Senate Study Bill 3145 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON HEALTH AND HUMAN SERVICES BILL BY CHAIRPERSON WARME) A BILL FOR An Act relating to the taxation of cigarettes, tobacco 1 products, vapor products, and consumable hemp products, and 2 making appropriations to the department of health and human 3 services and the department of justice. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 6698XC (3) 91 jm/jh

S.F. _____ DIVISION I 1 CIGARETTE TAXATION 2 Section 1. Section 453A.6, subsection 1, Code 2026, is 3 amended to read as follows: 4 1. There is imposed, and shall be collected and paid to 5 the department, a tax on all cigarettes used or otherwise 6 disposed of in this state for any purpose equal to six ten and 7 eight-tenths five hundredths cents on each cigarette. 8 Sec. 2. Section 453A.6, subsection 8, paragraph a, Code 9 2026, is amended to read as follows: 10 a. Pay directly to the department, in lieu of the tax under 11 subsection 1 , a tax equal to three four and six fifty-two 12 hundredths cents on each cigarette dispensed from such machine. 13 Payments made under this paragraph shall be remitted to the 14 department electronically. 15 DIVISION II 16 TAX ON TOBACCO PRODUCTS 17 Sec. 3. Section 453A.43, Code 2026, is amended to read as 18 follows: 19 453A.43 Tax on tobacco products. 20 1. a. A tax is imposed upon all tobacco products in this 21 state and upon any person engaged in business as a distributor 22 of tobacco products, at the rate of twenty-two fifty-five 23 percent of the wholesale sales price of the tobacco products , 24 except little cigars and snuff as defined in section 453A.42 . 25 Notwithstanding the rate of tax imposed under this paragraph 26 “a” on tobacco products, little cigars shall be subject to the 27 tax as specified pursuant to paragraph “c” , and snuff shall be 28 subject to the tax as specified in paragraph “d” . 29 b. In addition to the tax imposed under paragraph “a” , a 30 tax is imposed upon all tobacco products in this state and upon 31 any person engaged in business as a distributor of tobacco 32 products, at the rate of twenty-eight percent of the wholesale 33 sales price of the tobacco products, except little cigars and 34 snuff as defined in section 453A.42 . 35 -1- LSB 6698XC (3) 91 jm/jh 1/ 18

S.F. _____ c. b. Notwithstanding the rate of tax imposed pursuant 1 to paragraphs paragraph “a” and “b” , if the tobacco product 2 is a cigar, the total amount of the tax imposed pursuant to 3 paragraphs paragraph “a” and “b” combined shall not exceed fifty 4 fifty-five cents per cigar. 5 d. c. Little cigars shall be subject to the same rate of 6 tax imposed upon cigarettes in section 453A.6 , payable at the 7 time and in the manner provided in section 453A.6 ; and stamps 8 shall be affixed as provided in subchapter I of this chapter . 9 d. Snuff shall be subject to the tax as provided in 10 subsections 3 and 4 . 11 e. The taxes on tobacco products , excluding little cigars 12 and snuff, shall be imposed at the time the distributor does 13 any of the following: 14 (1) Brings, or causes to be brought, into this state from 15 outside the state tobacco products for sale. 16 (2) Makes, manufactures, or fabricates tobacco products in 17 this state for sale in this state. 18 (3) Ships or transports tobacco products to retailers in 19 this state, to be sold by those retailers. 20 2. a. A tax is imposed upon the use or storage by consumers 21 of tobacco products in this state, and upon the consumers, at 22 the rate of twenty-two fifty-five percent of the cost of the 23 tobacco products. 24 b. In addition to the tax imposed in paragraph “a” , a tax 25 is imposed upon the use or storage by consumers of tobacco 26 products in this state, and upon the consumers, at a rate of 27 twenty-eight percent of the cost of the tobacco products. 28 c. b. Notwithstanding the rate of tax imposed pursuant 29 to paragraphs paragraph “a” and “b” , if the tobacco product 30 is a cigar, the total amount of the tax imposed pursuant to 31 paragraphs paragraph “a” and “b” combined shall not exceed fifty 32 fifty-five cents per cigar. 33 d. c. The taxes imposed by this subsection shall not apply 34 if the taxes imposed by subsection 1 on the tobacco products 35 -2- LSB 6698XC (3) 91 jm/jh 2/ 18

