H.F. 2011 Section 1. Section 453A.1, subsections 1 and 29, Code 2026, 1 are amended to read as follows: 2 1. “Alternative nicotine product” means a product, not 3 consisting of or containing tobacco, that provides for the 4 ingestion into the body of nicotine, or a nicotine analog, 5 whether by chewing, absorbing, dissolving, inhaling, snorting, 6 or sniffing, or by any other means. “Alternative nicotine 7 product” does not include cigarettes, tobacco products, or vapor 8 products, or a product that is regulated as a drug or device by 9 the United States food and drug administration under chapter V 10 of the Federal Food, Drug, and Cosmetic Act. 11 29. a. “Vapor product” means any noncombustible product, 12 which may or may not contain nicotine or a nicotine analog , 13 that employs a heating element, power source, electronic 14 circuit, or other electronic, chemical, or mechanical means, 15 regardless of shape or size, that can be used to produce vapor 16 from a solution or other substance. “Vapor product” includes an 17 but is not limited to the following: 18 (1) Any product or device marketed, manufactured, 19 distributed, or sold as an electronic cigarette, electronic 20 cigar, electronic cigarillo, electronic pipe, or similar 21 product or device , and any . 22 (2) Any cartridge or other container of a solution or other 23 substance, which may or may not contain nicotine or a nicotine 24 analog , that is intended to be used with or in an electronic 25 cigarette, electronic cigar, electronic cigarillo, electronic 26 pipe, or similar product or device. 27 (3) Any component, part, or accessory of such a product 28 or device that is used during the operation of the product or 29 device when sold in combination with any substance containing 30 nicotine, a nicotine analog, tobacco, or tobacco derivative. 31 b. “Vapor product” does not include a any of the following: 32 (1) A product regulated as a drug or device by the United 33 States food and drug administration under chapter V of the 34 Federal Food, Drug, and Cosmetic Act. 35 -1- LSB 5042YH (3) 91 jm/jh 1/ 13

H.F. 2011 (2) Any component, part, or accessory of such a product 1 or device that is used during the operation of the product 2 or device when not sold in combination with any substance 3 containing nicotine, a nicotine analog, tobacco, or tobacco 4 derivative. 5 Sec. 2. Section 453A.1, Code 2026, is amended by adding the 6 following new subsection: 7 NEW SUBSECTION . 18A. “Nicotine analog” means a substance 8 that has a chemical structure that is substantially similar to 9 nicotine, or that has an effect on the central nervous system 10 that is substantially similar to, or greater than, the effects 11 of nicotine on the central nervous system. 12 Sec. 3. Section 453A.35, subsection 1, paragraph a, Code 13 2026, is amended to read as follows: 14 a. With the exception of revenues credited to the health 15 care trust fund pursuant to paragraph “b” and revenues credited 16 to the Iowa cancer research fund pursuant to paragraph “c” , 17 the proceeds derived from the sale of stamps and the payment 18 of fees and penalties provided for under this chapter , and 19 the permit fees received from all state permits issued by the 20 department, shall be credited to the general fund of the state. 21 Sec. 4. Section 453A.35, subsection 1, Code 2026, is amended 22 by adding the following new paragraph: 23 NEW PARAGRAPH . c. The revenues generated from the 24 additional tax in section 453A.43A shall be credited to the 25 Iowa cancer research fund created in section 453A.35B. 26 Sec. 5. NEW SECTION . 453A.35B Iowa cancer research fund. 27 1. An Iowa cancer research fund is created in the office of 28 the treasurer of state under the authority of the department of 29 health and human services. The fund consists of the revenues 30 generated from the additional tax in section 453A.43A. Moneys 31 in the fund shall be separate from the general fund of the 32 state and shall not be considered part of the general fund of 33 the state. Moneys in the fund shall be used only as specified 34 in this section and shall be appropriated only for the uses 35 -2- LSB 5042YH (3) 91 jm/jh 2/ 13

