H.F. 467 Section 1. Section 331.303, subsection 3, Code 2019, is 1 amended to read as follows: 2 3. Act upon applications for cigarette tax , tobacco 3 product, alternative nicotine product, and vapor product 4 permits in accordance with chapter 453A . 5 Sec. 2. Section 331.653, subsection 11, Code 2019, is 6 amended to read as follows: 7 11. Carry out duties relating to the seizure and forfeiture 8 of cigarettes, tobacco products, alternative nicotine products, 9 and vapor products, vehicles, and other property used in 10 violation of cigarette , tobacco product, alternative nicotine 11 product, or vapor product tax laws as provided in section 12 453A.32 . 13 Sec. 3. Section 331.756, subsection 20, Code 2019, is 14 amended to read as follows: 15 20. Assist, at the request of the director of revenue, 16 in the enforcement of cigar and cigarette, tobacco product, 17 alternative nicotine product, and vapor product tax laws as 18 provided in sections 453A.32 and 453A.49 . 19 Sec. 4. Section 453A.6, subsection 1, Code 2019, is amended 20 to read as follows: 21 1. There is imposed, and shall be collected and paid to the 22 department, a tax on all cigarettes used or otherwise disposed 23 of in this state for any purpose equal to six and eight-tenths 24 fourteen and three-tenths cents on each cigarette. 25 Sec. 5. Section 453A.6, subsection 8, paragraph a, Code 26 2019, is amended to read as follows: 27 a. Pay directly to the department, in lieu of the tax under 28 subsection 1 , a tax equal to three and six hundredths four 29 and four-tenths cents on each cigarette dispensed from such 30 machine. 31 Sec. 6. Section 453A.15, subsection 4, Code 2019, is amended 32 to read as follows: 33 4. Every permit holder or other person shall, when requested 34 by the department, make additional reports as the department 35 -1- LSB 1917YH (9) 88 pf/jh 1/ 19

H.F. 467 deems necessary and proper and shall at the request of the 1 department furnish full and complete information pertaining to 2 any transaction of the permit holder or other person involving 3 the purchase or sale or use of cigarettes , alternative nicotine 4 products, or vapor products, or purchase of cigarette stamps. 5 The director shall specifically prescribe the forms necessary 6 and require each retailer to provide on the forms prescribed, 7 full and complete information pertaining to any cigarettes, 8 alternative nicotine products, or vapor products offered for 9 sale or sold by the retailer, including the type and brand of 10 the product. 11 Sec. 7. Section 453A.24, subsection 2, Code 2019, is amended 12 to read as follows: 13 2. The director may require by rule that common carriers 14 or the appropriate persons provide monthly reports to the 15 department detailing all information the department deems 16 necessary on shipments into and out of Iowa of cigarettes , 17 and tobacco products , alternative nicotine products, or vapor 18 products, as set forth in this subchapter I and subchapter II 19 of this chapter . The director may require by rule that the 20 reports be filed by electronic transmission. 21 Sec. 8. Section 453A.32, subsection 6, Code 2019, is amended 22 to read as follows: 23 6. The provisions of this section applying to cigarettes 24 shall also apply to tobacco products , alternative nicotine 25 products, and vapor products taxed under subchapter II of this 26 chapter . 27 Sec. 9. Section 453A.33, Code 2019, is amended to read as 28 follows: 29 453A.33 Seizure not to affect criminal prosecution. 30 The seizure, forfeiture, and sale of cigarettes, tobacco 31 products, alternative nicotine products, vapor products, and 32 other property under the terms and conditions hereinabove set 33 out pursuant to section 453A.32 , shall not constitute any 34 defense to the person owning or having control or possession of 35 -2- LSB 1917YH (9) 88 pf/jh 2/ 19

