Tax Guide for
California Electronic Cigarette Excise Tax

Tax Guide for
California Electronic Cigarette Excise Tax

New Information

  • Senate Bill (SB) 793 (Stats. 2020, ch. 34), was approved at the November 8, 2022, election in the Proposition 31 referendum. Effective December 21, 2022, cigarette and tobacco products retailers, including their employees or agents, may not sell, offer, or possess with the intent to sell, menthol cigarettes, most flavored tobacco products, and tobacco product flavor enhancers.

    The law does not apply to flavored premium cigars with a wholesale price (retailer's purchase price) of $12.00 or more and flavored loose-leaf pipe tobacco. Flavored shisha/hookah tobacco may be sold in licensed retail stores that only admit persons 21 or older and operate following all state and/or local laws.

    For more information, please visit the California Department of Public Health's website for frequently asked questions, a fact sheet, and other useful resources. Also, read our special notice, New Law Prohibits Retail Sales of Menthol Cigarettes and Most Flavored Tobacco Products.

Helping businesses succeed is important to the California Department of Tax and Fee Administration (CDTFA). The taxes or fees paid to the state help fund state and local services and programs that are important to our communities.

This guide is intended to provide general information about the California Electronic Cigarette Excise Tax and registration, collection, filing, and payment responsibilities of retailers of electronic cigarettes containing or sold with nicotine.

California Electronic Cigarette Excise Tax

Beginning July 1, 2022, retailers of electronic cigarettes (in-state or out-of-state) are required to collect from the purchaser at the time of sale the California Electronic Cigarette Excise Tax (CECET) at the rate of 12.5 percent (12.50%) of the retail selling price of electronic cigarettes containing or sold with nicotine. The collection of the CECET is in addition to the sales and use tax.

A retailer of electronic cigarettes containing or sold with nicotine must:

  • Be registered with a CECET permit (account),
  • Include the CECET amount in any price marketing on any sign or display,
  • Collect the CECET from the purchaser at the rate of 12.5 percent (12.50%) of the retail selling price of electronic cigarettes containing or sold with nicotine at the time of sale,
  • Provide the purchaser with a receipt or other document that separately states the CECET and the amount they paid on each electronic cigarette retail sale,
  • File a CECET return electronically, and
  • Pay the excise tax to us (CDTFA).

Senate Bill (SB) 395 (Stats. 2021, ch. 489) enacted the Healthy Outcomes and Prevention Education (HOPE) Act, which imposes the CECET.

In addition to the HOPE Act, we administer other cigarette and tobacco products laws affecting retailers of electronic cigarettes containing or sold with nicotine. Retailers of electronic cigarettes containing or sold with nicotine also have responsibilities under the Cigarette and Tobacco Products Licensing Act of 2003. For more information, please visit our Tax Guide for Cigarettes and Tobacco Products.

How the Revenue is Used

Revenues collected, including interest and penalties, from the CECET are deposited into the California Electronic Cigarette Excise Tax Fund. The proceeds from the CECET, less refunds and administration/collection expenses, are used to fund essential safety net services and provide grants to students from disadvantaged backgrounds pursuing an education in the health field to combat the long-term negative impacts of tobacco products.

For detailed information on how the funds are used, see Revenue and Taxation Code (R&TC) section 31005.

How to Use This Guide

The Getting Started section provides key resources related to registration, filing returns, making payments, and other important information.

The Industry Topics section provides general definitions, examples of tax computation, and revocations.

The Resources section provides links to helpful information, including law and regulation information, guides, publications, special notices, and access to assistance from our customer service representatives.

If You Need Help

For assistance with topics included in this guide or other related questions, please email us or call our Customer Service Center at 1-800-400-7115 (CRS:711). Customer service representatives are available Monday through Friday from 7:30 a.m. to 5:00 p.m. (Pacific time), except state holidays. Additional contact information and hours of operation are available on our How to Contact Us webpage.

If you have suggestions for improving this guide, please contact us via email.

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Regardless of where a cigarette and tobacco products retailer is located, a CECET account is required, in addition:

  • A retailer physically located in California who sells electronic cigarettes containing or sold with nicotine to consumers in California must have a seller's permit, CECET account, and a Cigarette and Tobacco Products Retailer License (CRL) with us.
  • A retailer located outside California who sells electronic cigarettes containing or sold with nicotine and ships to consumers in California is considered a delivery seller (R&TC section 30101.7). Regardless if the out-of-state delivery seller is engaged in business in California (R&TC section 30108), the delivery seller must have a CECET account, a Cigarette and Tobacco Products Distributor License (CDL), a Tobacco Products Distributor Tax License, and a Prevent All Cigarette Trafficking (PACT) Act account with us, but is not required to have a CRL. The delivery seller may also be required to have a seller's permit or certificate of registration for use tax with us.

