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Delaware Vape Tax Takes Effect

Delaware Vape Tax Takes Effect


Governor John Carney Delaware

The new year is upon us and that means that a number of new laws about vaping are taking effect as 2018 dawns. Unfortunately, that means that vapers in some states including Delaware are going to be affected by taxes put in place like the taxes put in place on cigarettes.

Starting January 1, Delaware residents have to pay five cents in tax for each fluid milliliter of e-juice in the vapor products they buy. One of the positive aspects of vaping over cigarettes is that it offers nicotine while delivering fewer toxins and a lower overall cost. Adding a tax to vaping undercuts that selling point, and when taxes are put in place, vape shops have been put out of business in other states.

Initial Proposal

Initially, the state’s governor John Carney proposed a 30 percent wholesale tax on e-juice products, which many owners of the more than a dozen vape shops in Delaware feared would put their livelihoods and businesses at risk.

“With a good definition, 15 percent is totally doable,” said Benden Styles, operations manager at Delaware Vapor to Delaware Public Media in April 2017. “I don’t think we’d even have to get excited about that. It would just be doing our part. I mean, just look at this budget deficit. We understand.”

In Pennsylvania, a similar measure that went into effect in 2016 put a 40 percent wholesale tax on e-juice products, and resulted in the closure of over 100 vape shops in the state, according to the Times Herald.

Budget Passing

In 2017, the Delaware general assembly passed several revenue measures in an effort to balance the state budget and avoid a $400 million deficit. These include increasing cigarette taxes by 50 cents, and the alcohol tax by a few cents per ounce, depending on the type of beverage.

The Delaware measure, passed in July, added vapor products to the definition of “tobacco products” and required dealers of vapor products to obtain licenses just like dealers of traditional tobacco. It defines “vapor product” as “any nicotine liquid solution or other material containing nicotine that is intended to be used with or in an electronic smoking device.”

“Electronic smoking device” is defined as “a nonlighted, noncombustible device that employs a mechanical heating element, battery, or circuit regardless of shape or size, to produce aerosolized or vaporized nicotine for inhalation into the body of an individual.” Electronic smoking devices include e-cigarettes, e-cigars, e-pipes, e-hookahs, vape pens, as well as “any other similar product with any other product name or descriptor.”

Delaware is notorious for having low taxes, and considered by many to be a “tax haven” for businesses. It has a 0% state sales tax, but the state does impose a gross receipts tax on the seller of goods (tangible or otherwise) or provider of services in the state.

We'll wait to see how this one plays out - an extra tax of 75 cents for a 15 ml bottle doesn't sound as crippling as measures other states have explored, but when government looks to a single industry to solve across-the-board revenue woes bad things can happen fast.