H.F. 467 the property from criminal prosecution for any act or omission 1 made or offense committed under this chapter or from liability 2 to pay penalties provided by this chapter . 3 Sec. 10. Section 453A.35, subsection 1, paragraph b, Code 4 2019, is amended to read as follows: 5 b. The revenues generated from the tax on cigarettes 6 pursuant to section 453A.6, subsection 1 , and from the tax on 7 tobacco products , alternative nicotine products, and vapor 8 products as specified in section 453A.43, subsections 1, 2, 3, 9 and 4 , shall be credited to the health care trust fund created 10 in section 453A.35A . 11 Sec. 11. Section 453A.35A, Code 2019, is amended to read as 12 follows: 13 453A.35A Health care trust fund. 14 1. A health care trust fund is created in the office of 15 the treasurer of state. The fund consists of the revenues 16 generated from the tax on cigarettes pursuant to section 17 453A.6, subsection 1 , and from the tax on tobacco products , 18 alternative nicotine products, and vapor products as specified 19 in section 453A.43, subsections 1, 2, 3, and 4 , that are 20 credited to the health care trust fund, annually, pursuant to 21 section 453A.35 . Moneys in the fund shall be separate from 22 the general fund of the state and shall not be considered 23 part of the general fund of the state. However, the fund 24 shall be considered a special account for the purposes of 25 section 8.53 relating to generally accepted accounting 26 principles. Moneys in the fund shall be used only as specified 27 in this section and shall be appropriated only for the uses 28 specified. Moneys in the fund are not subject to section 8.33 29 and shall not be transferred, used, obligated, appropriated, 30 or otherwise encumbered, except as provided in this section . 31 Notwithstanding section 12C.7, subsection 2 , interest or 32 earnings on moneys deposited in the fund shall be credited to 33 the fund. 34 2. Moneys in the fund shall be used only for purposes 35 -3- LSB 1917YH (9) 88 pf/jh 3/ 19

H.F. 467 related to health care including mental health services , 1 substance abuse treatment and prevention, and tobacco use 2 prevention, cessation, and control. The first nine million 3 dollars credited to the fund, annually, shall be used for the 4 purposes of tobacco use prevention, cessation, and control in 5 accordance with the centers for disease control and prevention 6 of the United States department of health and human services’ 7 most recently published best practices for comprehensive 8 tobacco control programs, and the remaining revenue credited, 9 annually, to the fund shall be used first for mental health 10 services followed by the other specified purposes of the fund. 11 Sec. 12. Section 453A.39, subsection 1, Code 2019, is 12 amended to read as follows: 13 1. A manufacturer, distributor, wholesaler, retailer, or 14 distributing agent, or an agent thereof of a manufacturer, 15 distributor, wholesaler, retailer, or distributing agent , shall 16 not give away cigarettes , or tobacco products , alternative 17 nicotine products, or vapor products, at any time in connection 18 with the manufacturer’s, distributor’s, wholesaler’s, 19 retailer’s, or distributing agent’s business or for promotion 20 of the business or product, except as provided in subsection 2 . 21 Sec. 13. Section 453A.40, subsection 1, Code 2019, is 22 amended to read as follows: 23 1. All persons required to obtain a permit or to be licensed 24 under section 453A.13 or section 453A.44 having in their 25 possession and held for resale on the effective date of an 26 increase in the tax rate cigarettes, little cigars, or tobacco 27 products , alternative nicotine products, or vapor products upon 28 which the tax under section 453A.6 or 453A.43 has been paid, 29 unused cigarette tax stamps which have been paid for under 30 section 453A.8 , unused metered imprints which have been paid 31 for under section 453A.12 , or tobacco products , alternative 32 nicotine products, or vapor products for which the tax has 33 not been paid under section 453A.46 shall be subject to an 34 inventory tax on the items as provided in this section . 35 -4- LSB 1917YH (9) 88 pf/jh 4/ 19

H.F. 467 Sec. 14. Section 453A.42, Code 2019, is amended to read as 1 follows: 2 453A.42 Definitions. 3 When used in this subchapter , unless the context clearly 4 indicates otherwise, the following terms shall have the 5 meanings, respectively, ascribed to them in this section : 6 1. “Business” means any trade, occupation, activity, 7 or enterprise engaged in for the purpose of selling or 8 distributing tobacco products , alternative nicotine products, 9 or vapor products in this state. 10 2. “Consumer” means any person who has title to or 11 possession of tobacco products , alternative nicotine products, 12 or vapor products in storage, for use or other consumption in 13 this state. 14 3. “Delivery sale” means any sale of an alternative nicotine 15 product or a vapor product to a purchaser in this state where 16 the purchaser submits the order for such sale by means of a 17 telephonic or other method of voice transmission, mail or any 18 other delivery service, or the internet or other online service 19 and the alternative nicotine product or vapor product is 20 delivered by use of mail or a delivery service. The sale of an 21 alternative nicotine product or vapor product shall constitute 22 a delivery sale regardless of whether the seller is located 23 in this state. “Delivery sale” does not include a sale to a 24 distributor or retailer of any alternative nicotine product or 25 vapor product not for personal consumption. 26 4. “Director” means the director of the department of 27 revenue. 28 5. “Distributor” means any and each of the following: 29 a. Any person engaged in the business of selling tobacco 30 products , alternative nicotine products, or vapor products 31 in this state who brings, or causes to be brought, into this 32 state from without the state any tobacco products , alternative 33 nicotine products, or vapor products for sale ; . 34 b. Any person who makes, manufactures, or fabricates tobacco 35 -5- LSB 1917YH (9) 88 pf/jh 5/ 19

