SF 497 (LSB 2716XS (7) 88)

SENATE FILE 497

BY  CELSI, HOGG, PETERSEN, BOLKCOM, QUIRMBACH, and T. TAYLOR

A BILL FOR

An Act relating to cigarettes, tobacco products, and vapor products, including taxation of such products.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 331.303, subsection 3, Code 2019, is amended to read as follows:
   3.  Act upon applications for cigarette tax, tobacco product, alternative nicotine product, and vapor product permits in accordance with chapter 453A.
    Sec. 2.  Section 331.653, subsection 11, Code 2019, is amended to read as follows:
   11.  Carry out duties relating to the seizure and forfeiture of cigarettes, tobacco products, and vapor products, vehicles, and other property used in violation of cigarette, tobacco product, or vapor product tax laws as provided in section 453A.32.
    Sec. 3.  Section 331.756, subsection 20, Code 2019, is amended to read as follows:
   20.  Assist, at the request of the director of revenue, in the enforcement of cigar and cigarette, tobacco product, and vapor product tax laws as provided in sections 453A.32 and 453A.49.
    Sec. 4.  Section 453A.6, subsection 1, Code 2019, is amended to read as follows:
   1.  There is imposed, and shall be collected and paid to the department, a tax on all cigarettes used or otherwise disposed of in this state for any purpose equal to six and eight-tenths fourteen and three-tenths cents on each cigarette.
    Sec. 5.  Section 453A.6, subsection 8, paragraph a, Code 2019, is amended to read as follows:
   a.  Pay directly to the department, in lieu of the tax under subsection 1, a tax equal to three and six hundredths four and four-tenths cents on each cigarette dispensed from such machine.
    Sec. 6.  Section 453A.15, subsection 4, Code 2019, is amended to read as follows:
   4.  Every permit holder or other person shall, when requested by the department, make additional reports as the department deems necessary and proper and shall at the request of the department furnish full and complete information pertaining to any transaction of the permit holder or other person involving the purchase or sale or use of cigarettes, alternative nicotine products, or vapor products, or purchase of cigarette stamps.  The director shall specifically prescribe the forms necessary and require each retailer to provide on the forms prescribed, full and complete information pertaining to any cigarettes, alternative nicotine products, or vapor products offered for sale or sold by the retailer, including the type and brand of the product.
    Sec. 7.  Section 453A.24, subsection 2, Code 2019, is amended to read as follows:
   2.  The director may require by rule that common carriers or the appropriate persons provide monthly reports to the department detailing all information the department deems necessary on shipments into and out of Iowa of cigarettes, and tobacco products, alternative nicotine products, or vapor products, as set forth in this subchapter I and subchapter II of this chapter. The director may require by rule that the reports be filed by electronic transmission.
    Sec. 8.  Section 453A.32, subsection 6, Code 2019, is amended to read as follows:
   6.  The provisions of this section applying to cigarettes shall also apply to tobacco products, alternative nicotine products, and vapor products taxed under subchapter II of this chapter.
    Sec. 9.  Section 453A.33, Code 2019, is amended to read as follows:
   453A.33  Seizure not to affect criminal prosecution.
   The seizure, forfeiture, and sale of cigarettes, tobacco products, alternative nicotine products, vapor products, and other property under the terms and conditions hereinabove set out pursuant to section 453A.32, shall not constitute any defense to the person owning or having control or possession of the property from criminal prosecution for any act or omission made or offense committed under this chapter or from liability to pay penalties provided by this chapter.
    Sec. 10.  Section 453A.35, subsection 1, paragraph b, Code 2019, is amended to read as follows:
   b.  The revenues generated from the tax on cigarettes pursuant to section 453A.6, subsection 1, and from the tax on tobacco products as specified in section 453A.43, subsections 1, 2, 3, and 4, and from the tax on vapor products as specified in section 453A.47D, shall be credited to the health care trust fund created in section 453A.35A.
    Sec. 11.  Section 453A.35A, subsection 1, Code 2019, is amended to read as follows:
   1.  A health care trust fund is created in the office of the treasurer of state. The fund consists of the revenues generated from the tax on cigarettes pursuant to section 453A.6, subsection 1, and from the tax on tobacco products as specified in section 453A.43, subsections 1, 2, 3, and 4, and from the tax on vapor products as specified in section 453A.47D, that are credited to the health care trust fund, annually, pursuant to section 453A.35. Moneys in the fund shall be separate from the general fund of the state and shall not be considered part of the general fund of the state. However, the fund shall be considered a special account for the purposes of section 8.53 relating to generally accepted accounting principles. Moneys in the fund shall be used only as specified in this section and shall be appropriated only for the uses specified. Moneys in the fund are not subject to section 8.33 and shall not be transferred, used, obligated, appropriated, or otherwise encumbered, except as provided in this section. Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys deposited in the fund shall be credited to the fund.