S.F. _____ have been paid. 1 e. d. The taxes imposed under this subsection shall not 2 apply to the use or storage of tobacco products in quantities 3 of: 4 (1) Less than twenty-five cigars. 5 (2) Less than one pound smoking or chewing tobacco or other 6 tobacco products not specifically mentioned herein in this 7 chapter , in the possession of any one consumer. 8 3. A tax is imposed upon all snuff in this state and upon 9 any person engaged in business as a distributor of snuff at 10 the rate of one dollar and nineteen cents per ounce, with a 11 proportionate tax at the same rate on all fractional parts of 12 an ounce of snuff fifty-five percent of the wholesale sales 13 price . The tax shall be computed based on the net weight 14 listed by the manufacturer. The tax on snuff shall be imposed 15 at the time the distributor does any of the following: 16 a. Brings or causes to be brought into this state from 17 outside the state, snuff for sale. 18 b. Makes, manufactures, or fabricates snuff in this state 19 for sale in this state. 20 c. Ships or transports snuff to retailers in this state, to 21 be sold by those retailers. 22 4. a. A tax is imposed upon the use or storage by consumers 23 of snuff in this state, and upon the consumers, at the rate of 24 one dollar and nineteen cents per ounce with a proportionate 25 tax at the same rate on all fractional parts of an ounce of 26 snuff fifty-five percent of the wholesale sales price . The 27 tax shall be computed based on the net weight as listed by the 28 manufacturer. 29 b. The tax imposed by this subsection shall not apply if the 30 tax imposed by subsection 3 on snuff has been paid. 31 c. The tax shall not apply to the use or storage of snuff in 32 quantities of less than ten ounces. 33 5. Any tobacco product with respect to which a tax has once 34 been imposed under this subchapter shall not again be subject 35 -3- LSB 6698XC (3) 91 jm/jh 3/ 18

S.F. _____ to tax under this subchapter , except as provided in section 1 453A.40 . 2 6. The tax imposed by this section shall not apply with 3 respect to any tobacco product which under the Constitution 4 and laws of the United States may not be made the subject of 5 taxation by this state. 6 7. The tax imposed by this section shall be in addition to 7 all other occupation or privilege taxes or license fees now or 8 hereafter imposed by any city or county. 9 8. All excise taxes collected under this chapter by a 10 distributor or any individual are deemed to be held in trust 11 for the state of Iowa. 12 DIVISION III 13 EXCISE TAX ON VAPOR PRODUCTS 14 Sec. 4. Section 331.303, subsection 3, Code 2026, is amended 15 to read as follows: 16 3. Act upon applications for cigarette , tobacco product, 17 and vapor product tax permits in accordance with chapter 453A . 18 Sec. 5. Section 331.653, subsection 11, Code 2026, is 19 amended to read as follows: 20 11. Carry out duties relating to the seizure and forfeiture 21 of cigarettes, tobacco products, and vapor products, vehicles, 22 and other property used in violation of cigarette , tobacco 23 product, and vapor product tax laws as provided in section 24 453A.32 . 25 Sec. 6. Section 331.756, subsection 19, Code 2026, is 26 amended to read as follows: 27 19. Assist, at the request of the director of revenue, in 28 the enforcement of cigar and cigarette, tobacco product, and 29 vapor product tax laws as provided in sections 453A.32 and 30 453A.49 . 31 Sec. 7. Section 453A.1, subsection 21, Code 2026, is amended 32 to read as follows: 33 21. “Place of business” is construed to mean and include any 34 place where cigarettes , tobacco products, or vapor products are 35 -4- LSB 6698XC (3) 91 jm/jh 4/ 18