H.F. 467 products , alternative nicotine products, or vapor products in 1 this state for sale in this state ; . 2 c. Any person engaged in the business of selling tobacco 3 products , alternative nicotine products, or vapor products 4 without this state who ships or transports tobacco products , 5 alternative nicotine products, or vapor products to retailers 6 in this state, to be sold by those retailers. 7 6. “Little cigar” means any roll for smoking which meets all 8 of the following conditions : 9 a. Is made wholly or in part of tobacco, irrespective of 10 size or shape and irrespective of tobacco being flavored, 11 adulterated, or mixed with any other ingredient ; . 12 b. Is not a cigarette as defined in section 453A.1, 13 subsection 4 ; and . 14 c. Either weighs not more than three pounds per thousand, 15 irrespective of retail price, or weighs more than three pounds 16 per thousand and has a retail price of not more than two 17 and one-half cents per little cigar. For purposes of this 18 subsection , the retail price is the ordinary retail price in 19 this state, not including retail sales tax, use tax, or the tax 20 on little cigars imposed by section 453A.43 . 21 7. “Manufacturer” means a person who manufactures and sells 22 tobacco products , alternative nicotine products, or vapor 23 products . 24 8. “Person” means any individual, firm, association, 25 partnership, joint stock company, joint adventure venture , 26 corporation, trustee, agency, or receiver, or any legal 27 representative of any of the foregoing individual, firm, 28 association, partnership, joint stock company, joint venture, 29 corporation, trustee, agency, or receiver . 30 9. “Place of business” means any place where tobacco 31 products alternative nicotine products, or vapor products are 32 sold or where tobacco products , alternative nicotine products, 33 or vapor products are manufactured, stored, or kept for the 34 purpose of sale or consumption, including any vessel, vehicle, 35 -6- LSB 1917YH (9) 88 pf/jh 6/ 19

H.F. 467 airplane, train, or vending machine; or for a business within 1 or without the state that conducts delivery sales, any place 2 where alternative nicotine products or vapor products are sold 3 or where alternative nicotine products or vapor products are 4 kept for the purpose of sale, including delivery sales. 5 10. “Retail outlet” means each place of business from which 6 tobacco products , alternative nicotine products, or vapor 7 products are sold to consumers. 8 11. “Retailer” means any person engaged in the business 9 of selling tobacco, tobacco products, alternative nicotine 10 products, or vapor products to ultimate consumers. 11 12. “Sale” means any transfer, exchange, or barter, in any 12 manner or by any means whatsoever, for a consideration, and 13 includes and means all sales made by any person. It includes 14 a gift by a person engaged in the business of selling tobacco 15 products, alternative nicotine products, or vapor products 16 for advertising, as a means of evading the provisions of this 17 subchapter , or for any other purposes whatsoever . 18 13. “Snuff” means any finely cut, ground, or powdered 19 tobacco that is not intended to be smoked. 20 14. “Storage” means any keeping or retention of tobacco 21 products , alternative nicotine products, or vapor products for 22 use or consumption in this state. 23 15. “Subjobber” means any person, other than a manufacturer 24 or distributor, who buys tobacco products , alternative nicotine 25 products, or vapor products from a distributor and sells them 26 to persons other than the ultimate consumers. 27 16. “Tobacco products” means cigars; little cigars as 28 defined herein; cheroots; stogies; periques; granulated, plug 29 cut, crimp cut, ready rubbed, and other smoking tobacco; 30 snuff; cavendish; plug and twist tobacco; fine-cut and other 31 chewing tobaccos; shorts; refuse scraps, clippings, cuttings 32 and sweepings of tobacco, and other kinds and forms of tobacco, 33 prepared in such manner as to be suitable for chewing or 34 smoking in a pipe or otherwise, or both for chewing and 35 -7- LSB 1917YH (9) 88 pf/jh 7/ 19

