S.F. 2127 DIVISION I 1 REGULATION OF DEVICE RETAILERS 2 Section 1. NEW SECTION . 453E.1 Definitions. 3 As used in this chapter, unless the context otherwise 4 requires: 5 1. “Business” means any trade, occupation, activity, 6 or enterprise engaged in for the purpose of selling or 7 distributing tobacco products and devices in this state. 8 2. “Consumer” means any person who has title to or 9 possession of devices in storage, for use or other consumption 10 in this state. 11 3. “Controlled substance” means controlled substance as 12 defined in section 124.101. 13 4. “Delivery sale” means any sale of a device to a purchaser 14 in this state where the purchaser submits the order for 15 such sale by means of a telephonic or other method of voice 16 transmission, mail or any other delivery service, or the 17 internet or other online service and the device is delivered by 18 use of mail or a delivery service. The sale of a device shall 19 constitute a delivery sale regardless of whether the seller is 20 located in this state. “Delivery sale” does not include a sale 21 to a distributor or retailer of a device not for personal use. 22 5. “Department” means the department of revenue. 23 6. “Device” means an item that is a glass or metal pipe 24 designed to ingest a substance through combustion that would 25 otherwise be defined as drug paraphernalia pursuant to 21 26 U.S.C. §863(d) but is exempt under 21 U.S.C. §863(f)(2) because 27 the item is intended for use with tobacco products. 28 7. “Device retailer” means a tobacco retailer who is also 29 engaged in selling devices to the ultimate consumer. 30 8. “Director” means the director of revenue. 31 9. “Place of business” means any place where tobacco 32 products and devices are sold, stored, or kept for the purpose 33 of sale or consumption; or for a business within or without the 34 state that conducts delivery sales, any place where tobacco 35 -1- LSB 5058SV (1) 88 pf/jh 1/ 15

S.F. 2127 products and devices are sold or are kept for the purpose of 1 sale, including delivery sales. 2 10. “Retail outlet” means each place of business from which 3 tobacco products and devices are sold to consumers. 4 11. “Sale” means any transfer, exchange, or barter, in 5 any manner or by any means whatsoever, for consideration, and 6 includes and means all sales made by any person. 7 12. “Tobacco products” means cigars; little cigars; 8 cheroots; stogies; periques; granulated, plug cut, crimp cut, 9 ready rubbed, and other smoking tobacco; snuff; cavendish; 10 plug and twist tobacco; fine-cut and other chewing tobaccos; 11 shorts; refuse scraps, clippings, cuttings and sweepings of 12 tobacco, and other kinds and forms of tobacco, prepared in 13 such manner as to be suitable for chewing or smoking in a pipe 14 or otherwise, or both for chewing and smoking; but shall not 15 include cigarettes as defined in section 453A.1. 16 13. “Tobacco retailer” means a retailer as defined in 17 section 453A.42. 18 14. “Use” means the exercise of any right or power 19 incidental to the ownership of tobacco products or devices. 20 Sec. 2. NEW SECTION . 453E.2 Administration —— rules. 21 1. The director shall administer this chapter. The director 22 shall collect, supervise, and enforce the collection of all 23 fees, taxes, and civil penalties imposed under this chapter and 24 deposit them in the specialty courts program fund created in 25 section 453E.6. 26 2. The director may adopt rules pursuant to chapter 17A that 27 are necessary to enforce this chapter. 28 3. The director may designate employees to administer 29 and enforce the provisions of this chapter, including the 30 collection of all taxes provided for in this chapter. In the 31 enforcement, the director may request aid from the attorney 32 general, the special agents of the state, any county attorney, 33 or any peace officer. The director may appoint clerks and 34 additional help as may be needed to administer this chapter. 35 -2- LSB 5058SV (1) 88 pf/jh 2/ 15