S.F. _____ sold or where cigarettes , tobacco products, or vapor products 1 are stored within or without the state of Iowa by the holder of 2 an Iowa permit or kept for the purpose of sale or consumption; 3 or if sold from any vehicle or train, the vehicle or train on 4 which or from which such cigarettes , tobacco products, or vapor 5 products are sold shall constitute a place of business; or for 6 a business within or without the state that conducts delivery 7 sales, any place where alternative nicotine products or vapor 8 products are sold or where alternative nicotine products or 9 vapor products are kept for the purpose of sale. 10 Sec. 8. Section 453A.15, subsections 1, 2, and 4, Code 2026, 11 are amended to read as follows: 12 1. The director may prescribe the forms necessary for the 13 efficient administration of this subchapter and may require 14 uniform books and records to be used and kept by each permit 15 holder or other person as deemed necessary. The director may 16 also require each permit holder or other person to keep and 17 retain in the director’s possession evidence on prescribed 18 forms of all transactions involving the purchase and sale 19 of cigarettes , tobacco products, or vapor products, or the 20 purchase and use of stamps. The evidence shall be kept for a 21 period of three years from the date of each transaction, for 22 the inspection at all times by the department. 23 2. Where a state permit holder sells cigarettes , tobacco 24 products, or vapor products at retail, the holder shall be 25 required to maintain detailed records for sales of cigarettes , 26 tobacco products, or vapor products to be sold at retail and 27 the cigarette such sales records shall be kept separate and 28 apart. 29 4. Every permit holder or other person shall, when requested 30 by the department, make additional reports as the department 31 deems necessary and proper and shall at the request of the 32 department furnish full and complete information pertaining to 33 any transaction of the permit holder or other person involving 34 the purchase or sale or use of cigarettes , tobacco products, or 35 -5- LSB 6698XC (3) 91 jm/jh 5/ 18

S.F. _____ vapor products, or purchase of cigarette stamps. 1 Sec. 9. Section 453A.24, Code 2026, is amended to read as 2 follows: 3 453A.24 Carrier to permit access to records. 4 1. Every common carrier or person in this state having 5 custody of books or records showing the transportation 6 of cigarettes , tobacco products, or vapor products, both 7 interstate and intrastate , shall give and allow the department 8 free access to those books and records. 9 2. The director may require by rule that common carriers 10 or the appropriate persons provide monthly reports to the 11 department detailing all information the department deems 12 necessary on shipments into and out of Iowa of cigarettes , 13 and tobacco products , alternative nicotine products, or vapor 14 products as set forth in this subchapter I and subchapter 15 II of this chapter . A report required to be submitted 16 by the director pursuant to this section shall be filed 17 electronically. 18 Sec. 10. Section 453A.32, subsection 6, Code 2026, is 19 amended to read as follows: 20 6. The provisions of this section applying to cigarettes 21 shall also apply to tobacco products , alternative nicotine 22 products, and vapor products taxed under subchapter II of this 23 chapter . 24 Sec. 11. Section 453A.33, Code 2026, is amended to read as 25 follows: 26 453A.33 Seizure not to affect criminal prosecution. 27 The seizure, forfeiture, and sale of cigarettes, tobacco 28 products, alternative nicotine products, vapor products, and 29 other property under the terms and conditions set out in 30 section 453A.32 , shall not constitute any defense to the person 31 owning or having control or possession of the property from 32 criminal prosecution for any act or omission made or offense 33 committed under this chapter or from liability to pay penalties 34 provided by this chapter . 35 -6- LSB 6698XC (3) 91 jm/jh 6/ 18

S.F. _____ Sec. 12. Section 453A.35, subsection 1, paragraph b, Code 1 2026, is amended to read as follows: 2 b. The revenues generated from the tax on consumable hemp 3 products as specified in section 453F.2, from the tax on 4 cigarettes pursuant to section 453A.6, subsection 1 subsections 5 1 and 8 , from the tax on tobacco products as specified in 6 section 453A.43, subsections 1, 2, 3, and 4 , from the tax 7 on vapor products as specified in section 453A.47D, and from 8 the fees and penalties specified in subchapter III shall be 9 credited to the health care trust fund created in section 10 453A.35A . 11 Sec. 13. Section 453A.35A, subsection 1, Code 2026, is 12 amended to read as follows: 13 1. A health care trust fund is created in the office of 14 the treasurer of state. The fund consists of the revenues 15 generated from the tax on consumable hemp products as specified 16 in section 453F.2, from the tax on cigarettes pursuant to 17 section 453A.6, subsection 1 subsections 1 and 8 , from the 18 tax on tobacco products as specified in section 453A.43, 19 subsections 1, 2, 3, and 4 , from the tax on vapor products 20 as specified in section 453A.47D, and from the fees and 21 penalties specified in subchapter III , that are credited to 22 the health care trust fund, annually, pursuant to section 23 453A.35 . Moneys in the fund shall be separate from the 24 general fund of the state and shall not be considered part of 25 the general fund of the state. Moneys Except as otherwise 26 provided, 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 Sec. 14. Section 453A.39, subsection 1, Code 2026, is 35 -7- LSB 6698XC (3) 91 jm/jh 7/ 18

