Hawaii has never made doing business in the vaping industry easy. Their most recent piece of legislation Act 62, threatens to impose even more challenges to the vape industry and the business owners who serve the community.
The barriers this law imposes are certainly not insurmountable, but it is imperative to navigate them correctly.
By now, most vape shop owners and brick and mortar resellers of vaping products have received notification from the State of Hawaii Attorney General’s Office.
The flyer itself is a bit confusing and we have provided a guide to help you navigate Act 62. Keep in mind that although we have consulted with industry experts, situations can vary greatly depending on your specific circumstances and we recommend conducting your own due diligence and seeking professional tax advice if you have any questions.
Summary of Hawaii Act 62
Act 62 places a new excise tax on electronic smoking devices and e-liquids. It also imposes new licensing requirements. The vaping excise taxes it imposes are not effective until January 1, 2024, but some of the licensing obligations took effect on July 1, 2024.
From January 1, 2024, a 70% excise tax will be imposed on the wholesale price of each electronic smoking device and e-liquid sold, used, or possessed by wholesalers and dealers. This tax rate is now the same as the excise tax on non-cigarette and cigar tobacco products.
How this Impacts Your Vape Business
If you are a retailer who engages in importing vape product to your retail location for sale from out of the state, you are by this definition considered a Dealer of tobacco products and thus need to register with the Attorney General's Office by July 1, 2023.
Vaping Definitions, Additions and Amendments
Act 62 adds new definitions for "e-liquid" and "electronic smoking device" to the existing Hawaii Revised Statutes (HRS). The definition of "tobacco products" is also amended to include electronic smoking devices and e-liquids.
Cigarette and Tobacco License Fee Change
Wholesalers and dealers of cigarettes and tobacco products, including electronic smoking devices and e-liquids, are required to obtain a cigarette and tobacco license from the Department of Taxation. The licensing fee has been increased from $2.50 to $250 annually. Existing licenses must be renewed by July 1 each year.
Retail Tobacco Permit
Retailers selling cigarettes, tobacco products, electronic smoking devices, or e-liquids need to obtain a retail tobacco permit starting January 1, 2024. The term "tobacco products" now includes electronic smoking devices and e-liquids. The permit fee has been increased from $20 to $50 annually. Retailers must obtain a permit for each place of business and designate whether they sell electronic smoking devices, e-liquids, or both.
Tax Obligations and Compliance
You must also submit monthly filings on all your tobacco/vape product shipments to be compliant. You will also be solely responsible for filing and remitting the 70% wholesale tax starting January 1, 2024. 70% Tax obligations will be the burden of the entity of first possession.
On the other hand, if your business plans to strictly retail products and you purchase from a licensed Hawaii tobacco wholesaler/dealer, all you need is a retail tobacco permit by January 1, 2024, for your store(s).
It is essential to comply with all relevant laws and regulations associated with the retailing of these products. Ensure that taxes have been cleared on the inventory you purchase after January 1, 2024, to avoid any unwarranted tax obligations.
Potential Felony Offense
It is important to be aware that starting July 1, 2023, shipments of vape products coming into the State of Hawaii from out-of-state sources without complying with the necessary legal requirements can result in felony offenses. Any unlawful activities related to the distribution, sale, or possession of vape products may lead to severe penalties under the law.
Final Thoughts on Act 62
We strongly advise all vape businesses to make certain they are compliant with Act 62 and other applicable laws and regulations. This summary hits the key points but as a business owner, it is crucial to conduct your own research and seek professional guidance to fully understand the implications of this law on your operations.
For additional questions or concerns, please contact the Department of Taxation's Technical Section at Tax.Technical.Section@hawaii.gov.
Provided the Department of Tax follows the same procedures as it did in 2009, they are likely to issue additional guidance soon. These announcements will be uploaded to the Department of Tax’s website here.