H.F. 467 smoking; but shall not include cigarettes as defined in section 1 453A.1, subsection 4 . 2 17. “Use” means the exercise of any right or power 3 incidental to the ownership of tobacco products , alternative 4 nicotine products, or vapor products . 5 18. “Wholesale sales price” means the established price 6 for which a manufacturer sells a tobacco product , alternative 7 nicotine product, or vapor product to a distributor, exclusive 8 of any discount or other reduction. 9 Sec. 15. Section 453A.43, Code 2019, is amended to read as 10 follows: 11 453A.43 Tax on tobacco products , alternative nicotine 12 products, and vapor products . 13 1. a. A tax is imposed upon all tobacco products , 14 alternative nicotine products, and vapor products in this 15 state and upon any person engaged in business as a distributor 16 of tobacco products, at the rate of twenty-two sixty-seven 17 percent of the wholesale sales price of the tobacco products, 18 except little cigars and snuff as defined in section 19 453A.42 , alternative nicotine products, or vapor products. 20 Notwithstanding the rate of tax imposed under this paragraph 21 “a” on tobacco products, little cigars shall be subject to the 22 tax as specified pursuant to paragraph “b” , and snuff shall be 23 subject to the tax as specified pursuant to paragraph “c” . 24 b. In addition to the tax imposed under paragraph “a” , a 25 tax is imposed upon all tobacco products in this state and upon 26 any person engaged in business as a distributor of tobacco 27 products, at the rate of twenty-eight percent of the wholesale 28 sales price of the tobacco products, except little cigars and 29 snuff as defined in section 453A.42 . 30 c. Notwithstanding the rate of tax imposed pursuant to 31 paragraphs “a” and “b” , if the tobacco product is a cigar, the 32 total amount of the tax imposed pursuant to paragraphs “a” and 33 “b” combined shall not exceed fifty cents per cigar. 34 d. b. Little cigars shall be subject to the same rate of 35 -8- LSB 1917YH (9) 88 pf/jh 8/ 19

H.F. 467 tax imposed upon cigarettes in section 453A.6 , payable at the 1 time and in the manner provided in section 453A.6 ; and stamps 2 shall be affixed as provided in subchapter I of this chapter . 3 c. Snuff shall be subject to the tax as provided in 4 subsections 3 and 4 . 5 e. d. The taxes on tobacco products, excluding little 6 cigars and snuff alternative nicotine products, and vapor 7 products, as specified pursuant to paragraph “a” , shall be 8 imposed at the time the distributor does any of the following: 9 (1) Brings, or causes to be brought, into this state from 10 outside the state tobacco products , alternative nicotine 11 products, or vapor products for sale. 12 (2) Makes, manufactures, or fabricates tobacco products , 13 alternative nicotine products, or vapor products in this state 14 for sale in this state. 15 (3) Ships or transports tobacco products , alternative 16 nicotine products, or vapor products to retailers in this 17 state, to be sold by those retailers. 18 2. a. A tax is imposed upon the use or storage by consumers 19 of tobacco products , alternative nicotine products, and vapor 20 products in this state, and upon the consumers, at the rate 21 of twenty-two sixty-seven percent of the cost of the tobacco 22 products , alternative nicotine products, or vapor products . 23 b. In addition to the tax imposed in paragraph “a” , a tax 24 is imposed upon the use or storage by consumers of tobacco 25 products in this state, and upon the consumers, at a rate of 26 twenty-eight percent of the cost of the tobacco products. 27 c. Notwithstanding the rate of tax imposed pursuant to 28 paragraphs “a” and “b” , if the tobacco product is a cigar, the 29 total amount of the tax imposed pursuant to paragraphs “a” and 30 “b” combined shall not exceed fifty cents per cigar. 31 d. b. The taxes imposed by this subsection shall not apply 32 if the taxes imposed by subsection 1 on the tobacco products , 33 alternative nicotine products, or vapor products have been 34 paid. 35 -9- LSB 1917YH (9) 88 pf/jh 9/ 19