S.F. _____ amended to read as follows: 1 1. A manufacturer, distributor, wholesaler, retailer, or 2 distributing agent, or an agent thereof of a manufacturer, 3 distributor, wholesaler, retailer, or distributing agent , 4 shall not give away cigarettes , or tobacco products , or vapor 5 products at any time in connection with the manufacturer’s, 6 distributor’s, wholesaler’s, retailer’s, or distributing 7 agent’s business or for promotion of the business or product, 8 except as provided in subsection 2 . 9 Sec. 15. Section 453A.40, subsections 1 and 3, Code 2026, 10 are amended to read as follows: 11 1. All persons required to obtain a permit or to be licensed 12 under section 453A.13 or section 453A.44 having in their 13 possession and held for resale on the effective date of an 14 increase in the tax rate cigarettes, little cigars, or tobacco 15 products , or vapor products upon which the tax under section 16 453A.6 , or 453A.43 , or 453A.47D has been paid, unused cigarette 17 tax stamps which have been paid for under section 453A.8 , 18 unused metered imprints which have been paid for under section 19 453A.12 , or tobacco products for which the tax has not been 20 paid under section 453A.46 shall be subject to an inventory tax 21 on the items as provided in this section . 22 3. The rate of the inventory tax on each item subject to 23 the tax as specified in subsection 1 is equal to the difference 24 between the amount paid on each item under section 453A.6 , 25 453A.8 , 453A.12 , or 453A.43 , or 453A.47D prior to the tax 26 increase and the amount that is to be paid on each similar item 27 under section 453A.6 , 453A.8 , 453A.12 , or 453A.43 , or 453A.47D 28 after the tax increase except that in computing the rate of the 29 inventory tax any discount allowed or allowable under section 30 453A.8 shall not be considered. 31 Sec. 16. Section 453A.42, subsections 1, 2, 8, 9, 10, 12, 32 14, and 17, Code 2026, are amended to read as follows: 33 1. “Business” means any trade, occupation, activity, 34 or enterprise engaged in for the purpose of selling or 35 -8- LSB 6698XC (3) 91 jm/jh 8/ 18

S.F. _____ distributing tobacco products or vapor products in this state. 1 2. “Consumer” means any person who has title to or 2 possession of tobacco products or vapor products in storage, 3 for use or other consumption in this state. 4 8. “Person” means any individual, firm, association, 5 partnership, joint stock company, joint adventure venture , 6 corporation, trustee, agency, or receiver, or any legal 7 representative of any of the foregoing individual, firm, 8 association, partnership, joint stock company, joint venture, 9 corporation, trustee, agency, or receiver . 10 9. “Place of business” means any place where tobacco 11 products are sold or where tobacco products or vapor products 12 are manufactured, stored, or kept for the purpose of sale or 13 consumption, including any vessel, vehicle, airplane, train, 14 or vending machine; or for a business within or without 15 the state that conducts delivery sales, any place where 16 alternative nicotine products or vapor products are sold or 17 where alternative nicotine products or vapor products are kept 18 for the purpose of sale, including delivery sales. 19 10. “Retail outlet” means each place of business from which 20 tobacco products or vapor products are sold to consumers. 21 12. “Sale” means any transfer, exchange, or barter, in any 22 manner or by any means whatsoever, for a consideration, and 23 includes and means all sales made by any person. It includes 24 a gift by a person engaged in the business of selling tobacco 25 products or vapor products , for advertising, as a means of 26 evading the provisions of this subchapter , or for any other 27 purposes whatsoever. 28 14. “Storage” means any keeping or retention of tobacco 29 products or vapor products for use or consumption in this 30 state. 31 17. “Use” means the exercise of any right or power 32 incidental to the ownership of tobacco products or vapor 33 products . 34 Sec. 17. Section 453A.42, Code 2026, is amended by adding 35 -9- LSB 6698XC (3) 91 jm/jh 9/ 18