H.F. 2011 specified. Moneys in the fund are not subject to section 8.33 1 and shall not be transferred, used, obligated, appropriated, 2 or otherwise encumbered, except as provided in this section. 3 Notwithstanding section 12C.7, subsection 2, interest or 4 earnings on moneys deposited in the fund shall be credited to 5 the fund. 6 2. Moneys in the fund shall not be disbursed prior to 7 July 1, 2027, and shall only be used for purposes related 8 to supporting and funding cancer research in the state. The 9 department of health and human services shall develop an 10 application process and guidelines for cancer researchers to 11 receive moneys from the fund. 12 3. The department of health and human services shall report 13 on the program pursuant to section 217.21, beginning with the 14 period disbursements commence. 15 Sec. 6. Section 453A.40, subsections 1 and 3, Code 2026, are 16 amended to read as follows: 17 1. All persons required to obtain a permit or to be licensed 18 under section 453A.13 or section 453A.44 having in their 19 possession and held for resale on the effective date of an 20 increase in the tax rate cigarettes, little cigars, or tobacco 21 products , alternative nicotine products, or vapor products upon 22 which the tax under section 453A.6 , or 453A.43 , or 453A.43A 23 has been paid, unused cigarette tax stamps which have been 24 paid for under section 453A.8 , unused metered imprints which 25 have been paid for under section 453A.12 , or tobacco products , 26 alternative nicotine products, or vapor products for which the 27 tax has not been paid under section 453A.46 shall be subject to 28 an inventory tax on the items as provided in this section . 29 3. The rate of the inventory tax on each item subject to 30 the tax as specified in subsection 1 is equal to the difference 31 between the amount paid on each item under section 453A.6 , 32 453A.8 , 453A.12 , or 453A.43 , or 453A.43A prior to the tax 33 increase and the amount that is to be paid on each similar item 34 under section 453A.6 , 453A.8 , 453A.12 , or 453A.43 , or 453A.43A 35 -3- LSB 5042YH (3) 91 jm/jh 3/ 13

H.F. 2011 after the tax increase except that in computing the rate of the 1 inventory tax any discount allowed or allowable under section 2 453A.8 shall not be considered. 3 Sec. 7. Section 453A.42, subsections 5, 7, 15, and 18, Code 4 2026, are amended to read as follows: 5 5. “Distributor” means any and each of the following: 6 a. Any person engaged in the business of selling tobacco 7 products , alternative nicotine products, or vapor products 8 in this state who brings, or causes to be brought, into this 9 state from without the state any tobacco products , alternative 10 nicotine products, or vapor products for sale ; . 11 b. Any person who makes, manufactures, or fabricates tobacco 12 products , alternative nicotine products, or vapor products in 13 this state for sale in this state ; . 14 c. Any person engaged in the business of selling tobacco 15 products , alternative nicotine products, or vapor products 16 without this state who ships or transports tobacco products , 17 alternative nicotine products, or vapor products to retailers 18 in this state, to be sold by those retailers. 19 7. “Manufacturer” means a person who manufactures and sells 20 tobacco products , alternative nicotine products, or vapor 21 products . 22 15. “Subjobber” means any person, other than a manufacturer 23 or distributor, who buys tobacco products , alternative nicotine 24 products, or vapor products from a distributor and sells them 25 to persons other than the ultimate consumers. 26 18. “Wholesale sales price” means the established price 27 for which a manufacturer sells a tobacco product , alternative 28 nicotine products, or vapor products to a distributor, 29 exclusive of any discount or other reduction. 30 Sec. 8. NEW SECTION . 453A.43A Additional taxes on 31 alternative nicotine and vapor products. 32 1. a. A tax is imposed upon all alternative nicotine 33 products and all vapor products in this state and upon any 34 person engaged as a distributor of alternative nicotine 35 -4- LSB 5042YH (3) 91 jm/jh 4/ 13

H.F. 2011 products and vapor products, at the rate of ten percent of the 1 wholesale sales price of the alternative nicotine products or 2 vapor products. 3 b. The tax on alternative nicotine products and vapor 4 products shall be imposed at the time the distributor does any 5 of the following: 6 (1) Brings, or causes to be brought into this state from 7 outside the state, alternative nicotine products or vapor 8 products for sale. 9 (2) Makes, manufactures, or fabricates alternative nicotine 10 products or vapor products in this state for sale in this 11 state. 12 (3) Ships or transports alternative nicotine products or 13 vapor products to retailers in this state, to be sold by the 14 retailers. 15 2. A tax is imposed upon the use or storage of alternative 16 nicotine products or vapor products in this state, and upon 17 any person who uses or stores alternative nicotine products or 18 vapor products, at the rate of ten percent of the cost of the 19 alternative nicotine products or vapor products, if the tax 20 imposed under subsection 1 has not been paid. 21 3. Any alternative nicotine product or vapor product 22 with respect to which a tax has once been imposed under 23 this subchapter shall not again be subject to tax under this 24 subchapter. 25 4. The tax imposed by this section shall not apply with 26 respect to any alternative nicotine product or vapor product 27 which under the constitution and laws of the United States may 28 not be made the subject of taxation by this state. 29 5. The tax imposed by this section shall be in addition to 30 any other taxes imposed by law. 31 6. All excise taxes collected under this section by any 32 person are deemed to be held in trust for the state of Iowa. 33 Sec. 9. Section 453A.44, subsections 1, 3, and 10, Code 34 2026, are amended to read as follows: 35 -5- LSB 5042YH (3) 91 jm/jh 5/ 13