S.F. 2127 Sec. 3. NEW SECTION . 453E.3 Device retailers —— permits —— 1 fees. 2 1. Permits required. A person shall not engage in the 3 business of a device retailer at any place of business or 4 through delivery sales, unless the person complies with all of 5 the following: 6 a. The person has received and holds a permit as a tobacco 7 retailer pursuant to section 453A.47A that has not been 8 suspended or revoked and is not expired; complies with the 9 provisions of chapter 453A applicable to a tobacco retailer; 10 and sells tobacco products in addition to devices at the retail 11 outlet or through delivery sales. 12 b. The person has received and holds a permit as a device 13 retailer pursuant to this section that has not been suspended 14 or revoked and is not expired, and complies with the provisions 15 of this chapter. 16 2. No sales without device retailer permit. A device 17 retailer shall not sell devices until an application has been 18 filed and the fee prescribed paid for a permit and until such 19 permit is obtained and only while such permit is not suspended, 20 revoked, or expired. 21 3. Number of device retailer permits. An application shall 22 be filed and a permit obtained for each place of business owned 23 or operated by a device retailer located in the state. If an 24 out-of-state device retailer makes delivery sales of devices, 25 an application shall be filed with the department and a permit 26 shall be issued for the out-of-state retailer’s principal place 27 of business. 28 4. Issuance. Cities may issue device retailer permits 29 to device retailers located within their respective limits. 30 County boards of supervisors may issue device retailer permits 31 to device retailers located in their respective counties, 32 outside of the corporate limits of cities. The city or county 33 shall submit a duplicate of any application for a device 34 retailer permit to the alcoholic beverages division of the 35 -3- LSB 5058SV (1) 88 pf/jh 3/ 15

S.F. 2127 department of commerce within thirty days of issuance of a 1 device retailer permit. The alcoholic beverages division of 2 the department of commerce shall submit the current list of 3 all device retailer permits issued to the department of public 4 health by the last day of each quarter of a state fiscal year. 5 5. Fees —— expiration. All device retailer permits provided 6 for in this section shall expire on June 30 of each year. A 7 device retailer permit shall not be granted or issued until the 8 applicant has paid the fees provided for in this section for 9 the period ending June 30 next, to the city or county granting 10 the device retailer permit. The fee for a device retailer 11 permit is one thousand dollars. 12 6. Application. Device retailer permits shall be issued 13 only upon application, accompanied by the one thousand dollar 14 fee, made upon forms furnished by the department upon written 15 request. The failure to furnish such forms shall be no excuse 16 for the failure to file the form unless absolute refusal is 17 shown. The forms shall specify all of the following: 18 a. The manner under which the device retailer transacts or 19 intends to transact business as a device retailer. 20 b. The principal office, residence, and place of business, 21 to which the device retailer permit is to apply. 22 c. If the applicant is not an individual, the principal 23 officers or members of the applicant, not to exceed three, and 24 their addresses. 25 d. Such other information as the director shall by rule 26 prescribe. 27 7. Records and reports of device retailers. 28 a. The director shall prescribe the forms necessary for 29 the efficient administration of this section and may require 30 uniform books and records to be used and kept by each device 31 retailer or other person as deemed necessary. 32 b. Every device retailer shall, when requested by the 33 department, make additional reports as the department deems 34 necessary and proper and shall at the request of the department 35 -4- LSB 5058SV (1) 88 pf/jh 4/ 15

S.F. 2127 furnish full and complete information pertaining to any 1 transaction of the device retailer involving the purchase or 2 sale of devices, including the number of devices sold. 3 8. Requirements for sale. 4 a. A device retailer shall not sell, give, or otherwise 5 supply a device to any person under eighteen years of age and 6 must verify the age of all purchasers of devices. Valid proof 7 of the purchaser’s identity and age shall be obtained at the 8 time the device is supplied to the purchaser. 9 b. A device retailer shall only display and sell devices in 10 a location where the device retailer ensures that the devices 11 are not visible to a person younger than eighteen years of 12 age and where no person younger than eighteen years of age is 13 present or permitted to enter at any time. 14 Sec. 4. NEW SECTION . 453E.4 Delivery sale of devices —— 15 permit —— requirements. 16 1. a. A person shall not mail, ship, or otherwise cause 17 to be delivered any device in connection with a delivery sale 18 to any other person within this state unless the person has 19 applied for and holds a device delivery sale permit as provided 20 in this section. 21 b. A person applying for a device delivery sale permit shall 22 submit an application for the permit electronically, or in a 23 manner prescribed by the director. 24 c. An application submitted pursuant to paragraph “b” shall 25 be accompanied by a permit fee in the amount of one thousand 26 dollars. 27 d. The director may in accordance with this section issue a 28 device delivery sale permit which shall be valid for one year 29 from the date of issuance unless it is sooner suspended or 30 revoked for a violation of this section. 31 e. A permit issued pursuant to this section may be renewed 32 annually by submitting a renewal application in a manner 33 prescribed by the director, accompanied by the one thousand 34 dollar permit fee. 35 -5- LSB 5058SV (1) 88 pf/jh 5/ 15