S.F. _____ the following new subsection: 1 NEW SUBSECTION . 10A. “Retail sales price” means the same as 2 “sales price” as defined in section 423.1. 3 Sec. 18. Section 453A.45, subsection 3, Code 2026, is 4 amended to read as follows: 5 3. Every retailer and subjobber shall procure itemized 6 invoices of all tobacco products and vapor products purchased. 7 The invoices shall show the name and address of the seller 8 and the date of purchase. The retailer and subjobber shall 9 preserve a legible copy of each invoice for three years 10 from the date of purchase. Invoices shall be available 11 for inspection by the director or the director’s authorized 12 agents or employees at the retailer’s or subjobber’s place of 13 business. 14 Sec. 19. NEW SECTION . 453A.47D Excise tax on vapor 15 products. 16 1. An excise tax at a rate of fifteen percent is imposed 17 on the retail sales price from the retail sale of, including 18 a delivery sale, of a vapor product. The amount of tax shall 19 be added to the retail sales price at the point of sale to the 20 consumer and shall be collected from the consumer. 21 2. The tax imposed by this section shall not apply with 22 respect to any vapor product which under the Constitution 23 and laws of the United States may not be made the subject of 24 taxation by this state. 25 3. The director shall administer the excise tax imposed 26 under this section as nearly as possible in conjunction with 27 the administration of the state sales and use tax law, except 28 that portion of the law that implements the streamlined sales 29 and use tax agreement. The director shall provide appropriate 30 forms, or provide on the regular state tax forms, for 31 reporting vapor product excise tax liability, and for ease of 32 administration may require vapor product excise tax liability 33 to be identified, reported, and remitted to the department as 34 sales and use tax liability, provided the department has the 35 -10- LSB 6698XC (3) 91 jm/jh 10/ 18

S.F. _____ ability to properly identify such amounts as vapor product 1 excise tax revenues upon receipt. 2 4. The director may require all persons who are engaged 3 in the business of deriving any sales price or purchase 4 price subject to tax under this section to register with 5 the department. The director may also require a tax permit 6 applicable only to this section for any vapor product retailer 7 not collecting, or any vapor product user not paying, taxes 8 under chapter 423. 9 5. Section 422.25, subsection 4, sections 422.30, 422.67, 10 and 422.68, section 422.69, subsection 1, sections 422.70, 11 422.71, 422.72, 422.74, and 422.75, section 423.14, subsection 12 1, and sections 423.23, 423.24, 423.25, 423.31 through 423.35, 13 423.37, 423.39 through 423.42, and 423.47, consistent with 14 the provisions of this chapter, shall apply with respect to 15 the tax authorized under this section in the same manner and 16 with the same effect as if the excise taxes on the sale of 17 vapor products were retail sales taxes within the meaning of 18 those statutes. Notwithstanding this subsection, the director 19 shall provide for monthly filing of returns and for other than 20 monthly filing of returns both as prescribed in section 423.31. 21 6. The tax imposed by this section shall be in addition to 22 any other taxes imposed by law. 23 7. All excise taxes collected under this section by any 24 person are deemed to be held in trust for the state of Iowa. 25 8. The department shall adopt rules pursuant to chapter 17A 26 to administer this section. 27 Sec. 20. Section 453A.51, Code 2026, is amended to read as 28 follows: 29 453A.51 Assessment of cost of audit. 30 The department may employ auditors or other persons to 31 audit and examine the books and records of a permit holder or 32 other person dealing in tobacco products and vapor products 33 to ascertain whether the permit holder or other person has 34 paid the amount of the taxes required to be paid by the permit 35 -11- LSB 6698XC (3) 91 jm/jh 11/ 18