H.F. 2011 1. No A person shall engage in the business of a distributor 1 or subjobber of tobacco products at any place of business 2 without first having received a license from the director to 3 engage in that business at that place of business. 4 3. A person without this state who ships or transports 5 tobacco products , alternative nicotine products, or vapor 6 products to retailers in this state, to be sold by those 7 retailers, may make application for a license as a distributor, 8 be granted a license by the director, and thereafter be subject 9 to all the provisions of this subchapter and entitled to act as 10 a licensed distributor. 11 10. The director may revoke, cancel, or suspend the 12 license or licenses of any distributor or subjobber for 13 violation of any of the provisions of this subchapter , or 14 any other act applicable to the sale of tobacco products, 15 alternative nicotine products, or vapor products, or any rule 16 or regulations promulgated by the director in furtherance of 17 this subchapter . No A license shall not be revoked, canceled, 18 or suspended except after notice and a hearing by the director 19 as provided in section 453A.48 . 20 Sec. 10. Section 453A.45, Code 2026, is amended to read as 21 follows: 22 453A.45 Licensees, duties. 23 1. a. Every distributor shall keep at each licensed 24 place of business complete and accurate records for that 25 place of business, including itemized invoices, of tobacco 26 products , alternative nicotine products, or vapor products 27 held, purchased, manufactured, brought in or caused to be 28 brought in from without the state, or shipped or transported to 29 retailers in this state, and of all sales of tobacco products , 30 alternative nicotine products, or vapor products made, except 31 sales to the ultimate consumer. 32 b. When a licensed distributor sells tobacco products , 33 alternative nicotine products, or vapor products exclusively to 34 the ultimate consumer at the address given in the license, an 35 -6- LSB 5042YH (3) 91 jm/jh 6/ 13

H.F. 2011 invoice of those sales is not required, but itemized invoices 1 shall be made of all tobacco products , alternative nicotine 2 products, or vapor products transferred to other retail 3 outlets owned or controlled by that licensed distributor. All 4 books, records, and other papers and documents required by 5 this subsection to be kept shall be preserved for a period 6 of at least three years after the date of the documents or 7 the date of the entries appearing in the records, unless the 8 director, in writing, authorized their destruction or disposal 9 at an earlier date. At any time during usual business hours, 10 the director, or the director’s duly authorized agents or 11 employees, may enter any place of business of a distributor, 12 without a search warrant, and inspect the premises, the records 13 required to be kept under this subsection , and the tobacco 14 products , alternative nicotine products, or vapor products 15 contained therein, to determine if all the provisions of this 16 subchapter are being fully complied with. If the director, 17 or any such agent or employee, is denied free access or is 18 hindered or interfered with in making the examination, the 19 license of the distributor at that premises is subject to 20 revocation by the director. 21 2. Every person who sells tobacco products , alternative 22 nicotine products, or vapor products to persons other than the 23 ultimate consumer shall render with each sale itemized invoices 24 showing the seller’s name and address, the purchaser’s name and 25 address, the date of sale, and all prices and discounts. The 26 person shall preserve legible copies of all these invoices for 27 three years from the date of sale. 28 3. Every retailer and subjobber shall procure itemized 29 invoices of all tobacco products , alternative nicotine 30 products, or vapor products purchased. The invoices shall show 31 the name and address of the seller and the date of purchase. 32 The retailer and subjobber shall preserve a legible copy 33 of each invoice for three years from the date of purchase. 34 Invoices shall be available for inspection by the director or 35 -7- LSB 5042YH (3) 91 jm/jh 7/ 13

