P.L. 2025, c.068 (A5805)

An Act concerning the taxation of cigarettes, liquid nicotine, and container e-liquid, dedicating certain revenues to the Health Care Subsidy Fund, and amending various parts of the statutory law.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 301 of P.L.1948, c.65 (C.54:40A-8) is amended to read as follows:

301. Tax imposed; rate. A tax is hereby imposed on the sale, use or possession for sale or use within this State of all cigarettes at the rate of [$0.135] $0.15 for each cigarette.

(cf: P.L.2009, c.70, s.1)

2. (New section) a. Each licensed retail dealer under P.L.1948, c.65 (C.54:40A-1 et seq.) shall, on or before the first day of the second month after the effective date of P.L. , c. (pending before the Legislature as this bill), file a return under oath or certified under the penalties of perjury with the director on forms furnished by the director, showing the number of cigarettes in the licensed retail dealer’s possession in the State at 12:01 a.m. on the effective date of P.L. , c. (pending before the Legislature as this bill) and shall at the time of filing that return pay the tax to the director. Failure to obtain such forms shall not be an excuse for the failure to make a return containing the information required by the director.

b. Notwithstanding the provisions of section 401 of P.L.1948, c.65 (C.54:40A-11) to the contrary, each licensed distributor and licensed wholesale dealer under P.L.1948, c.65 (C.54:40A-1 et seq.) shall, on or before the first day of the second month after the effective date of P.L. , c. (pending before the Legislature as this bill), file a return under oath or certified under the penalties of perjury with the director on forms furnished by the director, showing the amount of cigarettes in the dealer’s or wholesaler’s possession in the State at the close of business prior to the effective date of P.L. , c. (pending before the Legislature as this bill). An amount of tax shall be due equal to the additional tax on the number of cigarettes bearing stamps, and unaffixed stamps on hand. Each licensed distributor and licensed wholesale dealer shall at the time of filing that return pay the tax to the director. Failure to obtain such forms shall not be an excuse for the failure to make a return containing the information required by the director.

3. Section 5 of P.L.2018, c.50 (C.54:40B-3.2) is amended to read as follows:

5. a. There is imposed a tax upon the sale, use, or distribution of liquid nicotine within this State by a distributor or wholesaler to a retail dealer or consumer at the rate of [$0.10] $0.30 per fluid milliliter on the volume of the liquid nicotine as listed by the manufacturer, and a proportionate rate on all fractional parts of a fluid milliliter of volume of liquid nicotine as listed by the manufacturer.

b. Unless liquid nicotine has already been or will be subject to the tax imposed in subsection a. of this section, if a distributor or wholesaler uses the liquid nicotine within the State, there is imposed upon the distributor or wholesaler a compensating use tax of [$0.10] $0.30 per fluid milliliter of the volume of liquid nicotine as listed by the manufacturer, and a proportionate rate on all fractional parts of a fluid milliliter of the volume of liquid nicotine as listed by the manufacturer.

c. Unless a tax is due pursuant to subsection b. of this section, if a distributor or wholesaler has not paid the tax imposed in subsection a. of this section upon a sale that is subject to the tax imposed in that subsection a., there is imposed upon the retail dealer or consumer chargeable for the sale a compensating use tax of [$0.10] $0.30 per fluid milliliter on the volume of the liquid nicotine as listed by the manufacturer, and a proportionate rate on all fractional parts of a fluid milliliter of the volume of liquid nicotine as listed by the manufacturer, which shall be collected in the manner provided in subsection b. of section 5 of P.L.1990, c.39 (C.54:40B-5).

d. The tax imposed pursuant to this section shall not apply to the sale, use, or distribution of container e-liquid.

(cf: P.L.2019, c.147, s.3)

4. Section 5 of P.L.2019, c.147 (C.54:40B-3.4) is amended to read as follows:

5. a. There is imposed a tax at the rate of [10] 30 percent of the listed retail sale price of container e-liquid sold within the State.

b. The tax imposed pursuant to this section shall be collected by the seller.

c. The seller shall be personally liable for the tax required to be collected pursuant to this section.

d. The director shall prescribe the manner and method that the tax shall be payable. The director may require such information and records necessary for administration of the tax, including for the purpose of consistent administration with other provisions of the "Tobacco and Vapor Products Tax Act," P.L.1990, c.39 (C.54:40B-1 et seq.).

(cf: P.L.2019, c.147, s.5)

5. (New section) Each distributor and wholesaler shall, on or before the first day of the second month after the effective date of P.L. , c. (pending before the Legislature as this bill), file a return, under oath or certified under the penalties of perjury, with the director on forms furnished by the director, showing the amount of liquid nicotine in that distributor’s or wholesaler’s possession in the State at 12:01 a.m. on the effective date of P.L. , c. (pending before the Legislature as this bill), and shall, at the time of filing that return, pay an amount of tax equal to the additional tax on the amount of liquid nicotine in that distributor’s or wholesaler’s possession to the director. Failure to obtain such forms shall not be an excuse for the failure to make a return containing the information required by the director.

6. (New section) Each retail dealer shall, on or before the first day of the second month after the effective date of P.L. , c. (pending before the Legislature as this bill), file a return, under oath or certified under the penalties of perjury, with the director on forms furnished by the director, showing the amount of liquid nicotine in that retail dealer’s possession in the State at 12:01 a.m. on the effective date of P.L. , c. (pending before the Legislature as this bill), and shall file a return with the director in such form as the director may prescribe and shall, at the time of filing that return, pay an amount of tax equal to the additional tax on the amount of liquid nicotine in that retail dealer’s possession to the director. Failure to obtain such forms shall not be an excuse for the failure to make a return containing the information required by the director.