H.F. 467 e. c. The taxes imposed under this subsection shall not 1 apply to the use or storage of tobacco products in quantities 2 of: 3 (1) Less than twenty-five cigars. 4 (2) Less than one pound smoking or chewing tobacco or other 5 tobacco products not specifically mentioned herein in this 6 chapter , in the possession of any one consumer. 7 3. A tax is imposed upon all snuff in this state and upon 8 any person engaged in business as a distributor of snuff at 9 the rate of one dollar and nineteen cents per ounce, with a 10 proportionate tax at the same rate on all fractional parts of 11 an ounce of snuff sixty-seven percent of the wholesale sales 12 price or an amount equal to the tax on cigarettes pursuant to 13 section 453A.6 for each one and two-tenths ounces of snuff, 14 whichever is higher . The tax shall be computed based on the 15 net weight listed by the manufacturer. The tax on snuff 16 shall be imposed at the time the distributor does any of the 17 following: 18 a. Brings or causes to be brought into this state from 19 outside the state, snuff for sale. 20 b. Makes, manufactures, or fabricates snuff in this state 21 for sale in this state. 22 c. Ships or transports snuff to retailers in this state, to 23 be sold by those retailers. 24 4. a. A tax is imposed upon the use or storage by consumers 25 of snuff in this state, and upon the consumers, at the rate of 26 one dollar and nineteen cents per ounce with a proportionate 27 tax at the same rate on all fractional parts of an ounce of 28 snuff sixty-seven percent of the wholesale sales price or an 29 amount equal to the tax on cigarettes pursuant to section 30 453A.6 for each one and two-tenths ounces of snuff, whichever 31 is higher . The tax shall be computed based on the net weight 32 as listed by the manufacturer. 33 b. The tax imposed by this subsection shall not apply if the 34 tax imposed by subsection 3 on snuff has been paid. 35 -10- LSB 1917YH (9) 88 pf/jh 10/ 19

H.F. 467 c. The tax shall not apply to the use or storage of snuff in 1 quantities of less than ten ounces. 2 5. Any tobacco product , alternative nicotine product, or 3 vapor product with respect to which a tax has once been imposed 4 under this subchapter shall not again be subject to tax under 5 this subchapter , except as provided in section 453A.40 . 6 6. The tax imposed by this section shall not apply with 7 respect to any tobacco product , alternative nicotine product, 8 or vapor product which under the Constitution and laws of the 9 United States may not be made the subject of taxation by this 10 state. 11 7. The tax imposed by this section shall be in addition to 12 all other occupation or privilege taxes or license fees now or 13 hereafter imposed by any city or county. 14 8. All excise taxes collected under this chapter by a 15 distributor or any individual are deemed to be held in trust 16 for the state of Iowa. 17 Sec. 16. Section 453A.44, subsections 1, 3, and 10, Code 18 2019, are amended to read as follows: 19 1. No A person shall not engage in the business of a 20 distributor or subjobber of tobacco products , alternative 21 nicotine products, or vapor products at any place of business 22 without first having received a license from the director to 23 engage in that business at that place of business. 24 3. A person without this state who ships or transports 25 tobacco products , alternative nicotine products, or vapor 26 products to retailers in this state, to be sold by those 27 retailers, may make application for a license as a distributor, 28 be granted a license by the director, and thereafter be subject 29 to all the provisions of this subchapter and entitled to act as 30 a licensed distributor. 31 10. The director may revoke, cancel, or suspend the 32 license or licenses of any distributor or subjobber for 33 violation of any of the provisions of this subchapter , or 34 any other act applicable to the sale of tobacco products, 35 -11- LSB 1917YH (9) 88 pf/jh 11/ 19