For more information about cigarettes and tobacco products tax, licensing, and the PACT Act, please visit our Tax Guide for Cigarettes and Tobacco Products and our California Cigarette and Tobacco Products Licensing Act of 2003-Retailer License webpage.

If you are a retailer of electronic cigarettes containing or sold with nicotine, you are responsible for registering for a CECET account with us.

Online Registration

To register with us online for a CECET account, cigarette and tobacco products license, PACT Act account (if applicable), seller's permit, any other permits, licenses, or accounts, please visit our Online Services webpage, which has a list of information you will need to complete your registration.

Multiple Cigarette and Tobacco Products Retailer License (CRL) Locations

If you have multiple Cigarette and Tobacco Products Retailer License (CRL) locations that sell electronic cigarettes containing or sold with nicotine, only one CECET account is issued for reporting all your CRL locations. The total sales of the electronic cigarettes containing or sold with nicotine for all CRL locations will be reported on one CECET return. For example, if you have five CRL locations selling electronic cigarettes containing or sold with nicotine, you will report all five locations on your one CECET account.

The CECET return and payment are due on or before the last day of the month following each calendar quarterly period. For example, if your reporting period is for the first quarter (January – March), then the return and payment are due on April 30.

Returns

You must electronically file a CECET return even if you do not have any reportable activity during the period and/or if no amount is owed. To be considered timely, returns must be received by the due date. If the due date falls on a Saturday, Sunday, or state holiday, returns received by the next business day will be considered timely.

File a Return Online – File your return and pay your taxes through our Online Services webpage. Log in using your username and password and select the account for which you wish to file a return, then select the File a Return link for the filing period you wish to file and follow the prompts.

If you do not have a username and password, select the Sign Up Now link under the Create a Username heading from the Online Services webpage.

Filing a late return or late payment may result in a late penalty and/or interest assessment. See Penalty and Interest topic in this section.

Please visit our Video Tutorials page to view How to File a California Electronic Cigarette Excise Tax (CECET) Return.

Payments

Payments must be submitted by the return due date to be considered timely.

Make a Payment – Make payments through our Online Services webpage. Log in using your username and password and select the account for which you wish to make a payment. Select the More link under the I Want To section. Then select the Make a Payment link and follow the prompts.

Additional Payment Options – Please visit our website for additional convenient payment methods.

Electronic Funds Transfer (EFT) - Taxpayers with an estimated average monthly tax liability of $20,000 or more are required to pay amounts due by EFT. We will notify you in writing if you are required to pay your taxes electronically. Please visit our Electronic Funds Transfer (EFT) - Frequently Asked Questions (FAQ's) for payment methods and payment deadline information.

Payments must be received or postmarked by the due date to be considered timely. If the due date falls on a Saturday, Sunday, or state holiday, payments postmarked or received by the next business day will be considered timely.

The penalty for filing a late return and/or late tax payment is ten percent (10%) of the tax amount due for the period. Interest also applies to late tax payments.

Log into your account to submit an online request for an extension to file a return or relief from penalty (including interest due to a disaster).

A one percent (1%) reimbursement of the CECET collected, for any costs associated with collecting the tax, is automatically calculated and issued when you file your CECET return.

Example

Electronic Cigarettes
$100,000
CECET ($100,000 x 0.125)
$12,500
Reimbursement ($12,500 x 0.01)
$125
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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. 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.

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.

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.

Laws

Regulations

Tax Rates and License Fees

Special Notices

Legislative Information

Guides

Publications

Business Location Visits/Inspections

Other Helpful Resources

  • Videos and How-To Guides – These resources will help you avoid common mistakes, file your tax returns online, and more.
  • CDTFA Online Services – A listing of our online services, including online registration for seller's permits and other accounts.
  • CDTFA Offices – A comprehensive listing of all our offices and contact information.
  • California City and County Sales and Use Tax Rates – A listing of current and historical tax rates.
  • Find Your Tax Rate – You can look up the current sales and use tax rate for a specific address.
  • Contact Us – A listing of ways to contact us for help.
  • Get It in Writing! – Laws can be complex, and you are encouraged to put your tax questions in writing.
  • Sign Up for CDTFA Updates – Subscribe to our email lists to receive the latest news, newsletters, tax and fee updates, and other announcements.
  • Taxpayers' Rights Advocate (TRA) – The TRA Office helps taxpayers when they are unable to resolve a matter through normal channels, when they want information regarding procedures, or when there are apparent rights violations in the audit or collection of taxes or fees.