Legislature(2019 - 2020)DAVIS 106
03/20/2020 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB195 | |
| HB94 | |
| HB146 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 195 | TELECONFERENCED | |
| += | HB 94 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | HB 146 | TELECONFERENCED | |
| += | HB 84 | TELECONFERENCED | |
HB 94-ELECTRONIC SMOKING PRODUCTS EXCISE TAX
3:28:01 PM
CHAIR SPOHNHOLZ announced that the next order of business would
be HOUSE BILL NO. 94, "An Act relating to the taxation of
electronic smoking products; and providing for an effective
date."
3:28:28 PM
REPRESENTATIVE STUTES moved to adopt the proposed committee
substitute (CS) for HB 94, labeled 31-LS0441\K, Nauman, 3/13/20,
as the working document.
CHAIR SPOHNHOLZ objected for the purpose of discussion.
3:28:52 PM
REPRESENTATIVE HANNAN, prime sponsor, explained the changes to
HB 94 proposed under Version K. She stated that the committee
substitute adds measures for licensing online retailers, age
verification at point of sale and point of delivery, labelling
of items shipped, and taxation of direct online sales to the end
consumer.
3:29:30 PM
CHAIR SPOHNHOLZ removed her objection. There being no further
objection, Version K was adopted as the working draft.
CHAIR SPOHNHOLZ opened public testimony.
3:30:02 PM
JESSI WALTON expressed her opposition to HB 94. She offered her
belief that the bill would close small businesses.
REPRESENTATIVE STUTES asked how HB 94 would close small
businesses.
MS. WALTON opined that the 75 percent wholesale tax is a lot.
She said it will drive people to make their own vape juice (E-
cigarette liquid) at home, instead of buying vape juice that is
appropriately made from a retailer.
3:31:17 PM
KAMEREN EATON, Operations Manager, Alaska Elixirs Vapes, voiced
his opposition to HB 94. He expressed his concern that the 75
percent excise tax would drive customers to purchase products
online, which would bring down brick-and-mortar stores through
declining sales. He argued that combined with the 55 percent
nicotine tax in the Matanuska-Susitna borough, the additional 75
percent tax on electronic smoking products would add up to a tax
of 135 percent. Nonetheless, he commended the addition of age
verification for online sales.
3:32:46 PM
REPRESENTATIVE STUTES sought clarification as to whether the
bill equalizes the tax on electronic smoking products with the
tobacco tax.
REPRESENTATIVE HANNAN confirmed that. She explained that under
current law, tobacco products are taxed by the state at 75
percent of the wholesale price; however, vaping products are not
included in that category and therefore, are not currently taxed
in Alaska.
REPRESENTATIVE STUTES observed that despite the tax on
cigarettes, there are still a lot of people who smoke in the
state.
3:33:48 PM
SARAH EATON Co-owner Alaska Elixirs Vapes, expressed her
opposition to the 75 percent tax. She said if it were enacted,
her business would not be able to employ its personnel. She
alleged that the U.S. Food and Drug Administration (FDA)
identified that brick-and-mortar vape shops keep [electronic
smoking] products out of childrens hands and help adults quit
smoking cigarettes. She claimed that combined with the 55
percent nicotine tax in the Matanuska-Susitna borough, the
additional 75 percent tax on electronic smoking products would
add up to a tax of 135 percent, which would prevent her business
from making a profit. She opined that tobacco helps people and
that her business sells products save lives.
CHAIR SPOHNHOLZ said shes not sure that Ms. Eatons statements
have been verified by the FDA. She asked if online tobacco
sales are taxed.
REPRESENTATIVE HANNAN answered yes.
CHAIR SPOHNHOL asked how those online taxes are realized and
whether HB 94 allows for the online taxation of vaping products.
REPRESENTATIVE HANNAN deferred to Mr. Clark.
