H.F. 2339 Section 1. Section 453A.6, subsection 1, Code 2018, is 1 amended to read as follows: 2 1. There is imposed, and shall be collected and paid to the 3 department, a tax on all cigarettes used or otherwise disposed 4 of in this state for any purpose equal to six and eight-tenths 5 fourteen and three-tenths cents on each cigarette. 6 Sec. 2. Section 453A.6, subsection 8, paragraph a, Code 7 2018, is amended to read as follows: 8 a. Pay directly to the department, in lieu of the tax under 9 subsection 1 , a tax equal to three and six hundredths four 10 and four-tenths cents on each cigarette dispensed from such 11 machine. 12 Sec. 3. Section 453A.15, subsection 4, Code 2018, is amended 13 to read as follows: 14 4. Every permit holder or other person shall, when requested 15 by the department, make additional reports as the department 16 deems necessary and proper and shall at the request of the 17 department furnish full and complete information pertaining to 18 any transaction of the permit holder or other person involving 19 the purchase or sale or use of cigarettes , alternative nicotine 20 products, or vapor products, or purchase of cigarette stamps. 21 The director shall specifically prescribe the forms necessary 22 and require each retailer to provide on the forms prescribed, 23 full and complete information pertaining to any cigarettes, 24 alternative nicotine products, or vapor products offered for 25 sale or sold by the retailer, including the type and brand of 26 the product. 27 Sec. 4. Section 453A.24, subsection 2, Code 2018, is amended 28 to read as follows: 29 2. The director may require by rule that common carriers 30 or the appropriate persons provide monthly reports to the 31 department detailing all information the department deems 32 necessary on shipments into and out of Iowa of cigarettes , 33 and tobacco products , alternative nicotine products, or vapor 34 products, as set forth in this division I and division II 35 -1- LSB 5901YH (4) 87 pf/jh 1/ 18

H.F. 2339 of this chapter . The director may require by rule that the 1 reports be filed by electronic transmission. 2 Sec. 5. Section 453A.32, subsection 6, Code 2018, is amended 3 to read as follows: 4 6. The provisions of this section applying to cigarettes 5 shall also apply to tobacco products , alternative nicotine 6 products, and vapor products taxed under division II of this 7 chapter . 8 Sec. 6. Section 453A.33, Code 2018, is amended to read as 9 follows: 10 453A.33 Seizure not to affect criminal prosecution. 11 The seizure, forfeiture, and sale of cigarettes, tobacco 12 products, alternative nicotine products, vapor products, and 13 other property under the terms and conditions hereinabove set 14 out pursuant to section 453A.32 , shall not constitute any 15 defense to the person owning or having control or possession of 16 the property from criminal prosecution for any act or omission 17 made or offense committed under this chapter or from liability 18 to pay penalties provided by this chapter . 19 Sec. 7. Section 453A.35, subsection 1, paragraph b, Code 20 2018, is amended to read as follows: 21 b. The revenues generated from the tax on cigarettes 22 pursuant to section 453A.6, subsection 1 , and from the tax on 23 tobacco products , alternative nicotine products, and vapor 24 products as specified in section 453A.43, subsections 1, 2, 3, 25 and 4 , shall be credited to the health care trust fund created 26 in section 453A.35A . 27 Sec. 8. Section 453A.35A, Code 2018, is amended to read as 28 follows: 29 453A.35A Health care trust fund. 30 1. A health care trust fund is created in the office of 31 the treasurer of state. The fund consists of the revenues 32 generated from the tax on cigarettes pursuant to section 33 453A.6, subsection 1 , and from the tax on tobacco products , 34 alternative nicotine products, and vapor products as specified 35 -2- LSB 5901YH (4) 87 pf/jh 2/ 18