H.F. 467 alternative nicotine products, or vapor products, or any rule 1 or regulations promulgated by the director in furtherance of 2 this subchapter . No license shall be revoked, canceled, or 3 suspended except after notice and a hearing by the director as 4 provided in section 453A.48 . 5 Sec. 17. Section 453A.45, Code 2019, is amended to read as 6 follows: 7 453A.45 Licensees, duties. 8 1. a. Every distributor shall keep at each licensed 9 place of business complete and accurate records for that 10 place of business, including itemized invoices, of tobacco 11 products , alternative nicotine products, or vapor products 12 held, purchased, manufactured, brought in or caused to be 13 brought in from without the state, or shipped or transported to 14 retailers in this state, and of all sales of tobacco products , 15 alternative nicotine products, and vapor products made, except 16 sales to the ultimate consumer. 17 b. When a licensed distributor sells tobacco products , 18 alternative nicotine products, or vapor products exclusively to 19 the ultimate consumer at the address given in the license, an 20 invoice of those sales is not required, but itemized invoices 21 shall be made of all tobacco products , alternative nicotine 22 products, and vapor products transferred to other retail 23 outlets owned or controlled by that licensed distributor. All 24 books, records, and other papers and documents required by 25 this subsection to be kept shall be preserved for a period 26 of at least three years after the date of the documents or 27 the date of the entries appearing in the records, unless the 28 director, in writing, authorized their destruction or disposal 29 at an earlier date. At any time during usual business hours, 30 the director, or the director’s duly authorized agents or 31 employees, may enter any place of business of a distributor, 32 without a search warrant, and inspect the premises, the records 33 required to be kept under this subsection , and the tobacco 34 products , alternative nicotine products, and vapor products 35 -12- LSB 1917YH (9) 88 pf/jh 12/ 19

H.F. 467 contained therein at the place of business , to determine if 1 all the provisions of this subchapter are being fully complied 2 with. If the director, or any such agent or employee, is 3 denied free access or is hindered or interfered with in 4 making the examination, the license of the distributor at that 5 premises is subject to revocation by the director. 6 2. Every person who sells tobacco products , alternative 7 nicotine products, or vapor products to persons other than the 8 ultimate consumer shall render with each sale itemized invoices 9 showing the seller’s name and address, the purchaser’s name and 10 address, the date of sale, and all prices and discounts. The 11 person shall preserve legible copies of all these invoices for 12 three years from the date of sale. 13 3. Every retailer and subjobber shall procure itemized 14 invoices of all tobacco products , alternative nicotine 15 products, and vapor products purchased. The invoices shall 16 show the name and address of the seller and the date of 17 purchase. The retailer and subjobber shall preserve a legible 18 copy of each invoice for three years from the date of purchase. 19 Invoices shall be available for inspection by the director or 20 the director’s authorized agents or employees at the retailer’s 21 or subjobber’s place of business. 22 4. Records of all deliveries or shipments of tobacco 23 products , alternative nicotine products, or vapor products from 24 any public warehouse of first destination in this state which 25 is subject to the provisions of and licensed under chapter 26 554 shall be kept by the warehouse and be available to the 27 director for inspection. They shall show the name and address 28 of the consignee, the date, the quantity of tobacco products , 29 alternative nicotine products, or vapor products delivered, 30 and such other information as the commissioner may require. 31 These records shall be preserved for three years from the date 32 of delivery of the tobacco products , alternative nicotine 33 products, or vapor products . 34 5. a. The transportation of tobacco products , alternative 35 -13- LSB 1917YH (9) 88 pf/jh 13/ 19

H.F. 467 nicotine products, or vapor products into this state by means 1 other than common carrier must be reported to the director 2 within thirty days with the following exceptions: 3 (1) The transportation of not more than fifty cigars, not 4 more than ten ounces of snuff or snuff powder, or not more 5 than one pound of smoking or chewing tobacco or other tobacco 6 products not specifically mentioned herein; specified under 7 this subparagraph. 8 (2) Transportation by a person with a place of business 9 outside the state, who is licensed as a distributor under 10 section 453A.44 , or tobacco products , alternative nicotine 11 products, or vapor products sold by such person to a retailer 12 in this state. 13 b. The report shall be made on forms provided by the 14 director. The director may require by rule that the report be 15 filed by electronic transmission. 16 c. Common carriers transporting tobacco products , 17 alternative nicotine products, or vapor products into this 18 state shall file with the director reports of all such 19 shipments other than those which are delivered to public 20 warehouses of first destination in this state which are 21 licensed under the provisions of chapter 554 . Such reports 22 shall be filed on or before the tenth day of each month and 23 shall show with respect to deliveries made in the preceding 24 month; the date, point of origin, point of delivery, name 25 of consignee, description and quantity of tobacco products , 26 alternative nicotine products, or vapor products delivered, and 27 such information as the director may otherwise require. 28 d. Any person who fails or refuses to transmit to the 29 director the required reports or whoever refuses to permit the 30 examination of the records by the director shall be guilty of 31 a serious misdemeanor. 32 Sec. 18. Section 453A.46, subsection 1, paragraph a, Code 33 2019, is amended to read as follows: 34 a. On or before the twentieth day of each calendar month 35 -14- LSB 1917YH (9) 88 pf/jh 14/ 19

