New Law Regulates Online Sales of E-Cigarettes; Sales Tax Now Levied

Sep 1, 2017

Alternative nicotine products purchased online in Iowa are now subject to sales taxes for the first time under a new law that went into effect July 1st.  

Up to now, electronic cigarettes and vaping products could only legally be sold in Iowa stores and vending machines.     

Now online companies must acquire permits, restrict sales to those 18 or older, and collect state and local option sales taxes.  

"Time will tell if that number grows." Nicole Watson, Iowa Department of Revenue

So far only a handful of online sellers have acquired permits.

“I think time will tell if that number grows or not,” said Nicole Watson at the Iowa Department of Revenue.

Upon delivery of the online product, the law requires the signature of a person over the age of 18.    

Officials at the Alcoholic Beverages Division say they are discussing how to enforce that.

“There are a number of challenges especially with a lot of these retailers are likely located out of the state,” said Tobacco Program Coordinator Jessica Ekman, “which is why currently we're still in the discussion and planning phase.”

Ekman says they’re looking at how to fold the online sales into the current program for monitoring underage retail sales of products containing nicotine.    

"There are a number of challenges." Jessica Ekman, Iowa Alcoholic Beverages Division

The Department of Revenue could not say how much sales tax revenue the law will generate.

“The law became effective on July 1,” Watson said.  “So in terms of filing sales tax we may not have that information yet for those sellers because they have not yet reached a filing deadline.”

The law was part of a last-minute catch-all spending bill the legislature passed in the waning days of the 2017 legislative session, at the request of Republican leaders in the Senate.

“The fact is it’s happening right now,” said Sen. Charles Schneider (R-West Des Moines.)  “We want to make sure that sellers of vaping products are verifying that the purchasers of those products are at least eighteen and they ought to be paying sales tax to the state.”