S.F. _____ holder or other person under the provisions of this chapter . 1 If the taxes have not been paid, as required, the department 2 shall assess against the permit holder or other person, as 3 additional penalty, the reasonable expenses and costs of the 4 investigation and audit. 5 DIVISION IV 6 EXCISE TAX ON CONSUMABLE HEMP 7 Sec. 21. Section 204.7, subsection 4, Code 2026, is amended 8 to read as follows: 9 4. A person selling a consumable hemp product in this state 10 shall register with the department of health and human services 11 on a form prescribed by the department of health and human 12 services by rule and shall keep on the premises of the person’s 13 business a copy of the certificate of analysis issued pursuant 14 to section 204.8 for the hemp contained in the consumable hemp 15 products sold by the person. The department of health and 16 human services may impose a fee, established by the department 17 of health and human services by rule, on a registrant not to 18 exceed the cost of processing the registration. The department 19 of health and human services shall provide the names of 20 persons registering to sell consumable hemp products to the 21 department of revenue for the purpose of collecting the excise 22 tax in section 453F.2. The department of health and human 23 services shall adopt rules for the revocation of a registration 24 issued to a person who sells a consumable hemp product not in 25 compliance with this section . 26 Sec. 22. NEW SECTION . 453F.1 Definitions. 27 As used in this chapter: 28 1. “Consumable hemp product” means the same as defined in 29 section 204.2. 30 2. “Delivery sale” means any sale of a consumable hemp 31 product to a purchaser in this state where the purchaser 32 submits the order for such sale by means of a telephonic 33 or other method of voice transmission, mail or any other 34 delivery service, or the internet or other online service and 35 -12- LSB 6698XC (3) 91 jm/jh 12/ 18

S.F. _____ the consumable hemp product is delivered by use of mail or a 1 delivery service. The sale of consumable hemp product shall 2 constitute a delivery sale regardless of whether the seller is 3 located in this state. “Delivery sale” does not include a sale 4 to a distributor or retailer of any consumable hemp product not 5 for personal consumption. 6 3. “Department” means the department of revenue. 7 4. “Director” means the director of revenue. 8 5. “Retail sales price” means the same as “sales price” as 9 defined in section 423.1. 10 Sec. 23. NEW SECTION . 453F.2 Excise tax —— rules. 11 1. An excise tax at a rate of fifteen percent is imposed 12 on the retail sales price from the retail sale, including a 13 delivery sale, of a consumable hemp product. The amount of the 14 tax shall be added to the retail sales price at the point of 15 sale to the consumer and shall be collected from the consumer. 16 2. a. An excise tax at a rate of fifteen percent is imposed 17 upon the use and storage by a consumer of a consumable hemp 18 product in this state at a rate of fifteen percent of the cost 19 of the consumable hemp product. 20 b. The taxes imposed pursuant to this subsection shall not 21 apply if the taxes imposed by subsection 1 on the consumable 22 hemp product have been paid. 23 3. The director shall administer the excise tax imposed 24 under this section as nearly as possible in conjunction with 25 the administration of the state sales and use tax law, except 26 that portion of the law that implements the streamlined sales 27 and use tax agreement. The director shall provide appropriate 28 forms, or provide on the regular state tax forms, for reporting 29 consumable hemp product excise tax liability, and for ease 30 of administration may require consumable hemp product excise 31 tax liability to be identified, reported, and remitted to 32 the department as sales and use tax liability, provided the 33 department has the ability to properly identify such amounts as 34 consumable hemp product excise tax revenues upon receipt. 35 -13- LSB 6698XC (3) 91 jm/jh 13/ 18