    Sec. 12.  Section 453A.39, subsection 1, Code 2019, is amended to read as follows:
   1.  A manufacturer, distributor, wholesaler, retailer, or distributing agent, or an agent thereof of a manufacturer, distributor, wholesaler, retailer, or distributing agent, shall not give away cigarettes, or tobacco products, alternative nicotine products, or vapor products, at any time in connection with the manufacturer’s, distributor’s, wholesaler’s, retailer’s, or distributing agent’s business or for promotion of the business or product, except as provided in subsection 2.
    Sec. 13.  Section 453A.42, subsections 1, 2, 8, 9, 10, 12, 14, and 17, Code 2019, are amended to read as follows:
   1.  “Business” means any trade, occupation, activity, or enterprise engaged in for the purpose of selling or distributing tobacco products, alternative nicotine products, or vapor products in this state.
   2.  “Consumer” means any person who has title to or possession of tobacco products, alternative nicotine products, or vapor products in storage, for use or other consumption in this state.
   8.  “Person” means any individual, firm, association, partnership, joint stock company, joint adventure venture, corporation, trustee, agency, or receiver, or any legal representative of any of the foregoing individual, firm, association, partnership, joint stock company, joint venture, corporation, trustee, agency, or receiver.
   9.  “Place of business” means any place where tobacco products are sold or where tobacco products, alternative nicotine products, or vapor products are manufactured, stored, or kept for the purpose of sale or consumption, including any vessel, vehicle, airplane, train, or vending machine; or for a business within or without the state that conducts delivery sales, any place where alternative nicotine products or vapor products are sold or where alternative nicotine products or vapor products are kept for the purpose of sale, including delivery sales.
   10.  “Retail outlet” means each place of business from which tobacco products, alternative nicotine products, or vapor products are sold to consumers.
   12.  “Sale” means any transfer, exchange, or barter, in any manner or by any means whatsoever, for a consideration, and includes and means all sales made by any person. It includes a gift by a person engaged in the business of selling tobacco products, alternative nicotine products, or vapor products for advertising, as a means of evading the provisions of this subchapter, or for any other purposes whatsoever.
   14.  “Storage” means any keeping or retention of tobacco products, alternative nicotine products, or vapor products for use or consumption in this state.
   17.  “Use” means the exercise of any right or power incidental to the ownership of tobacco products, alternative nicotine products, or vapor products.
    Sec. 14.  Section 453A.43, Code 2019, is amended to read as follows:
   453A.43  Tax on tobacco products.
   1.  a.  A tax is imposed upon all tobacco products in this state and upon any person engaged in business as a distributor of tobacco products, at the rate of twenty-two seventy-five percent of the wholesale sales price of the tobacco products, except little cigars and snuff as defined in section 453A.42.  Notwithstanding the rate of the tax imposed under this paragraph “a” on tobacco products, little cigars shall be subject to the tax as specified pursuant to paragraph “c”, and snuff shall be subject to the tax as specified pursuant to paragraph “d”.
   b.  In addition to the tax imposed under paragraph “a”, a tax is imposed upon all tobacco products in this state and upon any person engaged in business as a distributor of tobacco products, at the rate of twenty-eight percent of the wholesale sales price of the tobacco products, except little cigars and snuff as defined in section 453A.42.
   c.  b.  Notwithstanding the rate of tax imposed pursuant to paragraphs paragraph “a” and “b”, if the tobacco product is a cigar, the total amount of the tax imposed pursuant to paragraphs paragraph “a” and “b” combined shall not exceed fifty cents one dollar per cigar.
   d.  c.  Little cigars shall be subject to the same rate of tax imposed upon cigarettes in section 453A.6, payable at the time and in the manner provided in section 453A.6; and stamps shall be affixed as provided in subchapter I of this chapter.
   d.  Snuff shall be subject to the tax as provided in subsections 3 and 4.
   e.  The taxes on tobacco products, excluding little cigars and snuff, shall be imposed at the time the distributor does any of the following:
   (1)  Brings, or causes to be brought, into this state from outside the state tobacco products for sale.
   (2)  Makes, manufactures, or fabricates tobacco products in this state for sale in this state.
   (3)  Ships or transports tobacco products to retailers in this state, to be sold by those retailers.
   2.  a.  A tax is imposed upon the use or storage by consumers of tobacco products in this state, and upon the consumers, at the rate of twenty-two seventy-five percent of the cost of the tobacco products.
   b.  In addition to the tax imposed in paragraph “a”, a tax is imposed upon the use or storage by consumers of tobacco products in this state, and upon the consumers, at a rate of twenty-eight percent of the cost of the tobacco products.
   c.  Notwithstanding the rate of tax imposed pursuant to paragraphs “a” and “b”, if the tobacco product is a cigar, the total amount of the tax imposed pursuant to paragraphs “a” and “b” combined shall not exceed fifty cents per cigar.
   d.  b.  The taxes imposed by this subsection shall not apply if the taxes imposed by subsection 1 on the tobacco products have been paid.
   e.  c.  The taxes imposed under this subsection shall not apply to the use or storage of tobacco products in quantities of:
   (1)  Less than twenty-five cigars.
   (2)  Less than one pound smoking or chewing tobacco or other tobacco products not specifically mentioned herein in this chapter, in the possession of any one consumer.