H.F. 2339 in section 453A.43, subsections 1, 2, 3, and 4 , that are 1 credited to the health care trust fund, annually, pursuant to 2 section 453A.35 . Moneys in the fund shall be separate from 3 the general fund of the state and shall not be considered 4 part of the general fund of the state. However, the fund 5 shall be considered a special account for the purposes of 6 section 8.53 relating to generally accepted accounting 7 principles. Moneys in the fund shall be used only as specified 8 in this section and shall be appropriated only for the uses 9 specified. Moneys in the fund are not subject to section 8.33 10 and shall not be transferred, used, obligated, appropriated, 11 or otherwise encumbered, except as provided in this section . 12 Notwithstanding section 12C.7, subsection 2 , interest or 13 earnings on moneys deposited in the fund shall be credited to 14 the fund. 15 2. Moneys in the fund shall be used only for purposes 16 related to health care including mental health services , 17 substance abuse treatment and prevention, and tobacco use 18 prevention, cessation, and control. The first nine million 19 dollars credited to the fund, annually, shall be used for the 20 purposes of tobacco use prevention, cessation, and control in 21 accordance with the centers for disease control and prevention 22 of the United States department of health and human services’ 23 most recently published best practices for comprehensive 24 tobacco control programs, and the remaining revenue credited, 25 annually, to the fund shall be used first for mental health 26 services followed by the other specified purposes of the fund. 27 Sec. 9. Section 453A.39, subsection 1, Code 2018, is amended 28 to read as follows: 29 1. A manufacturer, distributor, wholesaler, retailer, 30 or distributing agent, or agent thereof an agent of a 31 manufacturer, distributor, wholesaler, retailer, or 32 distributing agent , shall not give away cigarettes , or tobacco 33 products , alternative nicotine products, or vapor products, at 34 any time in connection with the manufacturer’s, distributor’s, 35 -3- LSB 5901YH (4) 87 pf/jh 3/ 18

H.F. 2339 wholesaler’s, retailer’s, or distributing agent’s business or 1 for promotion of the business or product, except as provided in 2 subsection 2 . 3 Sec. 10. Section 453A.40, subsection 1, Code 2018, is 4 amended to read as follows: 5 1. All persons required to obtain a permit or to be licensed 6 under section 453A.13 or section 453A.44 having in their 7 possession and held for resale on the effective date of an 8 increase in the tax rate cigarettes, little cigars, or tobacco 9 products , alternative nicotine products, or vapor products upon 10 which the tax under section 453A.6 or 453A.43 has been paid, 11 unused cigarette tax stamps which have been paid for under 12 section 453A.8 , unused metered imprints which have been paid 13 for under section 453A.12 , or tobacco products , alternative 14 nicotine products, or vapor products for which the tax has 15 not been paid under section 453A.46 shall be subject to an 16 inventory tax on the items as provided in this section . 17 Sec. 11. Section 453A.42, Code 2018, is amended to read as 18 follows: 19 453A.42 Definitions. 20 When used in this division , unless the context clearly 21 indicates otherwise, the following terms shall have the 22 meanings, respectively, ascribed to them in this section : 23 1. “Business” means any trade, occupation, activity, 24 or enterprise engaged in for the purpose of selling or 25 distributing tobacco products , alternative nicotine products, 26 or vapor products in this state. 27 2. “Consumer” means any person who has title to or 28 possession of tobacco products , alternative nicotine products, 29 or vapor products in storage, for use or other consumption in 30 this state. 31 3. “Delivery sale” means any sale of an alternative nicotine 32 product or a vapor product to a purchaser in this state where 33 the purchaser submits the order for such sale by means of a 34 telephonic or other method of voice transmission, mail or any 35 -4- LSB 5901YH (4) 87 pf/jh 4/ 18