S.F. _____ 4. The director may require all persons who are engaged 1 in the business of deriving any sales price or purchase 2 price subject to tax under this chapter to register with 3 the department. The director may also require a tax permit 4 applicable only to this section for any consumable hemp product 5 retailer not collecting, or any consumable hemp product user 6 not paying, taxes under chapter 423. 7 5. Section 422.25, subsection 4, sections 422.30, 422.67, 8 and 422.68, section 422.69, subsection 1, sections 422.70, 9 422.71, 422.72, 422.74, and 422.75, section 423.14, subsection 10 1, and sections 423.23, 423.24, 423.25, 423.31 through 423.35, 11 423.37, 423.39 through 423.42, and 423.47, consistent with the 12 provisions of this chapter, shall apply with respect to the tax 13 authorized under this section in the same manner and with the 14 same effect as if the excise taxes on the sale of consumable 15 hemp products were retail sales taxes within the meaning of 16 those statutes. Notwithstanding this subsection, the director 17 shall provide for monthly filing of returns and for other than 18 monthly filing of returns both as prescribed in section 423.31. 19 6. The tax imposed by this section shall not apply with 20 respect to any consumable hemp product which under the 21 Constitution and laws of the United States may not be made the 22 subject of taxation by this state. 23 7. The tax imposed by this section shall be in addition to 24 any other taxes imposed by law. 25 8. All excise taxes collected under this section by any 26 person are deemed to be held in trust for the state of Iowa 27 and shall be credited to the health care trust fund created in 28 section 453A.35A. 29 9. The department shall adopt rules pursuant to chapter 17A 30 to administer this chapter. 31 DIVISION V 32 APPROPRIATIONS 33 Sec. 24. DEPARTMENT OF HEALTH AND HUMAN SERVICES —— DOUBLE 34 UP FOOD BUCKS PROGRAM —— APPROPRIATION. There is appropriated 35 -14- LSB 6698XC (3) 91 jm/jh 14/ 18

S.F. _____ from the health care trust fund created in section 453A.35A to 1 the department of health and human services for the fiscal year 2 beginning July 1, 2026, and ending June 30, 2027, in addition 3 to any other funding appropriated for such purpose for the same 4 fiscal year, the following amount, or so much thereof as is 5 necessary, to be used for the purposes designated: 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000,000 7 The appropriation made in this section shall be used to 8 provide a grant to the Iowa healthiest state initiative to 9 support the double up food bucks program to make fresh fruits 10 and vegetables sold at farmers markets, grocery stores, and 11 other participating locations accessible to individuals and 12 families who reside in this state and receive assistance 13 through the federal supplemental nutrition assistance program. 14 Sec. 25. DEPARTMENT OF JUSTICE —— HUMAN TRAFFICKING —— 15 APPROPRIATION. There is appropriated from the health care 16 trust fund created in section 453A.35A to the department of 17 justice for the fiscal year beginning July 1, 2026, and ending 18 June 30, 2027, in addition to any other funding appropriated 19 for such purpose for the same fiscal year, the following 20 amount, or so much thereof as is necessary, to be used for the 21 purposes designated: 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000,000 23 The appropriation made in this section shall be used to 24 provide grants to care providers providing services to victims 25 of human trafficking. 26 EXPLANATION 27 The inclusion of this explanation does not constitute agreement with 28 the explanation’s substance by the members of the general assembly. 29 This bill relates to the taxation of cigarettes, tobacco 30 products, vapor products, and consumable hemp products, and 31 makes appropriations to the department of health and human 32 services and the department of justice. 33 DIVISION I —— CIGARETTE TAXATION. The bill raises the 34 cigarette tax from 6.8 cents per cigarette to 10.05 cents 35 -15- LSB 6698XC (3) 91 jm/jh 15/ 18