H.F. 2011 the director’s authorized agents or employees at the retailer’s 1 or subjobber’s place of business. 2 4. Records of all deliveries or shipments of tobacco 3 products , alternative nicotine products, or vapor products from 4 any public warehouse of first destination in this state which 5 is subject to the provisions of and licensed under chapter 6 554 shall be kept by the warehouse and be available to the 7 director for inspection. They The records shall show the name 8 and address of the consignee, the date, the quantity of tobacco 9 products , alternative nicotine products, or vapor products 10 delivered, and such other information as the commissioner may 11 require. These The records shall be preserved for three years 12 from the date of delivery of the tobacco products , alternative 13 nicotine products, or vapor products . 14 5. a. The transportation of tobacco products , alternative 15 nicotine products, or vapor products into this state by means 16 other than common carrier must be reported to the director 17 within thirty days with the following exceptions: 18 (1) The transportation of not more than fifty cigars, not 19 more than ten ounces of snuff or snuff powder, or not more 20 than one pound of smoking or chewing tobacco or other tobacco 21 products not specifically mentioned herein; 22 (2) Transportation by a person with a place of business 23 outside the state, who is licensed as a distributor under 24 section 453A.44 , or tobacco products , alternative nicotine 25 products, or vapor products sold by such person to a retailer 26 in this state. 27 b. The report shall be made on forms provided by the 28 director. A report required under this subsection shall be 29 filed electronically. A report required to be submitted 30 electronically under this subsection that is filed in a manner 31 other than in an electronic format specified by the department 32 shall not be considered a valid submission unless the director 33 has permitted the submission of such a report through an 34 alternative method pursuant to section 453A.57 . 35 -8- LSB 5042YH (3) 91 jm/jh 8/ 13

H.F. 2011 c. Common carriers transporting tobacco products , 1 alternative nicotine products, or vapor products into this 2 state shall file with the director reports of all such 3 shipments other than those which are delivered to public 4 warehouses of first destination in this state which are 5 licensed under the provisions of chapter 554 . Such reports 6 shall be filed electronically with the department on or before 7 the tenth day of each month and shall show with respect to 8 deliveries made in the preceding month all of the following: 9 (1) The date. 10 (2) The point of origin. 11 (3) The point of delivery. 12 (4) The name of the consignee. 13 (5) A description and the quantity of tobacco products , 14 alternative nicotine products, or vapor products delivered. 15 (6) Such other information as the director may require. 16 d. Any person who fails or refuses to transmit to the 17 director the required reports or whoever refuses to permit the 18 examination of the records by the director shall be guilty 19 of a serious misdemeanor. In addition, any person who fails 20 to timely submit a report required under this section is 21 subject to a penalty in the amount of fifty dollars for each 22 occurrence. 23 Sec. 11. Section 453A.46, subsection 1, paragraph a, 24 subparagraph (1), Code 2026, is amended to read as follows: 25 (1) On or before the twentieth day of each calendar month 26 every distributor with a place of business in this state shall 27 file a return with the director showing for the preceding 28 calendar month the quantity and wholesale sales price of each 29 tobacco product , alternative nicotine products, or vapor 30 products brought, or caused to be brought, into this state 31 for sale; made, manufactured, or fabricated in this state for 32 sale in this state; and any other information the director 33 may require. Every licensed distributor outside this state 34 shall in like manner file a return with the director showing 35 -9- LSB 5042YH (3) 91 jm/jh 9/ 13

H.F. 2011 for the preceding calendar month the quantity and wholesale 1 sales price of each tobacco product , alternative nicotine 2 products, or vapor products shipped or transported to retailers 3 in this state to be sold by those retailers and any other 4 information the director may require. Returns shall be made 5 upon forms made available in electronic form and prescribed 6 by the director and shall contain other information as the 7 director may require. Each return shall be accompanied by a 8 remittance for the full tax liability shown on the return, less 9 a discount as fixed by the director not to exceed five percent 10 of the tax. Within three years after the return is filed or 11 within three years after the return became due, whichever is 12 later, the department shall examine it, determine the correct 13 amount of tax, and assess the tax against the taxpayer for any 14 deficiency. The period for examination and determination of 15 the correct amount of tax is unlimited in the case of a false or 16 fraudulent return made with the intent to evade tax, or in the 17 case of a failure to file a return. 18 Sec. 12. Section 453A.46, subsection 6, Code 2026, is 19 amended to read as follows: 20 6. On or before the twentieth day of each calendar month, 21 every consumer who, during the preceding calendar month, 22 has acquired title to or possession of tobacco products , 23 alternative nicotine products, or vapor products for use or 24 storage in this state, and upon which tobacco products the 25 tax taxes imposed by section 453A.43 has or 453A.43A have not 26 been paid, shall file a return with the director showing the 27 quantity of tobacco products , alternative nicotine products, 28 or vapor products so acquired. The return shall be made upon 29 a form furnished and prescribed by the director, and shall 30 contain other information as the director may require. The 31 return shall be accompanied by a remittance for the full unpaid 32 tax liability shown by it. Within three years after the return 33 is filed or within three years after the return became due, 34 whichever is later, the department shall examine it, determine 35 -10- LSB 5042YH (3) 91 jm/jh 10/ 13