   3.  A tax is imposed upon all snuff in this state and upon any person engaged in business as a distributor of snuff at the rate of one dollar and nineteen cents per ounce, with a proportionate tax at the same rate on all fractional parts of an ounce of snuff seventy-five percent of the wholesale sales price. The tax shall be computed based on the net weight listed by the manufacturer. The tax on snuff shall be imposed at the time the distributor does any of the following:
   a.  Brings or causes to be brought into this state from outside the state, snuff for sale.
   b.  Makes, manufactures, or fabricates snuff in this state for sale in this state.
   c.  Ships or transports snuff to retailers in this state, to be sold by those retailers.
   4.  a.  A tax is imposed upon the use or storage by consumers of snuff in this state, and upon the consumers, at the rate of one dollar and nineteen cents per ounce with a proportionate tax at the same rate on all fractional parts of an ounce of snuff seventy-five percent of the wholesale sales price. The tax shall be computed based on the net weight as listed by the manufacturer.
   b.  The tax imposed by this subsection shall not apply if the tax imposed by subsection 3 on snuff has been paid.
   c.  The tax shall not apply to the use or storage of snuff in quantities of less than ten ounces.
   5.  Any tobacco product with respect to which a tax has once been imposed under this subchapter shall not again be subject to tax under this subchapter, except as provided in section 453A.40.
   6.  The tax imposed by this section shall not apply with respect to any tobacco product which under the Constitution and laws of the United States may not be made the subject of taxation by this state.
   7.  The tax imposed by this section shall be in addition to all other occupation or privilege taxes or license fees now or hereafter imposed by any city or county.
   8.  All excise taxes collected under this chapter by a distributor or any individual are deemed to be held in trust for the state of Iowa.
    Sec. 15.  Section 453A.45, subsection 3, Code 2019, is amended to read as follows:
   3.  Every retailer and subjobber shall procure itemized invoices of all tobacco products, alternative nicotine products, and vapor products purchased. The invoices shall show the name and address of the seller and the date of purchase. The retailer and subjobber shall preserve a legible copy of each invoice for three years from the date of purchase. Invoices shall be available for inspection by the director or the director’s authorized agents or employees at the retailer’s or subjobber’s place of business.
    Sec. 16.  Section 453A.47A, subsection 10, paragraph b, Code 2019, is amended to read as follows:
   b.  Every retailer shall, when requested by the department, make additional reports as the department deems necessary and proper and shall at the request of the department furnish full and complete information pertaining to any transaction of the retailer involving the purchase or sale or use of tobacco, tobacco products, alternative nicotine products, or vapor products.  The director shall specifically prescribe the forms necessary and require each retailer to provide on the forms prescribed full and complete information pertaining to any tobacco, tobacco products, alternative nicotine products, or vapor products offered for sale or sold by the retailer, including the type and brand of the product.
    Sec. 17.  NEW SECTION.  453A.47D  Tax on vapor products.
   1.  A tax is imposed upon all vapor products in this state at the rate of five dollars per cartridge or other container of a solution or other substance, which may or may not contain nicotine, that is intended to be used with or in a vapor product.
   2.  The tax on vapor products shall be imposed at the point of retail sale to consumers in this state. The amount of the tax shall be added to the selling price of each cartridge or other container sold in this state and shall be collected from the purchaser so that the ultimate consumer bears the burden of the tax.
    Sec. 18.  Section 453A.48, subsection 3, Code 2019, is amended to read as follows:
   3.  The director may exchange information with the officers and agencies of other states administering laws relating to the taxation of tobacco products and vapor products.
    Sec. 19.  Section 453A.51, Code 2019, is amended to read as follows:
   453A.51  Assessment of cost of audit.
   The department may employ auditors or other persons to audit and examine the books and records of a permit holder or other person dealing in tobacco products or vapor products to ascertain whether the permit holder or other person has paid the amount of the taxes required to be paid by the permit holder or other person under the provisions of this chapter. If the taxes have not been paid, as required, the department shall assess against the permit holder or other person, as additional penalty, the reasonable expenses and costs of the investigation and audit.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the taxes on cigarettes, tobacco products, and vapor products.
   The bill increases the tax imposed on cigarettes from six and eight-tenths cents to fourteen and three-tenths cents on each cigarette, or from $1.36 to $2.86 per pack of 20 cigarettes.
   The bill increases the tax on cigarettes assembled using loose tobacco products that are inserted into a vending machine from which assembled cigarettes are dispensed from three and six-hundredths cents to four and four-tenths cents, which is equivalent, based on the weight of tobacco used for each cigarette, to the tax on packaged cigarettes.
   The bill increases the tax on tobacco products from 50 percent of the wholesale sales price to 75 percent of the wholesale sales price. The bill amends the cap on the tax for cigars from 50 cents per cigar to $1 per cigar.
   The bill imposes a tax on vapor products in the state at the rate of $5 per cartridge or other container of a solution or substance, which may or may not contain nicotine, that is intended to be used with or in a vapor product.
   The tax is imposed at the point of retail sale to cartridges or other containers in the state so that the ultimate consumer bears the burden of the tax.
   The bill make other conforming changes.