H.F. 2339 other delivery service, or the internet or other online service 1 and the alternative nicotine product or vapor product is 2 delivered by use of mail or a delivery service. The sale of an 3 alternative nicotine product or vapor product shall constitute 4 a delivery sale regardless of whether the seller is located 5 in this state. “Delivery sale” does not include a sale to a 6 distributor or retailer of any alternative nicotine product or 7 vapor product not for personal consumption. 8 4. “Director” means the director of the department of 9 revenue. 10 5. “Distributor” means any and each of the following: 11 a. Any person engaged in the business of selling tobacco 12 products , alternative nicotine products, or vapor products 13 in this state who brings, or causes to be brought, into this 14 state from without the state any tobacco products , alternative 15 nicotine products, or vapor products for sale ; . 16 b. Any person who makes, manufactures, or fabricates tobacco 17 products , alternative nicotine products, or vapor products in 18 this state for sale in this state ; . 19 c. Any person engaged in the business of selling tobacco 20 products , alternative nicotine products, or vapor products 21 without this state who ships or transports tobacco products , 22 alternative nicotine products, or vapor products to retailers 23 in this state, to be sold by those retailers. 24 6. “Little cigar” means any roll for smoking which meets all 25 of the following conditions : 26 a. Is made wholly or in part of tobacco, irrespective of 27 size or shape and irrespective of tobacco being flavored, 28 adulterated, or mixed with any other ingredient ; . 29 b. Is not a cigarette as defined in section 453A.1, 30 subsection 4 ; and . 31 c. Either weighs not more than three pounds per thousand, 32 irrespective of retail price, or weighs more than three pounds 33 per thousand and has a retail price of not more than two 34 and one-half cents per little cigar. For purposes of this 35 -5- LSB 5901YH (4) 87 pf/jh 5/ 18

H.F. 2339 subsection , the retail price is the ordinary retail price in 1 this state, not including retail sales tax, use tax, or the tax 2 on little cigars imposed by section 453A.43 . 3 7. “Manufacturer” means a person who manufactures and sells 4 tobacco products , alternative nicotine products, or vapor 5 products . 6 8. “Person” means any individual, firm, association, 7 partnership, joint stock company, joint adventure venture , 8 corporation, trustee, agency, or receiver, or any legal 9 representative of any of the foregoing individual, firm, 10 association, partnership, joint stock company, joint venture, 11 corporation, trustee, agency, or receiver . 12 9. “Place of business” means any place where tobacco 13 products , alternative nicotine products, or vapor products are 14 sold or where tobacco products , alternative nicotine products, 15 or vapor products are manufactured, stored, or kept for the 16 purpose of sale or consumption, including any vessel, vehicle, 17 airplane, train, or vending machine; or for a business within 18 or without the state that conducts delivery sales, any place 19 where alternative nicotine products or vapor products are sold 20 or where alternative nicotine products or vapor products are 21 kept for the purpose of sale, including delivery sales. 22 10. “Retail outlet” means each place of business from which 23 tobacco products , alternative nicotine products, or vapor 24 products are sold to consumers. 25 11. “Retailer” means any person engaged in the business 26 of selling tobacco, tobacco products, alternative nicotine 27 products, or vapor products to ultimate consumers. 28 12. “Sale” means any transfer, exchange, or barter, in any 29 manner or by any means whatsoever, for a consideration, and 30 includes and means all sales made by any person. It includes 31 a gift by a person engaged in the business of selling tobacco 32 products, alternative nicotine products, or vapor products, 33 for advertising, as a means of evading the provisions of this 34 division , or for any other purposes whatsoever. 35 -6- LSB 5901YH (4) 87 pf/jh 6/ 18

H.F. 2339 13. “Snuff” means any finely cut, ground, or powdered 1 tobacco that is not intended to be smoked. 2 14. “Storage” means any keeping or retention of tobacco 3 products , alternative nicotine products, or vapor products for 4 use or consumption in this state. 5 15. “Subjobber” means any person, other than a manufacturer 6 or distributor, who buys tobacco products , alternative nicotine 7 products, or vapor products from a distributor and sells them 8 to persons other than the ultimate consumers. 9 16. “Tobacco products” means cigars; little cigars as 10 defined herein; cheroots; stogies; periques; granulated, plug 11 cut, crimp cut, ready rubbed, and other smoking tobacco; 12 snuff; cavendish; plug and twist tobacco; fine-cut and other 13 chewing tobaccos; shorts; refuse scraps, clippings, cuttings 14 and sweepings of tobacco, and other kinds and forms of tobacco, 15 prepared in such manner as to be suitable for chewing or 16 smoking in a pipe or otherwise, or both for chewing and 17 smoking; but shall not include cigarettes as defined in section 18 453A.1, subsection 4 . 19 17. “Use” means the exercise of any right or power 20 incidental to the ownership of tobacco products , alternative 21 nicotine products, or vapor products . 22 18. “Wholesale sales price” means the established price 23 for which a manufacturer sells a tobacco product , alternative 24 nicotine products, or vapor products to a distributor, 25 exclusive of any discount or other reduction. 26 Sec. 12. Section 453A.43, Code 2018, is amended to read as 27 follows: 28 453A.43 Tax on tobacco products , alternative nicotine 29 products, and vapor products . 30 1. a. A tax is imposed upon all tobacco products , 31 alternative nicotine products, and vapor products in this 32 state and upon any person engaged in business as a distributor 33 of tobacco products, at the rate of twenty-two sixty-seven 34 percent of the wholesale sales price of the tobacco products, 35 -7- LSB 5901YH (4) 87 pf/jh 7/ 18

