House File 2080 - Introduced HOUSE FILE 2080 BY STECKMAN , STAED , THEDE , HUNTER , EHLERT , LENSING , DONAHUE , M. SMITH , FORBES , COHOON , WOLFE , B. MEYER , KONFRST , HALL , WILBURN , ANDERSON , MASCHER , KACENA , KURTH , R. SMITH , ABDUL-SAMAD , and DERRY A BILL FOR An Act relating to cigarettes, tobacco products, and vapor 1 products, including the taxation of such products, and 2 making penalties applicable. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5671YH (6) 88 pf/jh

H.F. 2080 Section 1. Section 331.303, subsection 3, Code 2020, is 1 amended to read as follows: 2 3. Act upon applications for cigarette , tobacco product, 3 and vapor product tax permits in accordance with chapter 453A . 4 Sec. 2. Section 331.653, subsection 11, Code 2020, is 5 amended to read as follows: 6 11. Carry out duties relating to the seizure and forfeiture 7 of cigarettes, tobacco products, and vapor products, vehicles, 8 and other property used in violation of cigarette , tobacco 9 product, or vapor product tax laws as provided in section 10 453A.32 . 11 Sec. 3. Section 331.756, subsection 19, Code 2020, is 12 amended to read as follows: 13 19. Assist, at the request of the director of revenue, in 14 the enforcement of cigar and cigarette, tobacco product, and 15 vapor product tax laws as provided in sections 453A.32 and 16 453A.49 . 17 Sec. 4. Section 453A.1, subsection 21, Code 2020, is amended 18 to read as follows: 19 21. “Place of business” is construed to mean and include any 20 place where cigarettes , alternative nicotine products, or vapor 21 products are sold or where cigarettes , alternative nicotine 22 products, or vapor products are stored within or without the 23 state of Iowa by the holder of an Iowa permit or kept for the 24 purpose of sale or consumption; or if sold from any vehicle 25 or train, the vehicle or train on which or from which such 26 cigarettes are sold shall constitute a place of business; 27 or for a business within or without the state that conducts 28 delivery sales, any place where alternative nicotine products 29 or vapor products are sold or where alternative nicotine 30 products or vapor products are kept for the purpose of sale. 31 Sec. 5. Section 453A.1, Code 2020, is amended by adding the 32 following new subsection: 33 NEW SUBSECTION . 29A. “Vapor product solution or substance” 34 means any cartridge or other container of a solution or other 35 -1- LSB 5671YH (6) 88 pf/jh 1/ 8

H.F. 2080 substance, which may or may not contain nicotine, that is 1 intended to be used with an electronic cigarette, electronic 2 cigar, electronic cigarillo, electronic pipe, or similar 3 product or device, whether or not the solution or substance is 4 a component of the device or sold separately. 5 Sec. 6. Section 453A.15, subsections 1, 2, and 4, Code 2020, 6 are amended to read as follows: 7 1. The director may prescribe the forms necessary for the 8 efficient administration of this subchapter and may require 9 uniform books and records to be used and kept by each permit 10 holder or other person as deemed necessary. The director may 11 also require each permit holder or other person to keep and 12 retain in the director’s possession evidence on prescribed 13 forms of all transactions involving the purchase and sale of 14 cigarettes , alternative nicotine products, or vapor products, 15 or the purchase and use of stamps. The evidence shall be kept 16 for a period of three years from the date of each transaction, 17 for the inspection at all times by the department. 18 2. Where a state permit holder sells cigarettes , 19 alternative nicotine products, or vapor products at retail, the 20 holder shall be required to maintain detailed records for sales 21 of cigarettes , alternative nicotine products, or vapor products 22 to be sold at retail and the cigarette , alternative nicotine 23 product, or vapor product sales records shall be kept separate 24 and apart. 25 4. Every permit holder or other person shall, when requested 26 by the department, make additional reports as the department 27 deems necessary and proper and shall at the request of the 28 department furnish full and complete information pertaining to 29 any transaction of the permit holder or other person involving 30 the purchase or sale or use of cigarettes , alternative nicotine 31 products, vapor products, or purchase of cigarette stamps. 32 The director shall specifically prescribe the forms necessary 33 and require each retailer to provide on the forms prescribed, 34 full and complete information pertaining to any cigarettes, 35 -2- LSB 5671YH (6) 88 pf/jh 2/ 8

