Senate File 363 - IntroducedA Bill ForAn Act 1relating to the regulation of certain tobacco products,
2and providing penalties.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1   Section 1.  NEW SECTION.  453E.1  Definitions.
   2As used in this chapter, unless the context otherwise
3requires:
   41.  “Business” means any trade, occupation, activity,
5or enterprise engaged in for the purpose of selling or
6distributing tobacco products and devices in this state.
   72.  “Consumer” means any person who has title to or
8possession of devices in storage, for use or other consumption
9in this state.
   103.  “Controlled substance” means controlled substance as
11defined in section 124.101.
   124.  “Delivery sale” means any sale of a device to a purchaser
13in this state where the purchaser submits the order for
14such sale by means of a telephonic or other method of voice
15transmission, mail or any other delivery service, or the
16internet or other online service and the device is delivered by
17use of mail or a delivery service. The sale of a device shall
18constitute a delivery sale regardless of whether the seller is
19located in this state. “Delivery sale” does not include a sale
20to a distributor or retailer of a device not for personal use.
   215.  “Department” means the department of revenue.
   226.  a.  “Device” means any equipment or product, made in
23whole or in part of glass or metal, that is designed for use
24in inhaling through combustion tobacco, hemp, other plant
25materials, or a controlled substance. “Device” does not
26include a vapor product or a tobacco smoking product made of
27briar, meerschaum, clay, or corn cob and not having a surface,
28aperture, or other feature consisting of metal or glass.
   29b.  In determining whether any particular item constitutes a
30“device”, the following factors may be considered:
   31(1)  The instructions, oral or written, provided with the
32item concerning its use.
   33(2)  Any descriptive materials accompanying the item which
34explain or depict its use.
   35(3)  National and local advertising concerning the item’s
-1-1use.
   2(4)  The manner in which the item is displayed for sale.
   3(5)  Whether the owner of the place of business, or anyone in
4control of the item at the place of business, is a legitimate
5supplier of like or related items to the community, such as a
6licensed distributor, manufacturer, or subjobber.
   7(6)  Direct or circumstantial evidence of the ratio of sales
8of the item to the total sales of the place of business.
   9(7)  The existence and scope of legitimate uses of the item
10in the community.
   11(8)  Expert testimony concerning the item’s use.
   12c.  A particular item may constitute a device notwithstanding
13any lawful use of the item.
   147.  “Device retailer” means a person engaged in the retail
15sale of tangible personal property who is also engaged in
16selling devices to the ultimate consumer.
   178.  “Director” means the director of revenue.
   189.  “Distributor” means the same as defined in section
19453A.42.
   2010.  “Manufacturer” means the same as defined in section
21453A.42.
   2211.  “Place of business” means any place where tobacco
23products and devices are sold, stored, or kept for the purpose
24of sale or consumption; or for a business within or without the
25state that conducts delivery sales, any place where tobacco
26products and devices are sold or are kept for the purpose of
27sale, including delivery sales.
   2812.  “Retail outlet” means each place of business from which
29tobacco products and devices are sold to consumers.
   3013.  “Sale” means any transfer, exchange, or barter, in
31any manner or by any means whatsoever, for consideration, and
32includes and means all sales made by any person.
   3314.  “Subjobber” means the same as defined in section
34453A.42.
   3515.  “Tobacco products” means cigars; little cigars;
-2-1cheroots; stogies; periques; granulated, plug cut, crimp cut,
2ready rubbed, and other smoking tobacco; snuff; cavendish;
3plug and twist tobacco; fine-cut and other chewing tobaccos;
4shorts; refuse scraps, clippings, cuttings and sweepings of
5tobacco, and other kinds and forms of tobacco, prepared in
6such manner as to be suitable for chewing or smoking in a pipe
7or otherwise, or both for chewing and smoking; but shall not
8include cigarettes as defined in section 453A.1.
   916.  “Tobacco retailer” means a retailer as defined in
10section 453A.42.
   1117.  “Use” means the exercise of any right or power
12incidental to the ownership of tobacco products or devices.
