Washington State Tax and Licensing Needs for Tobacco, Vapor, and E-Cigarette Products

As a tobacco product distributor or retailer, it's important to understand the licensing and tax requirements for compliance in Washington State. Disregarding these rules often lead to costly audits and assessments that include additional expenses for applicable penalties and interest. This post will discuss the various licenses needed to sell tobacco, e-cigarette, and vapor products in Washington state, as well as the applicable taxes that must be collected and reported.

Licensing Requirements for Tobacco and Vapor Products in Washington

In Washington, anyone who sells or distributes tobacco products, vapes, e-cigarettes, and any related products must obtain a license from the State Department of Revenue that you must renew on an annual basis. The license fee depends on the nature of your tobacco sales and the number of locations. The current fee schedule is as follows:

• Tobacco Distributors: $650 + $115 for each additional location.
• Tobacco Retailers: $175 per location (Note: the WDOR waives this fee if you already have a Cigarette Retailer License for the same location).
• Vapor Product Delivery Sales: $250 (This license is for businesses that accept orders from consumers and deliver them through mail or other delivery services).
• Vapor Product Distributor: $150 + $100 for each additional location.
• Vapor Product Retailer: $175 per location.

In addition, when first applying for a tobacco product distribution license, a business license application must also be submitted along with a personal/criminal history statement for each owner and officer of the business.

Tobacco, Vapor, and E-Cigarette Taxes in Washington State

Washington imposes several different taxes on tobacco and vapor products when brought to or produced in the state for a first sale or transfer. Generally, this means the tax is the obligation of the manufacturer or distributor but could also fall to wholesalers, retailers, or consumers that purchase products where tax has not yet been paid. Washington’s sales and use tax also applies to the sale of tobacco products when transferred to a final consumer.

You collect and remit all applicable taxes to the Department of Revenue on a monthly basis—the 25^th of the month following the close of the period. Excise taxes for general tobacco products are submitted on the general monthly excise tax return. For vapor products and e-cigarettes, use schedule C4 for Electronic Nicotine Delivery Systems (ENDS), in which the total quantity of devices sold, total volume (in mL), the total retail price, and the wholesale price will be noted. Good record keeping in your point of sale system is absolutely vital to ensure all products are tracked appropriately, so they can be reported to the Department of Revenue. The individual in your organization normally responsible for filing its taxes can submit these forms and can do so electronically through the Department of Revenue's online service.

What Are the Washington Tax Rates for Tobacco, Vapor, and E-Cigarette Products

The tax on vapor products is $0.09 cents per mL on accessible containers of solution greater than 5 mL, and $0.27 per mL in all other cases. Other tobacco products are subject to an excise tax of 95% of the taxable sales price, with exceptions carved out for snuff and cigars which depend on the number and weight of the product sold.

Washington Penalties and Interest for Late Filing or Payment of Tobacco and Vapor Taxes

The Washington Department of Revenue imposes several different penalty levels for noncompliance with the filing, payment, or general administration of your tobacco taxes. The penalty rate for late filing of returns starts at nine percent but can increase up to 29 percent when 2 or more months late. Underpayment of tax incurs penalty assessments ranging from five to 25 percent depending on how significant the deficit is.

Credits for Overpayment of Washington Tobacco and Vapor Excise Taxes

Ecommerce for tobacco and vapor products has become a growing trend, which means you or your clients may have sales to businesses in states other than Washington. When you pay Washington excise tax on these products but sell or deliver them to customers in other states, you may be eligible for a credit. These tobacco excise tax credits may also be available in other cases when you remove product from your Washington inventory. For example, when you return products to a manufacturer or for accidental loss.

For Professional Help with Your Washington Tobacco Tax and Licensing Concerns

Compliance with tobacco excise taxes, business licensing, and general rules should be a primary concern for operators in Washington. Interactions with officials from the Department of Revenue or the Liquor and Cannabis Board are more of a when, not if, reality. When these situations arise during an audit, inspection, or written notice, our team of tobacco tax professionals are here to help. Additionally, if you have concerns about overpayment of tax, we have the procedural know-how to file credit application forms or refund claims through the proper appeal channels.