Nicotine Products Tax

C.R.S. tit. 39, art. 28.6
in effect

C.R.S. § 39-28.6-101 Legislative declaration

39-28.6-101. Legislative declaration. (1) The general assembly hereby finds and declares that: (a) Nicotine is a highly addictive and toxic substance; (b) There has been a significant increase in the use of electronic cigarettes, which heat nicotine, flavorings, and other chemicals to create an aerosol that is inhaled; (c) Children in middle school and high school have reported using electronic cigarettes at alarming rates, and studies have linked electronic cigarette use among youth to nicotine addiction and cigarette smoking; (d) The long-term health risks of this use are unknown, but electronic cigarette aerosol can contain harmful and potentially harmful substances including nicotine, cancer-causing chemicals, heavy metals, flavoring chemicals, ultrafine particles, and volatile organic compounds; (e) Yet nicotine products are not subject to the same excise tax as cigarettes and tobacco products; (f) Taxing nicotine products at the wholesale level will increase the total cost, which may serve as a deterrent to children and adolescents and in turn prevent and reduce consumption; and (g) Revenue from the tax can be used toward positive outcomes in children's lives. (2) Therefore, the general assembly intends to create a tax on nicotine products so that they are taxed in the same manner as tobacco products, including the licensing requirements that facilitate the collection of the tax.

C.R.S. § 39-28.6-102 Definitions

39-28.6-102. Definitions. As used in this article 28.6, unless the context otherwise requires: (1) "Delivery sale" means a sale of nicotine products to a consumer in this state when: (a) The consumer submits an order for the nicotine products to a delivery seller for sale by means other than an over-the-counter sale on the delivery seller's premises, including, but not limited to, telephone or other voice transmission, the mail or other delivery service, or the internet or other online service; and (b) The nicotine products are delivered when the seller is not in the physical presence of the consumer when the consumer obtains possession of the nicotine products by use of a common carrier, private delivery service, mail, or any other means. (2) "Delivery seller" means a person located outside of this state who makes delivery sales. (3) "Department" means the department of revenue. (4) "Distributor" means every person who: (a) First receives nicotine products in this state; (b) Sells nicotine products in this state and is primarily liable for the nicotine products tax on the nicotine products; (c) First sells or offers for sale in this state nicotine products imported into this state from any other state or country; or (d) Makes a delivery sale. (5) (a) "Manufacturer's list price" means, except as provided in subsections (5)(b) and (5)(c) of this section, the invoice price for which a manufacturer or supplier sells a nicotine product to a distributor exclusive of any discount or other reduction. (b) For a delivery seller, if determining the invoice price described in subsection (5)(a) of this section is impracticable, then "manufacturer's list price" means the average of the actual price paid, exclusive of any rebates or discounts applied, for the nicotine product's stock keeping unit during the preceding calendar year. The department may, by written notice to the delivery seller, prospectively require a delivery seller to calculate the tax on the invoice price if the department finds that the delivery seller's use of the average price paid was for the purpose of avoiding tax. (c) For a manufacturer who is also a delivery seller or a retailer, and who sells nicotine products exclusively to consumers and not to suppliers or distributors, "manufacturer's list price" means the manufacturer's cost to manufacture the nicotine product, which includes the manufacturing overhead and the cost of all direct materials and direct labor used. (6) "Modified risk tobacco product" means any tobacco product for which the secretary of the United States department of health and human services has issued an order authorizing the product to be commercially marketed as a modified risk tobacco product in accordance with 21 U.S.C. sec. 387k, or any successor section; except that the term does not include a noncombustible product that produces vapor or aerosol for inhalation from the application of a heating element to a liquid substance containing nicotine. (7) "Nicotine product" means a product that contains nicotine derived from tobacco or created synthetically that is intended for human consumption, whether by vaporizing, chewing, smoking, absorbing, dissolving, inhaling, snorting, sniffing, aerosolizing, or by any other means, and that is not: (a) A cigarette; (b) Tobacco products, as defined in section 39-28.5-101 (14); or (c) A drug, device, or combination product authorized for sale by the United States department of health and human services, as those terms are defined in the "Federal Food, Drug, and Cosmetic Act", 21 U.S.C. sec. 301 et seq. (8) "Sale" means any transfer, exchange, or barter, in any manner or by any means whatsoever, for a consideration, including all sales made by any person. The term includes: (a) A gift by a person engaged in the business of selling nicotine products, for advertising, as a means of evading the provisions of this article 28.6, or for any other purposes whatsoever; and (b) A delivery sale.