   1318.  “Vapor product” means the same as defined in section
14453A.1.
15   Sec. 2.  NEW SECTION.  453E.2  Administration — rules —
16intent.
   171.  The director shall administer this chapter. The director
18shall collect, supervise, and enforce the collection of all
19fees, taxes, and civil penalties imposed under this chapter.
   202.  The director may adopt rules pursuant to chapter 17A that
21are necessary to enforce this chapter.
   223.  The director may designate employees to administer
23and enforce the provisions of this chapter, including the
24collection of all taxes provided for in this chapter. In the
25enforcement, the director may request aid from the attorney
26general, the special agents of the state, any county attorney,
27or any peace officer. The director may appoint clerks and
28additional help as may be needed to administer this chapter.
   294.  This chapter or the holding of a device retailer permit
30or a device delivery sale permit under this chapter shall not
31be construed to provide for any of the following:
   32a.  Immunity from prosecution or the limitation of the
33application of other state law and regulations governing
34tobacco products, drug paraphernalia, or controlled substances.
   35b.  Authorization for the possession, marketing, offering
-3-1for sale, or selling of a device, the possession, marketing,
2offering for sale, or selling of which is otherwise prohibited
3by state or federal law.
4   Sec. 3.  NEW SECTION.  453E.3  Device retailers — permits —
5fees.
   61.  Permits required.  A person shall not engage in the
7business of a device retailer at any place of business or
8through delivery sales, unless the person complies with all of
9the following:
   10a.  The person has received and holds a permit as a tobacco
11retailer pursuant to section 453A.47A that has not been
12suspended or revoked and is not expired; complies with the
13provisions of chapter 453A applicable to a tobacco retailer;
14and sells tobacco products in addition to devices at the retail
15outlet or through delivery sales.
   16b.  The person has received and holds a permit as a device
17retailer pursuant to this section that has not been suspended
18or revoked and is not expired, and complies with the provisions
19of this chapter.
   202.  No sales without device retailer permit.  A device
21retailer shall not sell devices until an application has been
22filed and the fee prescribed paid for a permit and until such
23permit is obtained and only while such permit is not suspended,
24revoked, or expired.
   253.  Number of device retailer permits.  An application shall
26be filed and a permit obtained for each place of business
27owned or operated by a device retailer located in the state.
28If an out-of-state device retailer makes delivery sales of
29devices, an application shall be filed with the department and
30a permit shall be issued for the out-of-state device retailer’s
31principal place of business.
   324.  Issuance.  Cities may issue device retailer permits
33to device retailers located within their respective limits.
34County boards of supervisors may issue device retailer permits
35to device retailers located in their respective counties,
-4-1outside of the corporate limits of cities. The city or county
2shall submit a duplicate of any application for a device
3retailer permit to the alcoholic beverages division of the
4department of commerce within thirty days of issuance of a
5device retailer permit. The alcoholic beverages division of
6the department of commerce shall submit the current list of
7all device retailer permits issued to the department of public
8health by the last day of each quarter of a state fiscal year.
   95.  Fees — expiration.  All device retailer permits provided
10for in this section shall expire on June 30 of each year. A
11device retailer permit shall not be granted or issued until the
12applicant has paid the fees provided for in this section for
13the period ending June 30 next, to the city or county granting
14the device retailer permit. The fee for a device retailer
15permit is one thousand five hundred dollars.
   166.  Application.  Device retailer permits shall be issued
17only upon application, accompanied by the one thousand five
18hundred dollar fee, made upon forms furnished by the department
19upon written request. The failure to furnish such forms
20shall be no excuse for the failure to file the form unless
21absolute refusal is shown. The forms shall specify all of the
22following:
   23a.  The manner under which the device retailer transacts or
24intends to transact business as a device retailer.
   25b.  The principal office, residence, and place of business,
26to which the device retailer permit is to apply.
   27c.  If the applicant is not an individual, the names of the
28partners if the applicant is a partnership or the names of
29the principal officers or members if the applicant is a legal
30entity, and their addresses.