H.F. 2339 except little cigars and snuff as defined in section 1 453A.42 alternative nicotine products, or vapor products . 2 Notwithstanding the rate of tax imposed under this paragraph 3 “a” on tobacco products, little cigars shall be subject to the 4 tax as specified pursuant to paragraph “b” , and snuff shall be 5 subject to the tax as specified pursuant to paragraph “c” . 6 b. In addition to the tax imposed under paragraph “a” , a 7 tax is imposed upon all tobacco products in this state and upon 8 any person engaged in business as a distributor of tobacco 9 products, at the rate of twenty-eight percent of the wholesale 10 sales price of the tobacco products, except little cigars and 11 snuff as defined in section 453A.42 . 12 c. Notwithstanding the rate of tax imposed pursuant to 13 paragraphs “a” and “b” , if the tobacco product is a cigar, the 14 total amount of the tax imposed pursuant to paragraphs “a” and 15 “b” combined shall not exceed fifty cents per cigar. 16 d. b. Little cigars shall be subject to the same rate of 17 tax imposed upon cigarettes in section 453A.6 , payable at the 18 time and in the manner provided in section 453A.6 ; and stamps 19 shall be affixed as provided in division I of this chapter . 20 c. Snuff shall be subject to the tax as provided in 21 subsections 3 and 4 . 22 e. d. The taxes on tobacco products, excluding little 23 cigars and snuff, alternative nicotine products, and vapor 24 products, as specified pursuant to paragraph “a” , shall be 25 imposed at the time the distributor does any of the following: 26 (1) Brings, or causes to be brought, into this state from 27 outside the state tobacco products , alternative nicotine 28 products, or vapor products for sale. 29 (2) Makes, manufactures, or fabricates tobacco products , 30 alternative nicotine products, or vapor products in this state 31 for sale in this state. 32 (3) Ships or transports tobacco products , alternative 33 nicotine products, or vapor products to retailers in this 34 state, to be sold by those retailers. 35 -8- LSB 5901YH (4) 87 pf/jh 8/ 18

H.F. 2339 2. a. A tax is imposed upon the use or storage by consumers 1 of tobacco products , alternative nicotine products, and vapor 2 products in this state, and upon the consumers, at the rate 3 of twenty-two sixty-seven percent of the cost of the tobacco 4 products , alternative nicotine products, or vapor products . 5 b. In addition to the tax imposed in paragraph “a” , a tax 6 is imposed upon the use or storage by consumers of tobacco 7 products in this state, and upon the consumers, at a rate of 8 twenty-eight percent of the cost of the tobacco products. 9 c. Notwithstanding the rate of tax imposed pursuant to 10 paragraphs “a” and “b” , if the tobacco product is a cigar, the 11 total amount of the tax imposed pursuant to paragraphs “a” and 12 “b” combined shall not exceed fifty cents per cigar. 13 d. b. The taxes imposed by this subsection shall not apply 14 if the taxes imposed by subsection 1 on the tobacco products 15 have been paid. 16 e. c. The taxes imposed under this subsection shall not 17 apply to the use or storage of tobacco products in quantities 18 of: 19 (1) Less than twenty-five cigars. 20 (2) Less than one pound smoking or chewing tobacco or other 21 tobacco products not specifically mentioned herein, in the 22 possession of any one consumer. 23 3. A tax is imposed upon all snuff in this state and upon 24 any person engaged in business as a distributor of snuff at 25 the rate of one dollar and nineteen cents per ounce, with a 26 proportionate tax at the same rate on all fractional parts of 27 an ounce of snuff sixty-seven percent of the wholesale sales 28 price or an amount equal to the tax on cigarettes pursuant to 29 section 453A.6 for each one and two-tenths ounces of snuff, 30 whichever is higher . The tax shall be computed based on the 31 net weight listed by the manufacturer. The tax on snuff 32 shall be imposed at the time the distributor does any of the 33 following: 34 a. Brings or causes to be brought into this state from 35 -9- LSB 5901YH (4) 87 pf/jh 9/ 18