S.F. 2127 2. The delivery sale of devices pursuant to this 1 section shall be subject to the following requirements and 2 restrictions: 3 a. All devices delivered by delivery sale directly to a 4 resident of this state shall be delivered only by a device 5 delivery sale permit holder. 6 b. A device delivery sale permit holder shall only deliver 7 devices by delivery sale to a resident of this state who is at 8 least eighteen years of age for the resident’s personal use and 9 not for resale. 10 c. All devices delivered by delivery sale directly to a 11 resident of this state shall be conspicuously labeled with the 12 words “CONTAINS DEVICE: SIGNATURE OF PERSON AGE 18 OR OLDER 13 REQUIRED FOR DELIVERY” or shall be conspicuously labeled with 14 alternative wording preapproved by the director. 15 d. A device delivery sale permit holder shall obtain valid 16 proof of identity and age prior to delivery, and shall obtain 17 the signature of an adult as a condition of delivery. 18 e. A device delivery sale permit holder shall maintain 19 records of devices delivered which include the name of the 20 device manufacturer, quantity of devices delivered, recipient’s 21 name and address and verification of age on an electronic or 22 paper form of signature from the recipient of the device, and 23 sales and excise taxes paid. Records shall be submitted to 24 the director on a monthly basis in a form and manner to be 25 determined by the director. Records shall be maintained for at 26 least five years. 27 3. A device delivery sale permit holder shall remit to the 28 director an amount equivalent to the applicable sales tax and 29 excise tax on devices subject to delivery sale at the rates 30 specified in section 423.2 and section 453E.5, as applicable, 31 for deposit as provided in section 453E.6. The amount shall 32 be remitted at the time and in the manner provided in section 33 453E.5. 34 4. A device delivery sale permit holder shall be deemed to 35 -6- LSB 5058SV (1) 88 pf/jh 6/ 15

S.F. 2127 have consented to the jurisdiction of the director or any other 1 agency or court in this state concerning enforcement of this 2 section and any related laws, rules, or regulations. A device 3 delivery sale permit holder shall allow the director to perform 4 an audit of records of devices upon request. 5 Sec. 5. NEW SECTION . 453E.5 Sales and use tax on sales and 6 delivery sales of devices —— examination of records and premises 7 —— subpoena for witnesses and papers. 8 1. A sale or delivery sale of a device within this state 9 shall be subject to the sales tax provided in chapter 423, 10 subchapter II. All the provisions for the lien of the tax, its 11 collection, and all actions as provided in the uniform sales 12 and use tax administration Act, chapter 423, shall apply to the 13 tax imposed in this chapter. 14 2. There is levied and imposed an excise tax on a device 15 purchased for use in this state through a sale or delivery sale 16 in this state as follows: 17 a. If the purchase price of the device is twenty dollars or 18 less, an excise tax of ten dollars. 19 b. If the purchase price of the device is more than twenty 20 dollars, an excise tax of twenty dollars. 21 3. A device delivery sale permit holder shall be deemed to 22 have waived all claims that such permit holder lacks physical 23 presence within this state for purposes of collecting and 24 remitting the sales and excise taxes. 25 4. A device delivery sale permit holder making taxable 26 delivery sales of devices within this state and a device 27 retailer shall remit to the department all sales and excise 28 taxes due on such sales at the times and in the manner as 29 established by rule of the director. 30 5. The director shall adopt rules pursuant to chapter 17A to 31 administer this section. 32 6. Moneys collected under this section shall be deposited in 33 the specialty courts program fund created in section 453E.6. 34 7. a. For the purpose of enabling the department to 35 -7- LSB 5058SV (1) 88 pf/jh 7/ 15