H.F. 2011 the correct amount of tax, and assess the tax against the 1 taxpayer for any deficiency. The period for examination and 2 determination of the correct amount of tax is unlimited in the 3 case of a false or fraudulent return made with the intent to 4 evade tax, or in the case of a failure to file a return. 5 Sec. 13. Section 453A.47, Code 2026, is amended to read as 6 follows: 7 453A.47 Refunds, credits. 8 Where tobacco products , alternative nicotine products, or 9 vapor products upon which the tax imposed by this subchapter 10 has been reported and paid are shipped or transported by the 11 distributor to consumers to be consumed without the state or 12 to retailers or subjobbers without the state to be sold by 13 those retailers or subjobbers without the state or are returned 14 to the manufacturer by the distributor or destroyed by the 15 distributor, refund of such tax or credit may be made to the 16 distributor in accordance with regulations prescribed by the 17 director. Any overpayment of the tax imposed under section 18 453A.43 or 453A.43A may be made to the taxpayer in accordance 19 with regulations prescribed by the director. The director 20 shall cause any such refund of tax to be paid out of the general 21 fund of the state, and so much of said fund as may be necessary 22 is hereby appropriated for that purpose. 23 Sec. 14. Section 453A.47C, subsections 3 and 4, Code 2026, 24 are amended to read as follows: 25 3. A retailer required to possess or possessing a permit 26 under section 453A.13 or 453A.47A to make delivery sales 27 of alternative nicotine products or vapor products within 28 this state shall be deemed to have waived all claims that 29 such retailer lacks physical presence within this state for 30 purposes of collecting and remitting sales and use tax and the 31 additional tax provided in section 453A.43A . 32 4. A retailer making taxable delivery sales of alternative 33 nicotine products or vapor products within this state shall 34 remit to the department all sales and use tax due on such sales 35 -11- LSB 5042YH (3) 91 jm/jh 11/ 13

H.F. 2011 at the times and in the manner provided by chapter 423 , and 1 remit the additional tax as provided in section 453A.43A . 2 Sec. 15. Section 453A.48, subsection 3, Code 2026, is 3 amended to read as follows: 4 3. The director may exchange information with the officers 5 and agencies of other states administering laws relating to the 6 taxation of tobacco products , alternative nicotine products, 7 and vapor products . 8 Sec. 16. EFFECTIVE DATE. This Act takes effect January 1, 9 2027. 10 EXPLANATION 11 The inclusion of this explanation does not constitute agreement with 12 the explanation’s substance by the members of the general assembly. 13 This bill regulates alternative nicotine products and vapor 14 products and imposes taxes upon the wholesale sales price of 15 such products, and makes numerous conforming changes to Code 16 chapter 453A (cigarettes and tobacco-related products). 17 The bill defines “nicotine analog” to mean a substance that 18 has a chemical structure that is substantially similar to 19 nicotine, or that has an effect on the central nervous system 20 that is substantially similar to, or greater than, the effects 21 of nicotine on the central nervous system. 22 The bill adds “nicotine analog” to the definitions of 23 “alternative nicotine product” and “vapor product”. 24 The bill imposes a tax on alternative nicotine and 25 vapor products upon any person engaged as a distributor of 26 alternative nicotine products and vapor products, at the rate 27 of 10 percent of the wholesale sales price of such products. 28 In the alternative, a tax is imposed on the use or storage of 29 alternative nicotine and vapor products, at the rate of 10 30 percent of the cost of such products, if the 10 percent tax on 31 the wholesale sales price has not been paid. 32 The revenue generated by the bill is credited to the new 33 Iowa cancer research fund (fund), under the authority of the 34 department of health and human services (HHS). The bill 35 -12- LSB 5042YH (3) 91 jm/jh 12/ 13

H.F. 2011 specifies moneys in the fund shall not be disbursed prior to 1 July 1, 2027, and shall only be appropriated for purposes 2 related to supporting and funding cancer research in the state. 3 The bill requires HHS to develop an application process and 4 guidelines for cancer researchers to receive moneys from the 5 fund. 6 The fund is not subject to reversion and moneys or earnings 7 attributable to the fund are credited to the fund. 8 The bill takes effect January 1, 2027. 9 -13- LSB 5042YH (3) 91 jm/jh 13/ 13