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Nicotine Solution Products
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A nicotine solution product is any cartridge, bottle, or other package that contains nicotine in a solution consumed, or meant to be consumed, using a heating element, power source, electronic circuit, or other electronic, chemical, or mechanical means that produces vapor or aerosol.
Any nicotine solution product is considered a tobacco product, regardless of whether the nicotine is made or derived from tobacco.
Common examples of nicotine solution products include but are not limited to:
- Cartridges or pre-filled pods used with vaping devices
- Solutions used in open vape systems
- Devices included within kits (see discussion further below regarding taxation of kits)
Tobacco Tax
Nicotine solution products are subject to Tobacco Tax which is 95% of the wholesale sales price.
For more information on the wholesale sales price, see Minnesota Statute 297F.01, subdivision 23.
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When a distributor sells a cartridge, bottle, or other package of a solution containing nicotine as part of a kit that also includes a product, device, component, part, or accessory, the wholesale sales price is generally the price the distributor paid for the entire kit.
However, if the distributor sells the same exact cartridge, bottle, or other package of solution containing nicotine separately from the kit and can isolate the cost of the cartridge, bottle, or other package of solution containing nicotine, then the kit is taxed on the wholesale sales price of the separately sold solution containing nicotine as well as any federal excise taxes, freight charges, or packaging costs, regardless of whether they were included in the purchase price.
Examples
- A tobacco distributor sells a vaping starter kit to retailers that includes a bottle of a solution containing nicotine and a vaping device. The distributor does not sell the same exact bottle of solution containing nicotine separately from the kit. The Tobacco Tax is calculated on the price at which the distributor purchased the kit along with any applicable taxes, charges, and costs.
- A tobacco distributor sells a vaping starter kit to retailers that includes a cartridge of a solution containing nicotine and a vaping device. The distributor sells the same exact cartridge of solution containing nicotine separately from the kit and can isolate the cost of the separately sold cartridge of solution containing nicotine. The kit is taxed on the wholesale sales price of the separately sold cartridge along with any applicable taxes, charges, or costs.
Additional examples:
| Item |
Subject to Tobacco Tax |
| One-time use e-cigarette that contains nicotine |
Yes |
| Reusable or refillable device only and sold separately from starter kit |
No |
| Cartridges or e-juice containing nicotine |
Yes |
| Cartridges or e-juice with no nicotine |
No |
Here’s what you need to do if you are a distributor, retailer, or consumer. This is not an exhaustive list of all responsibilities.
| I am a... |
So I... |
If I do not, then... |
| Distributor |
Pay Tobacco Tax on all nicotine solution products purchased that contain nicotine regardless if it is derived from tobacco. |
I will be assessed tax, penalty, and interest on any unreported purchases. My license from the commissioner of revenue may be revoked. I may be criminally prosecuted.
|
| Retailer |
Purchase nicotine solution products from distributors licensed by the state of Minnesota.
Must keep all invoices of purchases at the location of retail for at least one year after the invoice date.
Must collect and remit Sales Tax on nicotine solution products sales.
|
My nicotine solution products may be seized as contraband, or I may be assessed tax, penalty, and interest. My license from the local government may be revoked. I may be criminally prosecuted.
|
| Consumer |
Pay Tobacco Use Tax on all non-exempt nicotine solution products that are not purchased through a retailer located in Minnesota. This includes nicotine solution products purchased from online out-of-state retailers. See Tobacco Use Tax Return (Form CT303).
|
I will be assessed tax, penalty, and interest on my purchases. I may be criminally prosecuted.
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