   31d.  Such other information as the director shall by rule
32prescribe.
   337.  Records and reports of device retailers.
   34a.  The director shall prescribe the forms necessary for
35the efficient administration of this section and may require
-5-1uniform books and records to be used and kept by each device
2retailer or other person as deemed necessary.
   3b.  Every device retailer shall, when requested by the
4department, make additional reports as the department deems
5necessary and proper and shall at the request of the department
6furnish full and complete information pertaining to any
7transaction of the device retailer involving the purchase or
8sale of devices, including the number of devices sold.
   98.  Requirements for sale.
   10a.  A device retailer shall not sell, give, or otherwise
11supply a device to any person under twenty-one years of age and
12must verify the age of all purchasers of devices. If a device
13is purchased at a retail outlet, valid proof of the purchaser’s
14identity and age shall be obtained at the time the device is
15supplied to the purchaser. If a device is purchased through a
16delivery sale, valid proof of the purchaser’s identity and age
17shall be obtained in accordance with section 453E.4.
   18b.  A device retailer shall only display and sell devices
19in a location of a retail outlet where the device retailer
20ensures that the devices are not visible to a person younger
21than twenty-one years of age and where no person younger than
22twenty-one years of age is present or permitted to enter at any
23time.
24   Sec. 4.  NEW SECTION.  453E.4  Delivery sale of devices —
25permit — requirements.
   261.  a.  A person shall not mail, ship, or otherwise cause
27to be delivered any device in connection with a delivery sale
28to any other person within this state unless the person has
29applied for and holds a device delivery sale permit as provided
30in this section.
   31b.  A person applying for a device delivery sale permit shall
32submit an application for the permit electronically, or in a
33manner prescribed by the director.
   34c.  An application submitted pursuant to paragraph “b” shall
35be accompanied by a permit fee in the amount of one thousand
-6-1five hundred dollars.
   2d.  The director may in accordance with this section issue a
3device delivery sale permit which shall be valid for one year
4from the date of issuance unless it is sooner suspended or
5revoked for a violation of this section.
   6e.  A permit issued pursuant to this section may be renewed
7annually by submitting a renewal application in a manner
8prescribed by the director, accompanied by the one thousand
9five hundred dollar permit fee.
   102.  The delivery sale of devices pursuant to this
11section shall be subject to the following requirements and
12restrictions:
   13a.  All devices delivered by delivery sale directly to a
14resident of this state shall be sold only by a device delivery
15sale permit holder.
   16b.  A device delivery sale permit holder shall only deliver
17devices by delivery sale to a resident of this state who is at
18least twenty-one years of age for the resident’s personal use
19and not for resale.
   20c.  All devices delivered by delivery sale directly to a
21resident of this state shall be conspicuously labeled with the
22words “CONTAINS DEVICE: SIGNATURE OF PERSON AGE 21 OR OLDER
23REQUIRED FOR DELIVERY” or shall be conspicuously labeled with
24alternative wording preapproved by the director.
   25d.  A device delivery sale permit holder shall obtain
26valid proof of identity and age prior to delivery, and shall
27obtain the signature of a person age twenty-one or older as a
28condition of delivery.
   29e.  A device delivery sale permit holder shall maintain
30records of devices delivered which include the name of the
31device manufacturer, quantity of devices delivered, recipient’s
32name and address and verification of age on an electronic or
33paper form of signature from the recipient of the device, and
34sales and excise taxes paid. Records shall be submitted to
35the director on a monthly basis in a form and manner to be
-7-1determined by the director. Records shall be maintained for at
2least five years.
   33.  A device delivery sale permit holder shall remit to the
4director an amount equivalent to the applicable sales tax and
5excise tax on devices subject to delivery sale at the rates
6specified in section 423.2 and section 453E.5, as applicable.
7The amount shall be remitted at the time and in the manner
8provided in section 453E.5.