H.F. 2339 outside the state, snuff for sale. 1 b. Makes, manufactures, or fabricates snuff in this state 2 for sale in this state. 3 c. Ships or transports snuff to retailers in this state, to 4 be sold by those retailers. 5 4. a. A tax is imposed upon the use or storage by consumers 6 of snuff in this state, and upon the consumers, at the rate of 7 one dollar and nineteen cents per ounce with a proportionate 8 tax at the same rate on all fractional parts of an ounce of 9 snuff sixty-seven percent of the wholesale sales price or an 10 amount equal to the tax on cigarettes pursuant to section 11 453A.6 for each one and two-tenths ounces of snuff, whichever 12 is higher . The tax shall be computed based on the net weight 13 as listed by the manufacturer. 14 b. The tax imposed by this subsection shall not apply if the 15 tax imposed by subsection 3 on snuff has been paid. 16 c. The tax shall not apply to the use or storage of snuff in 17 quantities of less than ten ounces. 18 5. Any tobacco product , alternative nicotine products, 19 or vapor products with respect to which a tax has once been 20 imposed under this division shall not again be subject to tax 21 under this division , except as provided in section 453A.40 . 22 6. The tax imposed by this section shall not apply with 23 respect to any tobacco product which under the Constitution 24 and laws of the United States may not be made the subject of 25 taxation by this state. 26 7. The tax imposed by this section shall be in addition to 27 all other occupation or privilege taxes or license fees now or 28 hereafter imposed by any city or county. 29 8. All excise taxes collected under this chapter by a 30 distributor or any individual are deemed to be held in trust 31 for the state of Iowa. 32 Sec. 13. Section 453A.44, subsections 1, 3, and 10, Code 33 2018, are amended to read as follows: 34 1. No A person shall not engage in the business of a 35 -10- LSB 5901YH (4) 87 pf/jh 10/ 18

H.F. 2339 distributor or subjobber of tobacco products , alternative 1 nicotine products, or vapor products at any place of business 2 without first having received a license from the director to 3 engage in that business at that place of business. 4 3. A person without this state who ships or transports 5 tobacco products , alternative nicotine products, or vapor 6 products to retailers in this state, to be sold by those 7 retailers, may make application for a license as a distributor, 8 be granted a license by the director, and thereafter be subject 9 to all the provisions of this division and entitled to act as 10 a licensed distributor. 11 10. The director may revoke, cancel, or suspend the 12 license or licenses of any distributor or subjobber for 13 violation of any of the provisions of this division , or 14 any other act applicable to the sale of tobacco products, 15 alternative nicotine products, or vapor products, or any rule 16 or regulations promulgated by the director in furtherance of 17 this division . No license shall be revoked, canceled, or 18 suspended except after notice and a hearing by the director as 19 provided in section 453A.48 . 20 Sec. 14. Section 453A.45, Code 2018, is amended to read as 21 follows: 22 453A.45 Licensees, duties. 23 1. a. Every distributor shall keep at each licensed 24 place of business complete and accurate records for that 25 place of business, including itemized invoices, of tobacco 26 products , alternative nicotine products, and vapor products 27 held, purchased, manufactured, brought in or caused to be 28 brought in from without the state, or shipped or transported to 29 retailers in this state, and of all sales of tobacco products , 30 alternative nicotine products, and vapor products made, except 31 sales to the ultimate consumer. 32 b. When a licensed distributor sells tobacco products , 33 alternative nicotine products, or vapor products exclusively to 34 the ultimate consumer at the address given in the license, an 35 -11- LSB 5901YH (4) 87 pf/jh 11/ 18