3:38:22 PM
TIMOTHY CLARK, Staff, Representative Sara Hannan, Alaska State
Legislature, on behalf of Representative Hannan, prime sponsor,
explained that online cigarette sales are subject to the tax;
however, the end consumer is responsible for paying the tax. He
noted that the current CS, Version K, adds vaping products to
the same category in terms of online sales from licensed
distributers to licensed retailers and online sales to
consumers.
CHAIR SPOHNHOLZ suggested a solution wherein the tax is
collected by the online retailer that makes the sale. She asked
if that would be outside the state's jurisdiction.
MR. CLARK said [the Tax Division] searched to find the right
structure for this tax; however, "the problem is the internet"
in terms of enforceability. He explained that while tobacco is
one of the most highly regulated commodities in the country,
vaping is one of the least regulated industries because it's
new. He expressed his hope that "as regulation is developed in
the coming years, which is a reasonable expectation, then the
efficacy of these measures would grow in the same way that the
taxation measures on tobacco are fairly robust."
CHAIR SPOHNHOLZ acknowledged the attempt to remedy the
collection of online sales tax as online commerce expands.
3:42:16 PM
REPRESENTATIVE HANNAN explained that since colonial times the
federal government has tracked the sale and distribution of
tobacco and shared that information with states. She added that
vaping disrupts that process because it cannot be tracked in the
same way.
3:43:43 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue, addressed how tobacco is tracked and taxed in Alaska.
He stated that tobacco is divided into two categories under the
tax statutes: cigarettes and other tobacco products (OTP).
Cigarettes, he said, have a base tax of 38 mills, which is a
dedicated fund, and the additional tax is a designated fund.
The federal Prevent All Cigarette Trafficking (PACT) Act
requires the tracking of all cigarettes, but not the tracking of
OTP. He explained that OTP are taxed at 75 percent of the
wholesale price, adding that OTP are only taxed if brought into
the state for resale.
3:46:43 PM
REPRESENTATIVE FIELDS questioned whether under current statutory
authority, the Department of Revenue would have the ability to
promulgate regulations to capture the tax revenue from online
sales of e-cigarettes if HB 94 were to pass.
MR. SPANOS answered yes, if given the authority to tax online
sales, the Department of Revenue could regulate the taxation of
online cigarette sales under HB 94.
REPRESENTATIVE FIELDS offered his understanding that given the
Department of Revenues existing authority under the Wayfair
Decision, the department could promulgate regulations on how the
tax on online sales is collected. He asked if that is correct.
MR. SPANOS clarified that the Wayfair Decision gave states the
authority to tax online sales. He said the bill would have to
specifically assess the tax and require the online retailer to
collect and remit the tax. He further explained that collection
and remittance is a traditional sales tax mechanism. He said
that language would need to be in HB 94 for the department to
require an online retailer to collect and remit.
3:48:26 PM
ROBERT BRISCOE expressed his opposition to HB 94. He informed
the committee that he works in a vape shop. He offered his
belief that raising the tax would drive people away from vape
shops, keep them on cigarettes longer, and affect business.
3:49:22 PM
ALEX MCDONALD voiced his opposition to the 75 percent tax. He
argued that this tax was defeated under Governor Walkers
administration and found to be a job-killer and a highly
regressive tax that hits low-income individuals the hardest. He
opined that considering a bill that would hurt small businesses
is absolutely backwards given the current economic state of
affairs. He offered his belief that HB 94 would push people
back to cigarettes. He alleged that if Medicaid recipients
could make the switch from cigarettes to safer products the
state would save one billion dollars in 10 years.
REPRESENTATIVE STUTES asked how [the tax] would have a greater
effect on low-income individuals.
MR. MCDONALD citing research from the Heartland Institute,
reported that people who make under $30,000 spend 14 percent of
their income on tobacco products versus people who make over
$60,000 and spend an average of 2 percent of their income on
tobacco products. He said, money is better spent by families
to buy shoes for their kids, school supplies, sports equipment
things that they actually need. He went on to say that people
are not harming themselves if they are using a product that is
found to be 95 percent safer than smoking. He added, the money
should stay in the families for trying to better their health.
