date, the hearing will no longer be necessary, and your permit will not be revoked. If you do not clear the cause of the citation on or before the date and time specified and do not appear for the hearing, your CECET permit will be revoked.

Reasons for Revocations

  1. Your seller's permit has been suspended or revoked.
  2. Your CRL or CDL has been suspended or revoked.
  3. You did not adhere to the Business and Professions Codes for the CRL or CDL.
  4. You did not follow a provision of the applicable law or regulation for the CECET program.

Reinstatement Fee for a Revoked CECET Permit

To reinstate a revoked CECET permit, you must:

  • Clear the cause of the revocation.
  • Comply with the Hope Act and/or its regulations.
  • Have an active seller's permit and CRL or CDL.
  • Pay the reinstatement fee of $100.