C.R.S. § 39-28.6-103 Tax levied

39-28.6-103. Tax levied. (1) There is levied a tax upon the sale, use, consumption, handling, or distribution of all nicotine products in this state, excluding nicotine products that are modified risk tobacco products, at the rate of: (a) Thirty percent of the manufacturer's list price of the nicotine products for the tax levied on and after January 1, 2021, but prior to January 1, 2022; (b) Thirty-five percent of the manufacturer's list price of the nicotine products for the tax levied on and after January 1, 2022, but prior to January 1, 2023; (c) Fifty percent of the manufacturer's list price of the nicotine products for the tax levied on and after January 1, 2023, but prior to July 1, 2024; (d) Fifty-six percent of the manufacturer's list price of the nicotine products for the tax levied on and after July 1, 2024, but prior to July 1, 2027; and (e) Sixty-two percent of the manufacturer's list price of the nicotine products for the tax levied on and after July 1, 2027. (2) There is levied a tax upon the sale, use, consumption, handling, or distribution of nicotine products that are modified risk tobacco products in this state at the rate of: (a) Fifteen percent of the manufacturer's list price of the nicotine products for the tax levied on and after January 1, 2021, but prior to January 1, 2022; (b) Seventeen and one-half percent of the manufacturer's list price of the nicotine products for the tax levied on and after January 1, 2022, but prior to January 1, 2023; (c) Twenty-five percent of the manufacturer's list price of the nicotine products for the tax levied on and after January 1, 2023, but prior to July 1, 2024; (d) Twenty-eight percent of the manufacturer's list price of the nicotine products for the tax levied on and after July 1, 2024, but prior to July 1, 2027; and (e) Thirty-one percent of the manufacturer's list price of the nicotine products for the tax levied on and after July 1, 2027. (3) The tax set forth in this section is collected by the department and is imposed at the time the distributor: (a) Brings, or causes to be brought, into this state from without the state nicotine products for sale; (b) Makes, manufactures, or fabricates nicotine products in this state for sale in this state; (c) Ships or transports nicotine products to retailers in this state to be sold by those retailers; or (d) Makes a delivery sale. (4) Repealed.

C.R.S. § 39-28.6-104 Exempt sales

39-28.6-104. Exempt sales. The tax imposed by section 39-28.6-103 shall not apply with respect to any nicotine products that, under the constitution and laws of the United States, may not be made the subject of taxation by this state. A person shall report the exempt sales to the department, as required by the department.

C.R.S. § 39-28.6-105 Licensing required - rules - fines

39-28.6-105. Licensing required - rules - fines. Beginning January 1, 2021, it is unlawful for any person to engage in the business of a distributor of nicotine products at any place of business without first obtaining a license granted and issued by the department, which license is in effect until June 30 following the date of issue, unless sooner revoked. The department shall grant a license only to a person who owns or operates the place from which the person engages in the business of a distributor of nicotine products, and, if the business is operated in two or more separate places by the person, a separate license for each place of business is required. A license may be renewed only upon timely application and payment of the required fee prior to expiration. A license may be transferred in the discretion of and pursuant to the rules adopted by the department. The fee for a license is ten dollars per year, and the fee is credited to the general fund. The fee is reduced at the rate of two dollars and fifty cents for each expired quarter of the license year. The department shall, on reasonable notice and after a hearing, suspend or revoke the license of any person violating any provision of this article 28.6, and the department shall not issue a license to the same person within a period of two years thereafter. The department may share information on the names and addresses of persons who purchased nicotine products for resale with the department of public health and environment and county and district public health agencies. The department shall refuse to issue a new or renewal distributor license, and shall revoke a distributor's license, if the distributor owes the state any delinquent taxes administered by the department or interest thereon pursuant to this title 39 that have been determined by law to be due and unpaid, unless the distributor has entered into an agreement approved by the department to pay the amount due. The department shall only issue a new or renewal distributor license to a distributor that has a current license issued pursuant to section 39-26-103.