H.F. 2080 alternative nicotine products, or vapor products offered for 1 sale or sold by the retailer, including the type and brand of 2 the product. 3 Sec. 7. Section 453A.24, Code 2020, is amended to read as 4 follows: 5 453A.24 Carrier to permit access to records. 6 1. Every common carrier or person in this state having 7 custody of books or records showing the transportation of 8 cigarettes , alternative nicotine products, or vapor products 9 both interstate and intrastate shall give and allow the 10 department free access to those books and records. 11 2. The director may require by rule that common carriers 12 or the appropriate persons provide monthly reports to the 13 department detailing all information the department deems 14 necessary on shipments into and out of Iowa of cigarettes , 15 and tobacco products , alternative nicotine products, or vapor 16 products as set forth in this subchapter I and subchapter II 17 of this chapter . The director may require by rule that the 18 reports be filed by electronic transmission. 19 Sec. 8. Section 453A.32, subsection 6, Code 2020, is amended 20 to read as follows: 21 6. The provisions of this section applying to cigarettes 22 shall also apply to tobacco products and vapor products taxed 23 under subchapter II of this chapter . 24 Sec. 9. Section 453A.33, Code 2020, is amended to read as 25 follows: 26 453A.33 Seizure not to affect criminal prosecution. 27 The seizure, forfeiture, and sale of cigarettes, tobacco 28 products, vapor products, and other property under the terms 29 and conditions hereinabove set out pursuant to section 453A.32 , 30 shall not constitute any defense to the person owning or having 31 control or possession of the property from criminal prosecution 32 for any act or omission made or offense committed under this 33 chapter or from liability to pay penalties provided by this 34 chapter . 35 -3- LSB 5671YH (6) 88 pf/jh 3/ 8

H.F. 2080 Sec. 10. Section 453A.35, subsection 1, paragraph b, Code 1 2020, is amended to read as follows: 2 b. The revenues generated from the tax on cigarettes 3 pursuant to section 453A.6, subsection 1 , and from the tax on 4 tobacco products as specified in section 453A.43, subsections 5 1, 2, 3, and 4 , and from the tax on vapor products as specified 6 in section 453A.47D, shall be credited to the health care trust 7 fund created in section 453A.35A . 8 Sec. 11. Section 453A.35A, subsection 1, Code 2020, is 9 amended to read as follows: 10 1. A health care trust fund is created in the office of 11 the treasurer of state. The fund consists of the revenues 12 generated from the tax on cigarettes pursuant to section 13 453A.6, subsection 1 , and from the tax on tobacco products 14 as specified in section 453A.43, subsections 1, 2, 3, and 4 , 15 and from the tax on vapor products as specified in section 16 453A.47D, that are credited to the health care trust fund, 17 annually, pursuant to section 453A.35 . Moneys in the fund 18 shall be separate from the general fund of the state and shall 19 not be considered part of the general fund of the state. 20 However, the fund shall be considered a special account for 21 the purposes of section 8.53 relating to generally accepted 22 accounting principles. Moneys in the fund shall be used only 23 as specified in this section and shall be appropriated only 24 for the uses specified. Moneys in the fund are not subject to 25 section 8.33 and shall not be transferred, used, obligated, 26 appropriated, or otherwise encumbered, except as provided in 27 this section . Notwithstanding section 12C.7, subsection 2 , 28 interest or earnings on moneys deposited in the fund shall be 29 credited to the fund. 30 Sec. 12. Section 453A.40, subsections 1 and 3, Code 2020, 31 are amended to read as follows: 32 1. All persons required to obtain a permit or to be licensed 33 under section 453A.13 or section 453A.44 having in their 34 possession and held for resale on the effective date of an 35 -4- LSB 5671YH (6) 88 pf/jh 4/ 8