H.F. 2339 invoice of those sales is not required, but itemized invoices 1 shall be made of all tobacco products , alternative nicotine 2 products, and vapor products transferred to other retail 3 outlets owned or controlled by that licensed distributor. All 4 books, records, and other papers and documents required by 5 this subsection to be kept shall be preserved for a period 6 of at least three years after the date of the documents or 7 the date of the entries appearing in the records, unless the 8 director, in writing, authorized their destruction or disposal 9 at an earlier date. At any time during usual business hours, 10 the director, or the director’s duly authorized agents or 11 employees, may enter any place of business of a distributor, 12 without a search warrant, and inspect the premises, the records 13 required to be kept under this subsection , and the tobacco 14 products , alternative nicotine products, and vapor products 15 contained therein at the place of business , to determine if all 16 the provisions of this division are being fully complied with. 17 If the director, or any such agent or employee, is denied 18 free access or is hindered or interfered with in making the 19 examination, the license of the distributor at that premises is 20 subject to revocation by the director. 21 2. Every person who sells tobacco products , alternative 22 nicotine products, or vapor products to persons other than the 23 ultimate consumer shall render with each sale itemized invoices 24 showing the seller’s name and address, the purchaser’s name and 25 address, the date of sale, and all prices and discounts. The 26 person shall preserve legible copies of all these invoices for 27 three years from the date of sale. 28 3. Every retailer and subjobber shall procure itemized 29 invoices of all tobacco products , alternative nicotine 30 products, and vapor products purchased. The invoices shall 31 show the name and address of the seller and the date of 32 purchase. The retailer and subjobber shall preserve a legible 33 copy of each invoice for three years from the date of purchase. 34 Invoices shall be available for inspection by the director or 35 -12- LSB 5901YH (4) 87 pf/jh 12/ 18

H.F. 2339 the director’s authorized agents or employees at the retailer’s 1 or subjobber’s place of business. 2 4. Records of all deliveries or shipments of tobacco 3 products , alternative nicotine products, and vapor products 4 from any public warehouse of first destination in this state 5 which is subject to the provisions of and licensed under 6 chapter 554 shall be kept by the warehouse and be available 7 to the director for inspection. They shall show the name and 8 address of the consignee, the date, the quantity of tobacco 9 products , alternative nicotine products, or vapor products 10 delivered, and such other information as the commissioner may 11 require. These records shall be preserved for three years 12 from the date of delivery of the tobacco products , alternative 13 nicotine products, or vapor products . 14 5. a. The transportation of tobacco products , alternative 15 nicotine products, or vapor products into this state by means 16 other than common carrier must be reported to the director 17 within thirty days with the following exceptions: 18 (1) The transportation of not more than fifty cigars, not 19 more than ten ounces of snuff or snuff powder, or not more 20 than one pound of smoking or chewing tobacco or other tobacco 21 products not specifically mentioned herein; specified under 22 this subparagraph. 23 (2) Transportation by a person with a place of business 24 outside the state, who is licensed as a distributor under 25 section 453A.44 , or tobacco products , alternative nicotine 26 products, or vapor products sold by such person to a retailer 27 in this state. 28 b. The report shall be made on forms provided by the 29 director. The director may require by rule that the report be 30 filed by electronic transmission. 31 c. Common carriers transporting tobacco products , 32 alternative nicotine products, or vapor products into this 33 state shall file with the director reports of all such 34 shipments other than those which are delivered to public 35 -13- LSB 5901YH (4) 87 pf/jh 13/ 18