C.R.S. § 39-28.6-106 Books and records to be preserved

39-28.6-106. Books and records to be preserved. (1) Every distributor shall keep at each licensed place of business complete and accurate records for that place of business, including itemized invoices of nicotine products held, purchased, manufactured, brought in or caused to be brought in from without the state, or shipped or transported to retailers in this state, and of all sales of nicotine products made, except sales to the ultimate consumer within the state. (2) The distributor's records must show the names and addresses of purchasers, the inventory of all nicotine products on hand, and other pertinent papers and documents relating to the purchase, sale, or disposition of nicotine products. (3) When a licensed distributor sells nicotine products exclusively to the ultimate consumer within the state at the address given in the license, no invoice of those sales is required, but the licensed distributor shall make itemized invoices of all nicotine products transferred to other retail outlets owned or controlled by that licensed distributor. A distributor shall preserve all books, records, and other papers and documents required by this section to be kept for a period of at least three years after the date of the documents, unless the department, in writing, authorizes their destruction or disposal at an earlier date. (4) (a) Every retailer that is not also a licensed distributor shall keep at its place of business complete and accurate records to show that all nicotine products received by the retailer were purchased from a licensed distributor. The retailer shall provide a copy of such records to the department if so requested. The department may establish the acceptable form of such records. (b) The general assembly shall appropriate money for any expenses incurred by the department related to enforcing subsection (4)(a) of this section from the tobacco tax enforcement cash fund created in section 39-28-107 (1)(b).

C.R.S. § 39-28.6-107 Returns and remittance of tax - civil penalty - rules

39-28.6-107. Returns and remittance of tax - civil penalty - rules. (1) Every distributor shall file a return with the department each quarter. The return, which must be upon forms prescribed and furnished by the department, must contain, among other things, the total amount of nicotine products purchased by the distributor during the preceding quarter and the tax due thereon. (2) Every distributor shall file a return with the department by the twentieth day of the month following the month reported and shall therewith remit the amount of tax due, less one and one-tenth percent of any amount remitted to cover the distributor's expense in the collection and remittance of the tax. If any distributor is delinquent in remitting the tax, other than in unusual circumstances shown to the satisfaction of the executive director of the department, the distributor is not allowed to retain any amounts to cover his or her expense in collecting and remitting the tax and, in addition, the penalty imposed under section 39-28.6-111 (2)(b) applies. (3) The department shall require distributors to use electronic funds transfers to remit tax payments due pursuant to this article 28.6 to the department and shall require distributors to file tax returns electronically. The department may promulgate rules governing electronic payment and filing. (4) (a) Any person, firm, limited liability company, partnership, or corporation, other than a distributor, in possession of nicotine products for which taxes have not otherwise been remitted pursuant to this section is liable and responsible for the uncollected tax that is levied pursuant to section 39-28.6-103 on behalf of the distributor who failed to pay the tax. The person or entity shall make the payment to the department within thirty days of first taking possession of the nicotine product. The department shall establish a form to be used for remittance of the payment. The department shall remit the proceeds it receives pursuant to this subsection (4)(a) to the state treasurer, and the state treasurer shall credit fifteen percent of the proceeds to the tobacco tax enforcement cash fund created in section 39-28-107 (1)(b) and eighty-five percent to the old age pension fund created in section 1 of article XXIV of the state constitution. (b) The executive director of the department may impose a civil penalty on any person, firm, limited liability company, partnership, or corporation in possession of nicotine products that fails to make a payment required pursuant to subsection (4)(a) of this section or who is a distributor by virtue of being the first person who receives the nicotine products in the state and who fails to make a payment required pursuant to this section in an amount that does not exceed five hundred percent of such payment. The department shall remit any money received pursuant to this subsection (4)(b) to the state treasurer for deposit in the tobacco tax enforcement cash fund created in section 39-28-107 (1)(b).