H.F. 2080 increase in the tax rate cigarettes, little cigars, or tobacco 1 products , or vapor products upon which the tax under section 2 453A.6 , or 453A.43 , or 453A.47D has been paid, unused cigarette 3 tax stamps which have been paid for under section 453A.8 , 4 unused metered imprints which have been paid for under section 5 453A.12 , or tobacco products for which the tax has not been 6 paid under section 453A.46 , or vapor products for which the tax 7 has not been paid under section 453A.47D, shall be subject to 8 an inventory tax on the items as provided in this section . 9 3. The rate of the inventory tax on each item subject to 10 the tax as specified in subsection 1 is equal to the difference 11 between the amount paid on each item under section 453A.6 , 12 453A.8 , 453A.12 , or 453A.43 , or 453A.47D prior to the tax 13 increase and the amount that is to be paid on each similar item 14 under section 453A.6 , 453A.8 , 453A.12 , or 453A.43 , or 453A.47D 15 after the tax increase except that in computing the rate of the 16 inventory tax any discount allowed or allowable under section 17 453A.8 shall not be considered. 18 Sec. 13. Section 453A.42, subsections 1, 2, 8, 9, 10, 12, 19 14, and 17, Code 2020, are amended to read as follows: 20 1. “Business” means any trade, occupation, activity, 21 or enterprise engaged in for the purpose of selling or 22 distributing tobacco products , alternative nicotine products, 23 or vapor products in this state. 24 2. “Consumer” means any person who has title to or 25 possession of tobacco products , alternative nicotine products, 26 or vapor products in storage, for use or other consumption in 27 this state. 28 8. “Person” means any individual, firm, association, 29 partnership, joint stock company, joint adventure venture , 30 corporation, trustee, agency, or receiver, or any legal 31 representative of any of the foregoing individual, firm, 32 association, partnership, joint stock company, joint venture, 33 corporation, trustee, agency, or receiver . 34 9. “Place of business” means any place where tobacco 35 -5- LSB 5671YH (6) 88 pf/jh 5/ 8

H.F. 2080 products , alternative nicotine products, or vapor products are 1 sold or where tobacco products , alternative nicotine products, 2 or vapor products are manufactured, stored, or kept for the 3 purpose of sale or consumption, including any vessel, vehicle, 4 airplane, train, or vending machine; or for a business within 5 or without the state that conducts delivery sales, any place 6 where alternative nicotine products or vapor products are sold 7 or where alternative nicotine products or vapor products are 8 kept for the purpose of sale, including delivery sales. 9 10. “Retail outlet” means each place of business from which 10 tobacco products , alternative nicotine products, or vapor 11 products are sold to consumers. 12 12. “Sale” means any transfer, exchange, or barter, in any 13 manner or by any means whatsoever, for a consideration, and 14 includes and means all sales made by any person. It includes 15 a gift by a person engaged in the business of selling tobacco 16 products , alternative nicotine products, or vapor products , 17 for advertising, as a means of evading the provisions of this 18 subchapter , or for any other purposes whatsoever . 19 14. “Storage” means any keeping or retention of tobacco 20 products , alternative nicotine products, or vapor products for 21 use or consumption in this state. 22 17. “Use” means the exercise of any right or power 23 incidental to the ownership of tobacco products , alternative 24 nicotine products, or vapor products . 25 Sec. 14. Section 453A.45, subsection 3, Code 2020, is 26 amended to read as follows: 27 3. Every retailer and subjobber shall procure itemized 28 invoices of all tobacco products , alternative nicotine 29 products, and vapor products purchased. The invoices shall 30 show the name and address of the seller and the date of 31 purchase. The retailer and subjobber shall preserve a legible 32 copy of each invoice for three years from the date of purchase. 33 Invoices shall be available for inspection by the director or 34 the director’s authorized agents or employees at the retailer’s 35 -6- LSB 5671YH (6) 88 pf/jh 6/ 8

