NJ Poised to Raise Sales Tax on Cigarettes and Vapes in 2026 Budget

the staff of the Ridgewood blog

TRENTON, NJ — As New Jersey lawmakers finalize the $58.1 billion state budget for fiscal year 2026 — the largest in state history — one controversial item appears to be making its way into the final cut: increased sales taxes on cigarettes, vaping products, and internet gaming.

Governor Phil Murphy’s proposed budget, originally unveiled in February, called for a combination of expanded tax exemptions and targeted tax hikes, aimed at bolstering revenue while providing some financial relief to families.

???? What’s Included: Cigarette & Vape Tax Hikes

Among the most significant proposed tax increases are those on tobacco and vaping products:

• Cigarettes: Tax to rise from $2.70 to $3.00 per pack (20 cigarettes) starting August 1, 2025

• Liquid nicotine: Tax to increase from $0.10 to $0.30 per fluid milliliter

• E-liquid containers: Retail tax to rise from 10% to 30% of sale price

The cigarette and vaping tax increases alone are expected to generate $69 million in new revenue.

???? Online Gaming & Sports Betting Tax Changes

Another major revenue stream under review:

• Internet casino gaming tax: Increasing from 15% to 30%

• Internet sports wagering tax: Increasing from 13% to 30%

These changes reflect New Jersey’s ongoing effort to regulate and profit from its thriving online gambling industry.

???? What’s Exempt: Baby Items & Sunscreen

On the flip side, the budget includes new tax exemptions for essential household items:

• Baby products no longer subject to sales tax:

  • Cribs

  • Car seats

  • Nursing bottles and nipples

  • Baby soap, shampoo, lotion, and powder

  • Strollers and child restraint systems

• Sunscreen products (FDA-regulated creams, sprays, lotions, and gels) will also be tax-exempt, provided they are specifically formulated to protect against UV radiation.

Note: Cosmetics or beauty products labeled as “sunscreen” but used primarily for appearance enhancement will not be included in the exemption.

????️ What’s Off the Table?

While originally floated in early budget discussions, the following items do not appear in current legislative committee bills:

• No tax hike on alcohol

• No expanded tax on recreational activities (e.g., bowling, laser tag, go-karting)

⏳ Budget Deadline Approaching

The New Jersey Legislature has until Monday, June 30 to pass the state budget and send it to Governor Murphy’s desk. To avoid a government shutdown, it must be signed into law before midnight.

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