C.R.S. § 39-28.6-108 When credit may be obtained for tax paid

39-28.6-108. When credit may be obtained for tax paid. Where nicotine products, upon which the tax imposed by this article 28.6 has been reported and paid, are shipped or transported by the distributor to retailers without the state to be sold by those retailers, are shipped or transported by the distributor to a consumer without the state on or after January 1, 2021, or are returned to the manufacturer by the distributor or destroyed by the distributor, credit of such tax may be made to the distributor in accordance with regulations prescribed by the department.

C.R.S. § 39-28.6-109 Distribution of tax collected

39-28.6-109. Distribution of tax collected. (1) The state treasurer shall credit the money collected for payment of the tax imposed under this article 28.6 to the old age pension fund created in section 1 of article XXIV of the state constitution in accordance with section 2 (a) and (f) of article XXIV of the state constitution and shall further transfer an amount equal to this amount to the general fund in accordance with section 7 (c) of article XXIV of the state constitution. (2) The state treasurer shall transfer an amount equal to the tax imposed under this article 28.6 from the general fund to the 2020 tax holding fund created in section 24-22-118 (1).

C.R.S. § 39-28.6-110 Taxation by cities and towns

39-28.6-110. Taxation by cities and towns. This article 28.6 does not prevent a statutory or home rule municipality, county, or city and county from imposing, levying, and collecting any special sales tax upon sales of cigarettes, tobacco products, or nicotine products, as that term is defined in section 18-13-121 (5), or upon the occupation or privilege of selling cigarettes, tobacco products, or nicotine products. This article 28.6 does not affect any existing authority of local governments to impose a special sales tax on cigarettes, tobacco products, or nicotine products, in accordance with section 39-28-112, to be used for local and governmental purposes.

C.R.S. § 39-28.6-111 Prohibited acts - penalties

39-28.6-111. Prohibited acts - penalties. (1) Beginning January 1, 2021, it is unlawful for any distributor to sell and distribute any nicotine products in this state without a license as required in section 39-28.6-105, or to willfully make any false or fraudulent return or false statement on any return, or to willfully evade the payment of the tax, or any part thereof, as imposed by this article 28.6. Any distributor or agent thereof who willfully violates any provision of this article 28.6 is subject to punishment as provided by section 39-21-118. (2) (a) If a person neglects or refuses to make a return as required by this article 28.6 and no amount of tax is due, the executive director of the department shall impose a penalty in the amount of twenty-five dollars. (b) If a person fails to pay the tax in the time allowed in section 39-28.6-107, a penalty equal to ten percent of the tax plus one-half of one percent per month from the date when due, together with interest on such delinquent taxes at the rate computed under section 39-21-110.5, applies. (c) In computing and assessing the penalty, penalty interest, and interest pursuant to subsection (2)(b) of this section, the executive director of the department may make an estimate, based upon information as may be available, of the amount of taxes due for the period for which the taxpayer is delinquent.

C.R.S. § 39-28.6-112 Revenue and spending limitations

39-28.6-112. Revenue and spending limitations. Notwithstanding any limitations on revenue, spending, or appropriations contained in section 20 of article X of the state constitution or any other provision of law, any revenue generated by the tax imposed by this article 28.6 approved by the voters at the statewide election in November 2020 may be collected and spent as a voter-approved revenue change.
Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://leg.colorado.gov/sites/default/files/images/olls/crs2024-title-39.docxFetched: 10/6/2026

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