7. Section 4 of P.L.1997, c.264 (C.26:2H-18.58g) is amended to read as follows:

4. Notwithstanding the provisions of any other law to the contrary,

a. commencing July 1, 1998 and ending June 30, 2006: after the deposit required pursuant to section 5 of P.L.1982, c.40 (C.54:40A-37.1), the first $150,000,000 of revenue collected annually from the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.) and the first $5,000,000 of revenue collected annually from the "Tobacco Products Wholesale Sales and Use Tax Act," P.L.1990, c.39 (C.54:40B-1 et seq.), shall be deposited into the Health Care Subsidy Fund established pursuant to section 8 of P.L.1992, c.160 (C.26:2H-18.58); and the next $390,000,000 of revenue collected annually from the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.) shall be appropriated annually for health programs, and the next $50,000,000 of revenue collected annually from the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.) shall be appropriated annually to the New Jersey Economic Development Authority for payment of debt service incurred by the authority for school facilities projects and in fiscal years commencing July 1, 2002 and July 1, 2003, the next $30,000,000 of revenue collected annually from the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.) shall be directed to the Department of Health to fund anti-smoking initiatives, except that the amount shall be $40,000,000 in the fiscal year commencing July 1, 2004 and $45,000,000 in the fiscal year commencing July 1, 2005; [and]

b. commencing with fiscal years beginning on and after July 1, 2006, after the deposit required pursuant to section 5 of P.L.1982, c.40 (C.54:40A-37.1), the first $150,000,000 of revenue collected annually from the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.) and the first $5,000,000 of revenue collected annually from the "Tobacco Products Wholesale Sales and Use Tax Act," P.L.1990, c.39 (C.54:40B-1 et seq.), shall be deposited into the Health Care Subsidy Fund established pursuant to section 8 of P.L.1992, c.160 (C.26:2H-18.58). In addition, commencing with fiscal years beginning on and after July 1, 2006 but before July 1, 2009, there shall be deposited $215,000,000 of revenue collected annually from the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.) in accordance with the provisions of section 5 of P.L.2004, c.68 (C.34:1B-21.20), and, commencing with fiscal years beginning on and after July 1, 2009, there shall be deposited $241,500,000 of revenue collected annually from the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.) in accordance with the provisions of section 5 of P.L.2004, c.68 (C.34:1B-21.20). In addition, commencing with fiscal years beginning on and after July 1, 2018, an amount equal to one percent of the total revenues collected annually from the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.) and the "Tobacco Products Wholesale Sales and Use Tax Act," P.L.1990, c.39 (C.54:40B-1 et seq.) shall be directed to the Department of Health to fund and implement evidence-based tobacco control programs that align with the federal Centers for Disease Control and Prevention Best Practices for Comprehensive Tobacco Control Programs and that include the goals of preventing youth initiation of tobacco usage, reducing exposure to secondhand smoke, and promotion of cessation. Funding priority shall be given to programs that aim to reduce the incidence of smoking among the State's Medicaid population and youth[.] ; and

c. commencing with fiscal years beginning on or after July 1, 2025, $2,000,000 of revenue collected annually from the tax on liquid nicotine pursuant to section 5 of P.L.2018, c.50 (C.54:40B-3.2) and the tax on container e-liquid pursuant to section 5 of P.L.2019, c.147 (C.54:40B-3.4) shall be deposited into the Health Care Subsidy Fund established pursuant to section 8 of P.L.1992, c.160 (C.26:2H-18.58).

(cf: P.L.2017, c.241, s.1)

8. This act shall take effect on August 1, 2025.

STATEMENT

This bill increases the rate of tax imposed on cigarettes, liquid nicotine, and container e-liquid, as recommended as part of the Governor’s Fiscal Year 2026 Budget, and dedicates a portion of the revenues collected from the tax on liquid nicotine and container e-liquid to the State’s Health Care Subsidy Fund.

Under current law, the State imposes a tax on cigarettes at a rate of $0.135 per cigarette, or $2.70 per pack of 20 cigarettes, which tax rate has been in effect since 2009. This bill would increase this tax rate to $0.15 per cigarette, or $3.00 per pack of 20 cigarettes.

Also under current law, liquid nicotine is taxed at a rate of $0.10 per fluid milliliter on the volume of liquid as listed by the manufacturer. Container e-liquid is taxed at the rate of 10 percent of the listed retail sale price for the product sold within the State. This bill would increase the tax rate from $0.10 to $0.30 per fluid milliliter for liquid nicotine, and increase the tax rate on container e-liquid from 10 percent to 30 percent of the listed retail sale price.

The bill’s provisions increasing the tax rates for cigarettes, liquid nicotine, and container e-liquid would take effect on August 1, 2025.

The bill would also require inventory reports and the payment of higher rates of tax on the inventories of these products by distributors, wholesalers, and retail suppliers in the State for the time at which the tax rate increases go into effect.

Lastly, the bill would dedicate $2 million of revenue collected from the taxes imposed on liquid nicotine and container e-liquid to the State’s Health Care Subsidy Fund. Under current law, the fund, administered by the Department of Health, annually receives dedicated revenues from a portion of the revenues collected annually from the cigarette tax, as well as the tobacco products wholesale sales and use tax. This bill would add a portion of the revenues collected from the taxes on liquid nicotine and container e-liquid as a dedicated revenue source for the fund.

Modifies tax rate on certain nicotine products.