H.F. 2080 or subjobber’s place of business. 1 Sec. 15. Section 453A.47A, subsection 10, paragraph b, Code 2 2020, is amended to read as follows: 3 b. Every retailer shall, when requested by the department, 4 make additional reports as the department deems necessary and 5 proper and shall at the request of the department furnish 6 full and complete information pertaining to any transaction 7 of the retailer involving the purchase or sale or use of 8 tobacco, tobacco products, alternative nicotine products, or 9 vapor products. The director shall specifically prescribe the 10 forms necessary and require each retailer to provide on the 11 forms prescribed full and complete information pertaining to 12 any tobacco, tobacco products, alternative nicotine products, 13 or vapor products offered for sale or sold by the retailer, 14 including the type and brand of the product. 15 Sec. 16. NEW SECTION . 453A.47D Tax on vapor products. 16 1. A tax is imposed upon all vapor products in this state 17 at the rate of one dollar and thirty-six cents per cartridge 18 or other container of a vapor product solution or substance, 19 whether or not the cartridge or other container of a vapor 20 product solution or substance is a component of the electronic 21 cigarette, electronic cigar, electronic cigarillo, electronic 22 pipe, or similar product or device, or sold separately. 23 2. The tax on vapor products shall be imposed at the point 24 of retail sale to consumers in this state. The amount of the 25 tax shall be added to the selling price of each cartridge or 26 other container sold in this state and shall be collected from 27 the purchaser so that the ultimate consumer bears the burden 28 of the tax. 29 Sec. 17. Section 453A.48, subsection 3, Code 2020, is 30 amended to read as follows: 31 3. The director may exchange information with the officers 32 and agencies of other states administering laws relating to the 33 taxation of tobacco products and vapor products . 34 Sec. 18. Section 453A.51, Code 2020, is amended to read as 35 -7- LSB 5671YH (6) 88 pf/jh 7/ 8

H.F. 2080 follows: 1 453A.51 Assessment of cost of audit. 2 The department may employ auditors or other persons to 3 audit and examine the books and records of a permit holder or 4 other person dealing in tobacco products or vapor products 5 to ascertain whether the permit holder or other person has 6 paid the amount of the taxes required to be paid by the permit 7 holder or other person under the provisions of this chapter . 8 If the taxes have not been paid, as required, the department 9 shall assess against the permit holder or other person, as 10 additional penalty, the reasonable expenses and costs of the 11 investigation and audit. 12 EXPLANATION 13 The inclusion of this explanation does not constitute agreement with 14 the explanation’s substance by the members of the general assembly. 15 This bill relates to the taxing and regulation of 16 cigarettes, tobacco products, alternative nicotine products, 17 and vapor products, by imposing a tax on vapor products in the 18 state at the rate of $1.36 per cartridge or other container of 19 a solution or substance, which may or may not contain nicotine, 20 that is intended to be used with or in a vapor product. The tax 21 is imposed at the point of retail sale on cartridges or other 22 containers sold in the state so that the ultimate consumer 23 bears the burden of the tax. Revenues generated from the tax 24 are credited to the health care trust fund. 25 The bill makes conforming changes to applicable Code 26 provisions. Existing penalties for violations of the 27 provisions of Code chapter 453A (cigarette and tobacco taxes 28 and regulation of alternative nicotine products and vapor 29 products), including permit revocation or suspension and civil 30 penalties, are applicable to violations of the bill. 31 -8- LSB 5671YH (6) 88 pf/jh 8/ 8