H.F. 2339 warehouses of first destination in this state which are 1 licensed under the provisions of chapter 554 . Such reports 2 shall be filed on or before the tenth day of each month and 3 shall show with respect to deliveries made in the preceding 4 month; the date, point of origin, point of delivery, name 5 of consignee, description and quantity of tobacco products , 6 alternative nicotine products, or vapor products delivered, and 7 such information as the director may otherwise require. 8 d. Any person who fails or refuses to transmit to the 9 director the required reports or whoever refuses to permit the 10 examination of the records by the director shall be guilty of 11 a serious misdemeanor. 12 Sec. 15. Section 453A.46, subsection 1, paragraph a, Code 13 2018, is amended to read as follows: 14 a. On or before the twentieth day of each calendar month 15 every distributor with a place of business in this state shall 16 file a return with the director showing for the preceding 17 calendar month the quantity and wholesale sales price of 18 each tobacco product , alternative nicotine product, or vapor 19 product brought, or caused to be brought, into this state for 20 sale; made, manufactured, or fabricated in this state for sale 21 in this state; and any other information the director may 22 require. Every licensed distributor outside this state shall 23 in like manner file a return with the director showing for 24 the preceding calendar month the quantity and wholesale sales 25 price of each tobacco product , alternative nicotine product, 26 or vapor product shipped or transported to retailers in this 27 state to be sold by those retailers and any other information 28 the director may require. Returns shall be made upon forms 29 furnished or made available in electronic form and prescribed 30 by the director and shall contain other information as the 31 director may require. Each return shall be accompanied by a 32 remittance for the full tax liability shown on the return, less 33 a discount as fixed by the director not to exceed five percent 34 of the tax. Within three years after the return is filed or 35 -14- LSB 5901YH (4) 87 pf/jh 14/ 18

H.F. 2339 within three years after the return became due, whichever is 1 later, the department shall examine it, determine the correct 2 amount of tax, and assess the tax against the taxpayer for any 3 deficiency. The period for examination and determination of 4 the correct amount of tax is unlimited in the case of a false or 5 fraudulent return made with the intent to evade tax, or in the 6 case of a failure to file a return. 7 Sec. 16. Section 453A.46, subsection 6, Code 2018, is 8 amended to read as follows: 9 6. On or before the twentieth day of each calendar month, 10 every consumer who, during the preceding calendar month, 11 has acquired title to or possession of tobacco products , 12 alternative nicotine products, or vapor products for use or 13 storage in this state, upon which tobacco products , alternative 14 nicotine products, or vapor products the tax imposed by 15 section 453A.43 has not been paid, shall file a return with the 16 director showing the quantity of tobacco products , alternative 17 nicotine products, or vapor products so acquired. The return 18 shall be made upon a form furnished and prescribed by the 19 director, and shall contain other information as the director 20 may require. The return shall be accompanied by a remittance 21 for the full unpaid tax liability shown by it. Within three 22 years after the return is filed or within three years after the 23 return became due, whichever is later, the department shall 24 examine it, determine the correct amount of tax, and assess the 25 tax against the taxpayer for any deficiency. The period for 26 examination and determination of the correct amount of tax is 27 unlimited in the case of a false or fraudulent return made with 28 the intent to evade tax, or in the case of a failure to file a 29 return. 30 Sec. 17. Section 453A.47, Code 2018, is amended to read as 31 follows: 32 453A.47 Refunds, credits. 33 Where tobacco products , alternative nicotine products, and 34 vapor products upon which the tax imposed by this division 35 -15- LSB 5901YH (4) 87 pf/jh 15/ 18

H.F. 2339 has been reported and paid are shipped or transported by the 1 distributor to consumers to be consumed without the state 2 or to retailers or subjobbers without the state to be sold 3 by those retailers or subjobbers without the state or are 4 returned to the manufacturer by the distributor or destroyed 5 by the distributor, refund of such tax or credit may be made 6 to the distributor in accordance with regulations prescribed 7 by the director. Any overpayment of the tax imposed under 8 section 453A.43 may be made to the taxpayer in accordance with 9 regulations prescribed by the director. The director shall 10 cause any such refund of tax to be paid out of the general fund 11 of the state, and so much of said fund as may be necessary is 12 hereby appropriated for that purpose. 13 Sec. 18. Section 453A.47A, subsection 10, paragraph b, Code 14 2018, is amended to read as follows: 15 b. Every retailer shall, when requested by the department, 16 make additional reports as the department deems necessary and 17 proper and shall at the request of the department furnish 18 full and complete information pertaining to any transaction 19 of the retailer involving the purchase or sale or use of 20 tobacco, tobacco products, alternative nicotine products, or 21 vapor products. The director shall specifically prescribe the 22 forms necessary and require each retailer to provide on the 23 forms prescribed full and complete information pertaining to 24 any tobacco, tobacco products, alternative nicotine products, 25 or vapor products offered for sale or sold by the retailer, 26 including the type and brand of the product. 27 Sec. 19. Section 453A.48, subsection 3, Code 2018, is 28 amended to read as follows: 29 3. The director may exchange information with the officers 30 and agencies of other states administering laws relating to the 31 taxation of tobacco products , alternative nicotine products, 32 and vapor products . 33 Sec. 20. Section 453A.51, Code 2018, is amended to read as 34 follows: 35 -16- LSB 5901YH (4) 87 pf/jh 16/ 18