   94.  A device delivery sale permit holder shall be deemed to
10have consented to the jurisdiction of the director or any other
11agency or court in this state concerning enforcement of this
12section and any related laws, rules, or regulations. A device
13delivery sale permit holder shall allow the director to perform
14an audit of records of devices upon request.
15   Sec. 5.  NEW SECTION.  453E.5  Sales and use tax on sales and
16delivery sales of devices — examination of records and premises
17— subpoena for witnesses and papers.
   181.  A sale or delivery sale of a device within this state
19shall be subject to the sales tax provided in chapter 423,
20subchapter II. All the provisions for the lien of the tax, its
21collection, and all actions as provided in the uniform sales
22and use tax administration Act, chapter 423, shall apply to the
23tax imposed in this chapter.
   242.  There is levied and imposed an excise tax on a device
25purchased in this state through a sale or purchased for use
26in this state through a delivery sale of forty percent of the
27purchase price of the device.
   283.  A device delivery sale permit holder shall be deemed to
29have waived all claims that such permit holder lacks physical
30presence within this state for purposes of collecting and
31remitting the sales and excise taxes.
   324.  A device delivery sale permit holder making taxable
33delivery sales of devices within this state and a device
34retailer shall remit to the department all sales and excise
35taxes due on such sales at the times and in the manner as
-8-1established by rule of the director.
   25.  The director may adopt rules pursuant to chapter 17A to
3administer this section.
   46.  Excise taxes collected under this section shall be
5deposited in the specialty courts program fund created in
6section 453E.6.
   77.  a.  For the purpose of enabling the department to
8determine the tax liability of device delivery sale permit
9holders, device retailers, or any other person dealing in
10devices or to determine whether a tax liability has been
11incurred, the department shall have the right to inspect any
12premises of the device delivery sale permit holder, device
13retailer, or other person dealing in devices located within
14or without the state of Iowa where devices are manufactured,
15produced, made, stored, transported, sold, or offered for
16sale or exchange, and to examine all of the records required
17to be kept or any other records that may be kept incident
18to the conduct of the business of said device delivery sale
19permit holder, device retailer, or any other person dealing in
20devices.
   21b.  The department shall also have the right as an incident
22to determining the tax liability, or whether a tax liability
23has been incurred, to examine all stocks of devices and to
24remain upon the premises for such length of time as may be
25necessary to fully determine the tax liability, or whether a
26tax liability has been incurred.
   27c.  It shall be unlawful for a permit holder to fail to
28produce upon demand of the department any records required to
29be kept or to hinder or prevent in any manner the inspection of
30the records or the examination of the premises.
   31d.  In the case of any departmental inspection conducted
32under this section requiring department personnel to travel
33outside the state of Iowa, any additional costs incurred by
34the department for out-of-state travel expenses shall be borne
35by the device delivery sale permit holder, device retailer, or
-9-1other person dealing in devices. These additional costs shall
2be those costs in excess of the costs of a similar inspection
3conducted at the geographical point located within the state
4of Iowa nearest to the out-of-state inspection point. In
5lieu of conducting an on-premises out-of-state inspection,
6the department shall have the authority to direct the device
7delivery sale permit holder, device retailer, or other person
8dealing in devices to assemble and transport all records
9described in this subsection to the nearest practical and
10convenient geographical location in Iowa for inspection by the
11department.
12   Sec. 6.  NEW SECTION.  453E.6  Specialty courts program fund.
   131.  A specialty courts program fund is created in the state
14treasury under the control of the drug policy coordinator of
15the governor’s office of drug control policy. Moneys from
16permit fees, with the exception of permit fees collected by
17cities or counties in the issuance of permits, and excise taxes
18imposed and collected pursuant to section 453E.5, shall be
19deposited in the fund. Permit fees collected by cities or
20counties under this chapter shall be paid to the treasurer of
21the city where the permit is effective, or to another city
22officer as designated by the city council, and credited to the
23general fund of the city. Permit fees collected by counties
24under this chapter shall be paid to the county treasurer and
25credited to the general fund of the county.
