Vaping Taxes Tempt States but Bring Challenges

San Francisco—home to vaping brand Juul—has banned the sale of e-cigarettes, although cigarettes, other tobacco products, and recreational marijuana remain legal there.

While San Francisco’s move late last month isn’t about tax, it highlights the sometimes awkward situation states find themselves in as they seek to go after new revenue by taxing vaping products.

Taxes on vaping products are either aimed at liquid used in vape pens or apply to sales of vapor products like the pens themselves. The idea is appealing as cigarette sales—and revenue from cigarette taxes—fall. National cigarette sales dropped 41% between 2001 and ...