S.F. 2127 determine the tax liability of device delivery sale permit 1 holders, device retailers, or any other person dealing in 2 devices or to determine whether a tax liability has been 3 incurred, the department shall have the right to inspect any 4 premises of the device delivery sale permit holder, device 5 retailer, or other person dealing in devices located within 6 or without the state of Iowa where devices are manufactured, 7 produced, made, stored, transported, sold, or offered for sale 8 or exchange, and to examine all of the records required to be 9 kept or any other records that may be kept incident to the 10 conduct of the business of said device delivery sale permit 11 holder, retailer, or any other person dealing in devices. 12 b. The department shall also have the right as an incident 13 to determining the tax liability, or whether a tax liability 14 has been incurred, to examine all stocks of devices and to 15 remain upon the premises for such length of time as may be 16 necessary to fully determine the tax liability, or whether a 17 tax liability has been incurred. 18 c. It shall be unlawful for a permit holder to fail to 19 produce upon demand of the department any records required to 20 be kept or to hinder or prevent in any manner the inspection of 21 the records or the examination of the premises. 22 d. In the case of any departmental inspection conducted 23 under this section requiring department personnel to travel 24 outside the state of Iowa, any additional costs incurred by 25 the department for out-of-state travel expenses shall be borne 26 by the device delivery sale permit holder, retailer, or other 27 person dealing in devices. These additional costs shall be 28 those costs in excess of the costs of a similar inspection 29 conducted at the geographical point located within the state 30 of Iowa nearest to the out-of-state inspection point. In 31 lieu of conducting an on-premises out-of-state inspection, 32 the department shall have the authority to direct the device 33 delivery sale permit holder, retailer, or other person dealing 34 in devices to assemble and transport all records described 35 -8- LSB 5058SV (1) 88 pf/jh 8/ 15

S.F. 2127 in this subsection to the nearest practical and convenient 1 geographical location in Iowa for inspection by the department. 2 Sec. 6. NEW SECTION . 453E.6 Specialty courts program fund. 3 1. A specialty courts program fund is created in the state 4 treasury under the control of the director of the department 5 of corrections. Moneys from permit fees, with the exception 6 of permit fees collected by cities or counties in the issuance 7 of permits, penalties, sales and use taxes, and other amounts 8 collected under this chapter shall be deposited in the fund. 9 Permit fees collected by cities or counties under this chapter 10 shall be paid to the treasurer of the city where the permit is 11 effective, or to another city officer as designated by the city 12 council, and credited to the general fund of the city. Permit 13 fees collected by counties under this chapter shall be paid to 14 the county treasurer and credited to the general fund of the 15 county. 16 2. Moneys in the fund shall be used only as provided 17 in appropriations from the fund for the purpose of the 18 support of specialty courts to address underlying substance 19 use disorder-related and mental health-related issues that 20 contribute to the contact of individuals with the justice 21 system. 22 3. The fund shall be separate from the general fund of the 23 state and shall not be considered part of the general fund of 24 the state. The moneys in the fund shall not be considered 25 revenue of the state, but rather shall be moneys of the fund. 26 The moneys in the fund are not subject to reversion to the 27 general fund of the state under section 8.33 and shall not 28 be transferred, used, obligated, appropriated, or otherwise 29 encumbered, except to provide for the purposes of this section. 30 Notwithstanding section 12C.7, subsection 2, interest or 31 earnings on moneys deposited in the fund shall be credited to 32 the fund. 33 4. The treasurer of state shall provide a quarterly 34 report of fund activities and balances to the director of the 35 -9- LSB 5058SV (1) 88 pf/jh 9/ 15

S.F. 2127 department of corrections. 1 Sec. 7. NEW SECTION . 453E.7 Permits —— suspension —— 2 revocation —— penalties. 3 1. The provisions of chapter 453A including the permit 4 suspension and revocation provisions and the civil penalties 5 established in section 453A.22 shall apply to tobacco retailers 6 who are also device retailer permit holders or device delivery 7 sale permit holders under this chapter. The provisions of 8 chapter 453A applicable to persons other than tobacco retailers 9 who violate chapter 453A shall also apply to persons who 10 violate this chapter. 11 2. A person holding a device retailer permit or a 12 device delivery sale permit under this chapter who violates 13 this chapter by marketing or selling a device to be used 14 or attempted to be used in combination with a controlled 15 substance to knowingly or intentionally and primarily inject, 16 ingest, inhale, or otherwise introduce into the human body a 17 controlled substance, resulting in the device constituting drug 18 paraphernalia pursuant to section 124.414, commits a simple 19 misdemeanor in violation of section 124.414 and is also subject 20 to permit revocation. 21 3. a. If a person holding a device retailer permit or a 22 device delivery sale permit issued by the department under this 23 chapter has willfully violated this chapter, the department 24 shall revoke the permit upon notice and hearing. The hearing 25 before the department may be held at a site in the state as the 26 department may direct. The notice shall be given by mailing a 27 copy to the permit holder’s place of business as it appears on 28 the application for a permit. If, upon hearing, the department 29 finds that the violation has occurred, the department may 30 revoke the permit. 31 b. If a device retailer permit or a device delivery 32 sale permit is suspended or revoked under this section, the 33 suspension or revocation shall only apply to the place of 34 business at which the violation occurred and shall not apply to 35 -10- LSB 5058SV (1) 88 pf/jh 10/ 15