   262.  Moneys in the fund shall be used only as provided
27in appropriations from the fund for the purpose of the
28support of specialty courts to address underlying substance
29use disorder-related and mental health-related issues that
30contribute to the contact of individuals with the justice
31system.
   323.  The fund shall be separate from the general fund of the
33state and shall not be considered part of the general fund of
34the state. The moneys in the fund shall not be considered
35revenue of the state, but rather shall be moneys of the fund.
-10-1The moneys in the fund are not subject to reversion to the
2general fund of the state under section 8.33 and shall not
3be transferred, used, obligated, appropriated, or otherwise
4encumbered, except to provide for the purposes of this section.
5Notwithstanding section 12C.7, subsection 2, interest or
6earnings on moneys deposited in the fund shall be credited to
7the fund.
   84.  The treasurer of state shall provide a quarterly report
9of fund activities and balances to the drug policy coordinator
10of the governor’s office of drug control policy.
11   Sec. 7.  NEW SECTION.  453E.7  Permits — suspension —
12revocation — penalties.
   131.  The provisions of chapter 453A including the permit
14suspension and revocation provisions and the civil penalties
15established in section 453A.22 shall apply to tobacco retailers
16who are also device retailer permit holders or device delivery
17sale permit holders under this chapter. The provisions of
18chapter 453A applicable to persons other than tobacco retailers
19who violate chapter 453A shall also apply to persons who
20violate this chapter.
   212.  A person holding a device retailer permit or a device
22delivery sale permit under this chapter who violates this
23chapter by marketing or selling a device to be used or
24attempted to be used or that is capable of use in combination
25with tobacco, hemp, other plant materials, or a controlled
26substance, to knowingly or intentionally and primarily inhale
27the material or substance through combustion commits a serious
28misdemeanor and is also subject to permit revocation.
   293.  a.  If a person holding a device retailer permit or a
30device delivery sale permit under this chapter has willfully
31violated this chapter, the department shall revoke the permit
32upon notice and hearing. The hearing before the department may
33be held at a site in the state as the department may direct.
34The notice shall be given by mailing a copy to the permit
35holder’s place of business as it appears on the application
-11-1for a permit. If, upon hearing, the department finds that the
2violation has occurred, the department may revoke the permit.
   3b.  If a device retailer permit or a device delivery
4sale permit is suspended or revoked under this section, the
5suspension or revocation shall only apply to the place of
6business at which the violation occurred and shall not apply to
7any other place of business to which the permit applies but at
8which the violation did not occur.
   9c.  The department or local authority shall report the
10suspension or revocation of a device retailer permit or a
11device delivery sale permit under this section to the alcoholic
12beverages division of the department of commerce within thirty
13days of the suspension or revocation of the permit.
   144.  In addition to any other applicable penalties, a device
15retailer permit holder or a device delivery sale permit holder
16who violates this chapter shall be subject to the following:
   17a.  For a first violation, a civil penalty of five hundred
18dollars.
   19b.  For a second violation, a civil penalty of one thousand
20dollars.
   21c.  A third violation constitutes grounds for suspension or
22revocation of the permit under this chapter.
   235.  A person other than a device retailer permit holder or a
24device delivery sale permit holder who violates this chapter,
25including a person who engages in the business of a device
26retailer at any place of business or through delivery sales
27without holding an applicable, valid permit under this chapter,
28commits a serious misdemeanor and shall also be subject to the
29following civil penalties:
   30a.  For a first violation, a civil penalty of one thousand
31dollars.
   32b.  For a second violation, a civil penalty of two thousand
33dollars.
   34c.  For a third or subsequent violation, a civil penalty of
35five thousand dollars.
-12-
1EXPLANATION
2The inclusion of this explanation does not constitute agreement with
3the explanation’s substance by the members of the general assembly.
   4This bill relates to the regulation of certain tobacco
5products.