H.F. 467 every distributor with a place of business in this state shall 1 file a return with the director showing for the preceding 2 calendar month the quantity and wholesale sales price of 3 each tobacco product , alternative nicotine product, or vapor 4 product brought, or caused to be brought, into this state for 5 sale; made, manufactured, or fabricated in this state for sale 6 in this state; and any other information the director may 7 require. Every licensed distributor outside this state shall 8 in like manner file a return with the director showing for 9 the preceding calendar month the quantity and wholesale sales 10 price of each tobacco product , alternative nicotine product, 11 or vapor product shipped or transported to retailers in this 12 state to be sold by those retailers and any other information 13 the director may require. Returns shall be made upon forms 14 furnished or made available in electronic form and prescribed 15 by the director and shall contain other information as the 16 director may require. Each return shall be accompanied by a 17 remittance for the full tax liability shown on the return, less 18 a discount as fixed by the director not to exceed five percent 19 of the tax. Within three years after the return is filed or 20 within three years after the return became due, whichever is 21 later, the department shall examine it, determine the correct 22 amount of tax, and assess the tax against the taxpayer for any 23 deficiency. The period for examination and determination of 24 the correct amount of tax is unlimited in the case of a false or 25 fraudulent return made with the intent to evade tax, or in the 26 case of a failure to file a return. 27 Sec. 19. Section 453A.46, subsection 6, Code 2019, is 28 amended to read as follows: 29 6. On or before the twentieth day of each calendar month, 30 every consumer who, during the preceding calendar month, 31 has acquired title to or possession of tobacco products , 32 alternative nicotine products, or vapor products for use or 33 storage in this state, upon which tobacco products , alternative 34 nicotine products, or vapor products the tax imposed by 35 -15- LSB 1917YH (9) 88 pf/jh 15/ 19

H.F. 467 section 453A.43 has not been paid, shall file a return with the 1 director showing the quantity of tobacco products , alternative 2 nicotine products, or vapor products so acquired. The return 3 shall be made upon a form furnished and prescribed by the 4 director, and shall contain other information as the director 5 may require. The return shall be accompanied by a remittance 6 for the full unpaid tax liability shown by it. Within three 7 years after the return is filed or within three years after the 8 return became due, whichever is later, the department shall 9 examine it, determine the correct amount of tax, and assess the 10 tax against the taxpayer for any deficiency. The period for 11 examination and determination of the correct amount of tax is 12 unlimited in the case of a false or fraudulent return made with 13 the intent to evade tax, or in the case of a failure to file a 14 return. 15 Sec. 20. Section 453A.47, Code 2019, is amended to read as 16 follows: 17 453A.47 Refunds, credits. 18 Where tobacco products , alternative nicotine products, or 19 vapor products upon which the tax imposed by this subchapter 20 has been reported and paid are shipped or transported by the 21 distributor to consumers to be consumed without the state 22 or to retailers or subjobbers without the state to be sold 23 by those retailers or subjobbers without the state or are 24 returned to the manufacturer by the distributor or destroyed 25 by the distributor, refund of such tax or credit may be made 26 to the distributor in accordance with regulations prescribed 27 by the director. Any overpayment of the tax imposed under 28 section 453A.43 may be made to the taxpayer in accordance with 29 regulations prescribed by the director. The director shall 30 cause any such refund of tax to be paid out of the general fund 31 of the state, and so much of said fund as may be necessary is 32 hereby appropriated for that purpose. 33 Sec. 21. Section 453A.47A, subsection 10, paragraph b, Code 34 2019, is amended to read as follows: 35 -16- LSB 1917YH (9) 88 pf/jh 16/ 19

