Understanding California’s Electronic Cigarette Excise Tax (CECET)

Vape and tobacco shops have seen remarkable growth over the past several years. The eCigarette and vape industry alone was valued at over $6 billion in 2020 and the expected annual growth is nearly 30% until 2028. This is good news for smoke shop business owners and other retailers that carry vape and electronic cigarette devices.

But, as you well know, the industry is highly regulated and doesn’t come without its fair share of headaches. Both federal and state governments continue to take steps to regulate the industry in order to protect younger consumers. One such change is the California Electronic Cigarette Excise Tax (CECET). The tax goes into effect July 1, 2022 and requires retailers to collect an additional 12.5% tax on all disposable vape and eCigaratte products.

While the new law is specific to California, it’s likely that other states begin adopting similar legislation. California often serves as a bellwether for these sorts of regulations, so it’s important that retailers from all states take notice.

What Are Electronic Cigarettes and Vape Devices?

The new tax only applies to eCigarettes and vape products. California defines these broadly:

“A device or delivery system in combination with any liquid substance containing nicotine that can be used to deliver nicotine in aerosolized or vaporized form to a person. Examples include any of the following items sold with any nicotine liquid or nicotine substance that is packages together as one unit or sold for a single price with: eCigarettes, eCigars, ePipes, vape pens, or eHookahs.

The tax also includes accessory devices such as vape modifiers, refill cartridges, atomizers, batteries, and chargers.

How Retailers Must Prepare for CECET

Any retailer who sells these products must register for a CECET seller permit/account through the state of California. This includes retailers or manufacturers that ship to California as well.

For those businesses that already have a Cigarette and Tobacco Products Retailer License (CRL) and indicated that they do sell electronic cigarette and nicotine products, the state of California will automatically register your business for this account. Any new vendors of these products, however, must opt in for this account.

For multi-store retailers, only one account is necessary.

Here is a more broad tax guide for selling cigarettes and tobacco products.

Updates to the eCigarette and Vape Sales Process

CECET requires retailers to collect the 12.5% tax on all applicable product sales at the time of purchase. This is, of course, in addition to all other applicable taxes, including sales tax.

The merchant must also provide the customer with an itemized receipt detailing the exact amount of each individual tax. The CECET amount must also be included in any advertisements that include the price.

All CECET returns must be filed and paid for online by the retailer on a quarterly basis. The first CECET return is due October 31, 2022 and will cover the period between July 1, 2022 and September 30, 2022.

Failure to comply with any of these conditions will result in the revokement of all related licenses.

Selling Electronic Cigarettes and Vapes with KORONA POS

Our powerful software is built to make operating a smoke shop a lot easier. In addition to inventory management, order automation, loyalty programs, and more, KORONA POS will also make the transition to this new tax structure painless for you.

At the checkout, you can apply this tax (and any others) as sub-indices. This avoids the potentially costly error of adding a tax that takes a percentage of the total after the initial sales tax (or any other tax) has been applied. Instead, shoppers will only be taxed on the total retail dollar amount of the applicable products that they’re purchasing.

To learn more about how we can help, click below for a product demo. We’ll show how the system works for smoke and vape shops, and particularly how to start applying this tax to your sales.

About the Author

Photo of author

Michael Chalberg

Michael has long focused his writing on the world of retail and small businesses. He''s been a part of the KORONA POS team since 2018 and loves helping entrepreneurs find ways to adapt and succeed. In his spare time, you'll likely find him hiking somewhere in the Southwest.