HF 2080 (LSB 5671YH (6) 88)

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 products, including the taxation of such products, and making penalties applicable.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 331.303, subsection 3, Code 2020, is amended to read as follows:
   3.  Act upon applications for cigarette, tobacco product, and vapor product tax permits in accordance with chapter 453A.
    Sec. 2.  Section 331.653, subsection 11, Code 2020, 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 19, Code 2020, is amended to read as follows:
   19.  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.1, subsection 21, Code 2020, is amended to read as follows:
   21.  “Place of business” is construed to mean and include any place where cigarettes, alternative nicotine products, or vapor products are sold or where cigarettes, alternative nicotine products, or vapor products are stored within or without the state of Iowa by the holder of an Iowa permit or kept for the purpose of sale or consumption; or if sold from any vehicle or train, the vehicle or train on which or from which such cigarettes are sold shall constitute a place of business; 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.
    Sec. 5.  Section 453A.1, Code 2020, is amended by adding the following new subsection:
   NEW SUBSECTION.  29A.  “Vapor product solution or substance” means any cartridge or other container of a solution or other substance, which may or may not contain nicotine, that is intended to be used with an electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device, whether or not the solution or substance is a component of the device or sold separately.
    Sec. 6.  Section 453A.15, subsections 1, 2, and 4, Code 2020, are amended to read as follows:
   1.  The director may prescribe the forms necessary for the efficient administration of this subchapter and may require uniform books and records to be used and kept by each permit holder or other person as deemed necessary. The director may also require each permit holder or other person to keep and retain in the director’s possession evidence on prescribed forms of all transactions involving the purchase and sale of cigarettes, alternative nicotine products, or vapor products, or the purchase and use of stamps. The evidence shall be kept for a period of three years from the date of each transaction, for the inspection at all times by the department.
   2.  Where a state permit holder sells cigarettes, alternative nicotine products, or vapor products at retail, the holder shall be required to maintain detailed records for sales of cigarettes, alternative nicotine products, or vapor products to be sold at retail and the cigarette, alternative nicotine product, or vapor product sales records shall be kept separate and apart.
   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, 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, Code 2020, is amended to read as follows:
   453A.24  Carrier to permit access to records.
   1.  Every common carrier or person in this state having custody of books or records showing the transportation of cigarettes, alternative nicotine products, or vapor products both interstate and intrastate shall give and allow the department free access to those books and records.
   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 2020, is amended to read as follows:
   6.  The provisions of this section applying to cigarettes shall also apply to tobacco products and vapor products taxed under subchapter II of this chapter.
    Sec. 9.  Section 453A.33, Code 2020, is amended to read as follows:
   453A.33  Seizure not to affect criminal prosecution.
   The seizure, forfeiture, and sale of cigarettes, tobacco 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 2020, 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 2020, 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.40, subsections 1 and 3, Code 2020, are amended to read as follows:
   1.  All persons required to obtain a permit or to be licensed under section 453A.13 or section 453A.44 having in their possession and held for resale on the effective date of an increase in the tax rate cigarettes, little cigars, or tobacco products, or vapor products upon which the tax under section 453A.6, or 453A.43, or 453A.47D has been paid, unused cigarette tax stamps which have been paid for under section 453A.8, unused metered imprints which have been paid for under section 453A.12, or tobacco products for which the tax has not been paid under section 453A.46, or vapor products for which the tax has not been paid under section 453A.47D, shall be subject to an inventory tax on the items as provided in this section.
   3.  The rate of the inventory tax on each item subject to the tax as specified in subsection 1 is equal to the difference between the amount paid on each item under section 453A.6, 453A.8, 453A.12, or 453A.43, or 453A.47D prior to the tax increase and the amount that is to be paid on each similar item under section 453A.6, 453A.8, 453A.12, or 453A.43, or 453A.47D after the tax increase except that in computing the rate of the inventory tax any discount allowed or allowable under section 453A.8 shall not be considered.
    Sec. 13.  Section 453A.42, subsections 1, 2, 8, 9, 10, 12, 14, and 17, Code 2020, 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, alternative nicotine products, or vapor 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.45, subsection 3, Code 2020, 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. 15.  Section 453A.47A, subsection 10, paragraph b, Code 2020, 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. 16.  NEW SECTION.  453A.47D  Tax on vapor products.
   1.  A tax is imposed upon all vapor products in this state at the rate of one dollar and thirty-six cents per cartridge or other container of a vapor product solution or substance, whether or not the cartridge or other container of a vapor product solution or substance is a component of the electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device, or sold separately.
   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. 17.  Section 453A.48, subsection 3, Code 2020, 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. 18.  Section 453A.51, Code 2020, 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 taxing and regulation of cigarettes, tobacco products, alternative nicotine products, and vapor products, by imposing a tax on vapor products in the state at the rate of $1.36 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 on cartridges or other containers sold in the state so that the ultimate consumer bears the burden of the tax. Revenues generated from the tax are credited to the health care trust fund.
   The bill makes conforming changes to applicable Code provisions. Existing penalties for violations of the provisions of Code chapter 453A (cigarette and tobacco taxes and regulation of alternative nicotine products and vapor products), including permit revocation or suspension and civil penalties, are applicable to violations of the bill.