H.F. 467 b. Every retailer shall, when requested by the department, 1 make additional reports as the department deems necessary and 2 proper and shall at the request of the department furnish 3 full and complete information pertaining to any transaction 4 of the retailer involving the purchase or sale or use of 5 tobacco, tobacco products, alternative nicotine products, or 6 vapor products. The director shall specifically prescribe the 7 forms necessary and require each retailer to provide on the 8 forms prescribed full and complete information pertaining to 9 any tobacco, tobacco products, alternative nicotine products, 10 or vapor products offered for sale or sold by the retailer, 11 including the type and brand of the product. 12 Sec. 22. Section 453A.48, subsection 3, Code 2019, is 13 amended to read as follows: 14 3. The director may exchange information with the officers 15 and agencies of other states administering laws relating to the 16 taxation of tobacco products , alternative nicotine products, 17 and vapor products . 18 Sec. 23. Section 453A.51, Code 2019, is amended to read as 19 follows: 20 453A.51 Assessment of cost of audit. 21 The department may employ auditors or other persons to 22 audit and examine the books and records of a permit holder 23 or other person dealing in tobacco products , alternative 24 nicotine products, or vapor products to ascertain whether 25 the permit holder or other person has paid the amount of the 26 taxes required to be paid by the permit holder or other person 27 under the provisions of this chapter . If the taxes have not 28 been paid, as required, the department shall assess against 29 the permit holder or other person, as additional penalty, the 30 reasonable expenses and costs of the investigation and audit. 31 EXPLANATION 32 The inclusion of this explanation does not constitute agreement with 33 the explanation’s substance by the members of the general assembly. 34 This bill relates to cigarettes, tobacco products, 35 -17- LSB 1917YH (9) 88 pf/jh 17/ 19

H.F. 467 alternative nicotine products, and vapor products under Code 1 chapter 453A (cigarette and tobacco taxes and regulation 2 of alternative nicotine products and vapor products). The 3 bill increases the tax on cigarettes and tobacco products 4 and imposes a tax on alternative nicotine products and vapor 5 products such that the tax is equivalent on all products to a 6 tax of $2.86 on a pack of cigarettes. 7 The bill increases the tax imposed on cigarettes from six and 8 eight-tenths cents to fourteen and three-tenths cents on each 9 cigarette, or from $1.36 to $2.86 per pack of 20 cigarettes. 10 The bill increases the tax on cigarettes assembled using 11 loose tobacco products that are inserted into a vending machine 12 from which assembled cigarettes are dispensed from three and 13 six-hundredths cents to four and four-tenths cents, which 14 is equivalent, based on the weight of tobacco used for each 15 cigarette, to the tax on packaged cigarettes. 16 The bill increases the tax on tobacco products from 50 17 percent of the wholesale sales price to 67 percent of the 18 wholesale sales price, and imposes this same tax on alternative 19 nicotine products and vapor products. The bill eliminates the 20 cap on the tax for cigars which was 50 cents per cigar. 21 The bill makes conforming provisions throughout the Code to 22 make administration and collection of the tax on alternative 23 nicotine products and vapor products the same as for tobacco 24 products. The bill provides that of the funds consisting of 25 the revenues generated from the tax on cigarettes, tobacco 26 products, alternative tobacco products, and vapor products, 27 the first $9 million credited to the health care trust fund, 28 annually, is to be used for the purposes of tobacco use 29 prevention, cessation, and control in accordance with the 30 centers for disease control and prevention of the United 31 States department of health and human services’ most recently 32 published best practices for comprehensive tobacco control 33 programs, and the remaining revenue credited, annually, to the 34 fund shall be used first for mental health services followed by 35 -18- LSB 1917YH (9) 88 pf/jh 18/ 19

H.F. 467 other specified purposes of the fund. 1 The bill provides that under the director of revenue’s 2 authorization to require permit holders to make additional 3 reports, the director shall specifically prescribe the forms 4 necessary and require each retailer to provide on the forms 5 prescribed, full and complete information pertaining to any 6 cigarettes, alternative nicotine products, or vapor products 7 offered for sale or sold by the retailer, including the type 8 and brand of the product. 9 -19- LSB 1917YH (9) 88 pf/jh 19/ 19