S.F. 2127 any other place of business to which the permit applies but at 1 which the violation did not occur. 2 c. The department or local authority shall report the 3 suspension or revocation of a device retailer permit or a 4 device delivery sale permit under this section to the alcoholic 5 beverages division of the department of commerce within thirty 6 days of the suspension or revocation of the permit. 7 4. In addition to any other applicable penalties, a device 8 retailer permit holder or a device delivery sale permit holder 9 who violates this chapter shall be subject to the following: 10 a. For a first violation, a civil penalty of five hundred 11 dollars. 12 b. For a second violation, a civil penalty of one thousand 13 dollars. 14 c. A third violation constitutes grounds for suspension or 15 revocation of the permit under this chapter. 16 5. A person other than a device retailer permit holder or a 17 device delivery sale permit holder who violates this chapter 18 shall be subject to the following penalties: 19 a. For a first violation, a civil penalty of one thousand 20 dollars. 21 b. For a second violation, a civil penalty of two thousand 22 dollars. 23 c. For a third or subsequent violation, a civil penalty of 24 five thousand dollars. 25 DIVISION II 26 HEMP PRODUCTS —— RETAIL SALES 27 Sec. 8. NEW SECTION . 126.24 Hemp products —— retail sales 28 —— claims. 29 Unless a state or federal agency has substantiated and 30 approved the efficacy and safety claims of a product based 31 on competent and reliable scientific evidence, a person 32 engaging in the retail sale in this state of a hemp product 33 that contains hemp-derived cannabidiol, or in the retail sale 34 of a cosmetic, personal care product, or product intended for 35 -11- LSB 5058SV (1) 88 pf/jh 11/ 15

S.F. 2127 human or animal consumption to which hemp-derived cannabidiol 1 has been added in compliance with section 204.7, subsection 2 9, shall include on the product’s principal display panel, 3 a statement that the product may or may not contain the 4 ingredients stated on the label, that the efficacy and safety 5 of the product have not been substantiated or approved by 6 a state or federal agency based on competent and reliable 7 scientific evidence, and that the consumer should use the 8 product at the consumer’s own risk. 9 EXPLANATION 10 The inclusion of this explanation does not constitute agreement with 11 the explanation’s substance by the members of the general assembly. 12 This bill relates to the regulation of certain tobacco and 13 hemp-related products. 14 Division I of the bill requires a person who engages in 15 the business of a device retailer through a retail outlet 16 or delivery sales to receive and hold a permit as a tobacco 17 retailer, comply with provisions applicable to a tobacco 18 retailer, sell tobacco products in addition to devices at the 19 retail outlet or through delivery sales, and hold a permit 20 as a device retailer. The bill provides for the application 21 for and issuance of device retailer permits by cities and 22 counties depending upon the location of the retailer; requires 23 the payment of a $1,000 fee for each permit; and provides for 24 annual expiration of the permits. The bill also requires 25 device retailer permit holders to keep certain records and 26 submit reports to the department of revenue; establishes 27 requirements for the sale of devices including that a device 28 retailer shall not sell, give, or otherwise supply a device to 29 any person under 18 years of age and must verify the age of 30 all purchasers of devices; and provides that a device retailer 31 shall only display and sell devices in a location where the 32 device retailer ensures that the devices are not visible to a 33 person younger than 18 years of age and where no person younger 34 than 18 years of age is present or permitted to enter at any 35 -12- LSB 5058SV (1) 88 pf/jh 12/ 15