   6The bill requires a person who engages in the business of
7a device retailer through a retail outlet or delivery sales
8to receive and hold a permit as a tobacco retailer, comply
9with provisions applicable to a tobacco retailer, sell tobacco
10products in addition to devices at the retail outlet or through
11delivery sales, and hold a permit as a device retailer. The
12bill provides for the application for and issuance of device
13retailer permits by cities and counties depending upon the
14location of the retailer; requires the payment of a fee for
15each permit; and provides for annual expiration of the permits.
16The bill also requires device retailer permit holders to
17keep certain records and submit reports to the department of
18revenue; establishes requirements for the sale of devices
19including that a device retailer shall not sell, give, or
20otherwise supply a device to any person under 21 years of age
21and must verify the age of all purchasers of devices; and
22provides that a device retailer shall only display and sell
23devices in a location where the device retailer ensures that
24the devices are not visible to a person younger than 21 years
25of age and where no person younger than 21 years of age is
26present or permitted to enter at any time.
   27The bill establishes requirements for the delivery sale
28of devices including permit requirements and restrictions
29including all devices delivered by delivery sale directly to
30a resident of this state shall be delivered by a holder of
31a device delivery sale permit; that a device delivery sale
32permit holder shall only deliver devices by delivery sale to
33a resident of this state who is at least 21 years of age, for
34the resident’s personal use and consumption and not for resale;
35all devices delivered by delivery sale directly to a resident
-13-1of this state shall be conspicuously labeled with the words
2“CONTAINS DEVICE: SIGNATURE OF PERSON AGE 21 OR OLDER REQUIRED
3FOR DELIVERY” or with an alternative wording preapproved by
4the director of revenue; a device delivery sale permit holder
5shall obtain valid proof of identity and age prior to delivery,
6and shall obtain the signature of a person age 21 or older
7as a condition of delivery; and that a device delivery sale
8permit holder shall maintain records of devices delivered which
9include certain information that must be maintained for five
10years.
   11The bill provides for the imposition, collection, and
12payment of sales and excise taxes on the retail sale, including
13delivery sales, of devices. Moneys from permit fees, with the
14exception of city and county permit fees, and excise taxes
15imposed and collected under the bill, are to be deposited in
16the specialty courts program fund created in the bill to be
17used for the purpose of the support of specialty courts to
18address underlying substance use disorder-related and mental
19health-related issues that contribute to the contact of
20individuals with the justice system.
   21The bill provides penalties for violations of the bill.
22The applicable provisions of Code chapter 453A (cigarette and
23tobacco taxes and regulation of alternative nicotine products
24and vapor products) including penalties and license suspension
25and revocation provisions and penalties applicable to those
26other than permit holders apply to tobacco retailers who are
27also device retailer permit holders or device delivery sale
28permit holders as well as to those who are not permit holders.
   29Additionally, a person holding a device retailer permit or a
30device delivery sale permit who violates the bill by marketing
31or selling a device to be used or attempted to be used or that
32is capable of use in combination with tobacco, hemp, other
33plant materials, or a controlled substance, to knowingly or
34intentionally and primarily inhale the material or controlled
35substance through combustion, commits a serious misdemeanor and
-14-1is also subject to permit revocation. A serious misdemeanor is
2punishable by confinement for no more than one year and a fine
3of at least $430 but not more than $2,560.
   4If a person holding a device retailer permit or a device
5delivery sale permit willfully violates the bill, the
6department shall revoke the permit upon notice and hearing.
   7In addition to any other applicable penalties, a device
8retailer permit holder or a device delivery sale permit holder
9who violates the Code chapter is subject to a civil penalty
10of $500 for a first violation, a civil penalty of $1,000 for
11a second violation, and a third violation constitutes grounds
12for suspension or revocation of the permit. A person other
13than a device retailer permit holder or a device delivery
14sale permit holder, including a person who engages in the
15business of a device retailer at a place of business or
16through delivery sales without holding an applicable, valid
17permit under the bill, who violates the Code chapter commits
18a serious misdemeanor and is also subject to a civil penalty
19of $1,000 for a first violation, a civil penalty of $2,000 for
20a second violation, and a civil penalty of $5,000 for a third
21or subsequent violation.
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