H.F. 2339 453A.51 Assessment of cost of audit. 1 The department may employ auditors or other persons to 2 audit and examine the books and records of a permit holder 3 or other person dealing in tobacco products , alternative 4 nicotine products, and vapor products to ascertain whether 5 the permit holder or other person has paid the amount of the 6 taxes required to be paid by the permit holder or other person 7 under the provisions of this chapter . If the taxes have not 8 been paid, as required, the department shall assess against 9 the permit holder or other person, as additional penalty, the 10 reasonable expenses and costs of the investigation and audit. 11 EXPLANATION 12 The inclusion of this explanation does not constitute agreement with 13 the explanation’s substance by the members of the general assembly. 14 This bill relates to cigarettes, tobacco products, 15 alternative nicotine products, and vapor products under Code 16 chapter 453A (cigarette and tobacco taxes and regulation 17 of alternative nicotine products and vapor products). The 18 bill increases the tax on cigarettes and tobacco products 19 and imposes a tax on alternative nicotine products and vapor 20 products such that the tax is equivalent on all products to a 21 tax of $2.86 on a pack of cigarettes. 22 The bill increases the tax imposed on cigarettes from six and 23 eight-tenths cents to fourteen and three-tenths cents on each 24 cigarette, or from $1.36 to $2.86 per pack of 20 cigarettes. 25 The bill increases the tax on cigarettes assembled using 26 loose tobacco products that are inserted into a vending machine 27 from which assembled cigarettes are dispensed from three and 28 six-hundredths cents to four and four-tenths cents, which 29 is equivalent, based on the weight of tobacco used for each 30 cigarette, to the tax on packaged cigarettes. 31 The bill increases the tax on tobacco products from 50 32 percent of the wholesale sales price to 67 percent of the 33 wholesale sales price, and imposes this same tax on alternative 34 nicotine products and vapor products. The bill eliminates the 35 -17- LSB 5901YH (4) 87 pf/jh 17/ 18

H.F. 2339 cap on the tax for cigars which was 50 cents per cigar. 1 The bill makes conforming provisions throughout Code 2 chapter 453A to make administration and collection of the 3 tax on alternative nicotine products and vapor products the 4 same as for tobacco products. The bill provides that of the 5 funds consisting of the revenues generated from the tax on 6 cigarettes, tobacco products, alternative tobacco products, and 7 vapor products, the first $9 million credited to the health 8 care trust fund, annually, is to be used for the purposes of 9 tobacco use prevention, cessation, and control in accordance 10 with the centers for disease control and prevention of the 11 United States department of health and human services’ most 12 recently published best practices for comprehensive tobacco 13 control programs, and the remaining revenue credited, annually, 14 to the fund shall be used first for mental health services 15 followed by other specified purposes of the fund. 16 The bill provides that under the director of revenue’s 17 authorization to require permit holders to make additional 18 reports, the director shall specifically prescribe the forms 19 necessary and require each retailer to provide on the forms 20 prescribed, full and complete information pertaining to any 21 cigarettes, alternative nicotine products, or vapor products 22 offered for sale or sold by the retailer, including the type 23 and brand of the product. 24 -18- LSB 5901YH (4) 87 pf/jh 18/ 18