S.F. 2127 time. 1 The bill establishes requirements for the delivery sale 2 of devices including permit requirements and restrictions 3 including all devices delivered by delivery sale directly to 4 a resident of this state shall be delivered by a holder of 5 a device delivery sale permit; that a device delivery sale 6 permit holder shall only deliver devices by delivery sale to 7 a resident of this state who is at least 18 years of age, for 8 the resident’s personal use and consumption and not for resale; 9 all devices delivered by delivery sale directly to a resident 10 of this state shall be conspicuously labeled with the words 11 “CONTAINS DEVICE: SIGNATURE OF PERSON AGE 18 OR OLDER REQUIRED 12 FOR DELIVERY” or with an alternative wording preapproved by 13 the director of revenue; a device delivery sale permit holder 14 shall obtain valid proof of identity and age prior to delivery, 15 and shall obtain the signature of an adult as a condition of 16 delivery; and that a device delivery sale permit holder shall 17 maintain records of devices delivered which include certain 18 information that must be maintained for five years. 19 The bill provides for the imposition, collection, and 20 payment of sales and excise taxes on the retail sale, including 21 delivery sales, of devices. Moneys collected, with the 22 exception of city and county permit fees, are to be deposited 23 in the specialty courts program fund created in the bill to 24 be used for the purpose of the support of specialty courts 25 to address underlying substance use disorder-related and 26 mental health-related issues that contribute to the contact of 27 individuals with the justice system. 28 The bill provides penalties for violations of the bill. 29 The applicable provisions of Code chapter 453A (cigarette and 30 tobacco taxes and regulation of alternative nicotine products 31 and vapor products) including penalties and license suspension 32 and revocation provisions and penalties applicable to those 33 other than permit holders apply to tobacco retailers who are 34 also device retailer permit holders or device delivery sale 35 -13- LSB 5058SV (1) 88 pf/jh 13/ 15

S.F. 2127 permit holders as well as to those who are not permit holders. 1 Additionally, a person holding a device retailer permit 2 or a device delivery sale permit who violates the bill by 3 marketing or selling a device to be used or attempted to be 4 used in combination with a controlled substance to knowingly 5 or intentionally and primarily inject, ingest, inhale, or 6 otherwise introduce into the human body a controlled substance, 7 resulting in the device constituting drug paraphernalia, 8 commits a simple misdemeanor in violation of Code section 9 124.414 and is also subject to permit revocation. 10 If a person holding a device retailer permit or a device 11 delivery sale permit willfully violates the bill, the 12 department shall revoke the permit upon notice and hearing. 13 In addition to any other applicable penalties, a device 14 retailer permit holder or a device delivery sale permit holder 15 who violates the Code chapter is subject to a civil penalty 16 of $500 for a first violation, a civil penalty of $1,000 for 17 a second violation, and a third violation constitutes grounds 18 for suspension or revocation of the permit. A person other 19 than a device retailer permit holder or a device delivery sale 20 permit holder who violates the Code chapter is subject to a 21 civil penalty of $1,000 for a first violation, a civil penalty 22 of $2,000 for a second violation, and a civil penalty of $5,000 23 for a third or subsequent violation. 24 Division II of the bill relates to claims made regarding 25 hemp products sold at retail. The bill provides that unless 26 a state or federal agency has substantiated and approved the 27 efficacy and safety claims of a product based on competent and 28 reliable scientific evidence, a person engaging in the retail 29 sale in this state of a hemp product that contains hemp-derived 30 cannabidiol, or in the retail sale of a cosmetic, personal care 31 product, or product intended for human or animal consumption 32 to which hemp-derived cannabidiol has been added in compliance 33 with Code section 204.7(9), shall include on the product’s 34 principal display panel a statement that the product may or 35 -14- LSB 5058SV (1) 88 pf/jh 14/ 15

S.F. 2127 may not contain the ingredients stated on the label, that the 1 efficacy and safety of the product have not been substantiated 2 or approved by a state or federal agency based on competent and 3 reliable scientific evidence, and that the consumer should use 4 the product at the consumer’s own risk. 5 The violation of this provision is a serious misdemeanor as 6 well as an unfair practice under Code section 714.16. 7 -15- LSB 5058SV (1) 88 pf/jh 15/ 15