S.F. _____ per cigarette. The overall tax on a pack of cigarettes (20 1 cigarettes) goes from $1.36 to $2.01. 2 The bill also raises the tax on loose tobacco products 3 inserted into a vending machine from which assembled cigarettes 4 are dispensed. The tax is increased from 3.06 cents on each 5 cigarette dispensed from the vending machine to 4.52 cents. 6 By increasing the cigarette tax in the bill, the inventory 7 tax is also assessed on cigarettes remaining in inventories 8 taxed under the previous tax rate that is equal to the 9 difference between the previous tax rate and the new tax rate. 10 Code section 453A.35 specifies that revenues from the tax 11 on cigarettes are deposited into the health care trust fund 12 created in Code section 453A.35A. 13 DIVISION II —— TAX ON TOBACCO PRODUCTS. Currently, a tax is 14 imposed on the distributor of all tobacco products (excluding 15 cigarettes, little cigars, and snuff) at a rate of 22 percent 16 of the wholesale sales price under Code section 453A.43(1)(a) 17 and at a rate of 28 percent under Code section 453A.43(1)(b) 18 for a combined rate of 50 percent tax on the wholesale sales 19 price. The bill combines the 22 percent rate and the 28 20 percent rate and raises the tax on tobacco products from the 21 combined rate of 50 percent to 55 percent of the wholesale 22 sales price. 23 Currently, the tax on cigars is capped at 50 cents per cigar. 24 The bill raises the cap on the tax on cigars to 55 cents to 25 match the percentage increase of the other tax increases within 26 Code section 453A.43(1). 27 The bill changes the tax on snuff to match the tax on other 28 tobacco products within Code section 453A.43(1) by taxing snuff 29 at 55 percent of the wholesale price rather than taxing snuff 30 at a rate of $1.19 per ounce. 31 By increasing the tax on the wholesale sales price of tobacco 32 products in the bill, the inventory tax is assessed on any 33 tobacco products remaining in inventories taxed under the 34 previous tax rate that is equal to the difference between the 35 -16- LSB 6698XC (3) 91 jm/jh 16/ 18

S.F. _____ previous tax rate and the new tax rate. 1 Code section 453A.35 specifies that revenues from the tax on 2 tobacco products are deposited into the health care trust fund 3 created in Code section 453A.35A. 4 The bill also makes other conforming changes to Code section 5 453A.43. 6 DIVISION III —— EXCISE TAX ON VAPOR PRODUCTS. The bill 7 creates an excise tax on vapor products at a rate of 15 percent 8 on the sales price from the retail sale, including a delivery 9 sale, of vapor products to consumers. The excise tax is in 10 addition to any other tax imposed by law. The excise tax shall 11 be collected at the point of sale from the consumer. The 12 bill requires the director of revenue to administer the vapor 13 product excise tax as nearly as possible in conjunction with 14 the administration of the state sales and use tax law, except 15 that portion of the law that implements the streamlined sales 16 and use tax agreement. The bill deposits all revenues raised 17 from the vapor products excise tax into the health care trust 18 fund created in Code section 453A.35A. The bill requires the 19 department to adopt rules to administer the new excise tax. 20 The bill makes other conforming changes to implement the new 21 tax. 22 DIVISION IV —— EXCISE TAX ON CONSUMABLE HEMP PRODUCTS. The 23 bill creates an excise tax on consumable hemp products at a 24 rate of 15 percent on the sales price from the retail sale, 25 including a delivery sale, of consumable hemp products to 26 consumers. The excise tax is in addition to any other tax 27 imposed by law. The bill requires the department to adopt 28 rules to administer the new excise tax. The bill requires 29 the director of revenue to administer the consumable hemp 30 excise tax as nearly as possible in conjunction with the 31 administration of the state sales and use tax law, except that 32 portion of the law that implements the streamlined sales and 33 use tax agreement. The bill deposits all revenues raised from 34 the consumable hemp excise tax into the health care trust fund 35 -17- LSB 6698XC (3) 91 jm/jh 17/ 18

S.F. _____ created in Code section 453A.35A. 1 DIVISION V —— APPROPRIATIONS. For the fiscal year beginning 2 July 1, 2026, and ending June 30, 2027, the bill makes an 3 appropriation to the department of human services in the amount 4 of $1 million from the health care trust fund created in Code 5 section 453A.35A, to be used to provide a grant to the Iowa 6 healthiest state initiative to support the double up food bucks 7 program to make fresh fruits and vegetables sold at farmers 8 markets, grocery stores, and other participating locations 9 accessible to individuals and families who reside in this 10 state and receive assistance through the federal supplemental 11 nutrition assistance program. 12 For the fiscal year beginning July 1, 2026, and ending June 13 30, 2027, the bill makes an appropriation to the department of 14 justice in the amount of $1 million from the health care trust 15 fund created in Code section 453A.35A, to be used to provide 16 victim assistance grants to care providers providing services 17 to victims of human trafficking. 18 -18- LSB 6698XC (3) 91 jm/jh 18/ 18