3:53:51 PM
REPRESENTATIVE FIELDS asked Mr. McDonald if he is aware that the
Heartland Institute is substantially funded by the very same
large tobacco companies that have acquired the e-cigarette
companies.
MR. MCDONALD said the doctors that issued the report are
nationally recognized for tobacco and substance control at the
Heartland Institute.
REPRESENTATIVE FIELDS stated that the Heartland Institute is a
well-known front group for junk science funded by the very
industries that are trying to avoid necessary regulation on a
variety of issues, including tobacco.
3:54:57 PM
SHAUN D'SYLVA, Clear the Air Alaska, informed the committee that
he owns three adult vapor stores located in Fairbanks, Wasilla,
and Anchorage. He discussed several studies and various
research, indicating that e-cigarettes are an effective smoking
cessation tool and less harmful than combustible cigarettes. He
argued that [vaping] is 95 percent safer than smoking
cigarettes, adding that the tax proposed under HB 94 would steer
people away from [vaping] products that are healthier, safer,
and can help reduce the states Medicare costs. Nonetheless, he
stated his support for the T-21 [Tobacco 21] which raised the
federal minimum age for sale of tobacco products from 18 to 21
years - portion of the bill. To conclude, he reiterated his
concern about treating [e-cigarettes] the same as cigarettes.
He opined that they are not the same.
REPRESENTATIVE GILLIS asked why [e-cigarettes] are treated
different in England than in they are the United States.
MR. D'SYLVA said Public Health England is responsible for the
countrys entire health care system. He claimed that they took
a comprehensive, science-based, nonbiased look at e-cigarette
technology and that their goal is to reduce combustible
cigarette sales to zero by the year 2030.
4:00:48 PM
CHRIS EATON expressed his opposition to HB 94. He opined that
the bill is not for the public interest. He offered his belief
that it will close small businesses and open a black market.
4:01:44 PM
JASON JONES, Owner, Legion Vapor, reported that vaping is 95-99
percent safer than smoking cigarettes. He opined that vaping
products and cigarettes should not be taxed equally. He offered
his belief that the tax increase will encourage people to return
to cigarettes. He expressed concern that his business would not
survive if this bill were to pass. To conclude, he said that he
opposes HB 94.
4:03:00 PM
ELIJAH ROWLEY said he is testifying in opposition to HB 94. He
noted that he works in a vape shop and is concerned that if the
proposed tax is enacted, he or his fellow employees will lose
their job.
4:03:41 PM
JONATHAN WILSON expressed his opposition to HB 94. He offered
his belief that it would increase health care costs and push
people back to smoking cigarettes. He argued that its been a
failed bill for years, adding that it will harm small
businesses.
4:04:33 PM
GREG WEAVER said, its ludicrous that we even have people
calling in whining about jobs being lost when they are pumping
poison into the systems of our children. He pointed out that
vaping is unregulated by the FDA and argued that no one knows
whats in it. He added that kids think vaping is safe and can
easily hide it from their parents. He opined that it should
get kicked out of our state."
4:06:52 PM
FRANK LAMONT expressed his opposition to HB 94. He said that
imposing a 75 percent tax would make it more difficult to get
adults off cigarettes and on to vaping. He said the bill would
affect his place of work and might cause him to lose his job,
rendering him useless of any income for a period of time. He
claimed that vaping helps gradually decrease users nicotine
intake to zero. In closing, he reiterated his opposition to HB
94.
4:08:14 PM
MARGE STONEKING, American Lung Association, expressed her
support for HB 94. She stated that despite what vapor industry
representatives might say, e-cigarettes and vapes are tobacco
products. They are not different, safer, or better than
combustible cigarettes, she said. She explained that [e-
cigarettes] are derived from the tobacco plant and are under the
jurisdiction of the FDA as tobacco products, not as
pharmaceutical cessation products. She added that they need to
be treated as such under the law. She reported that increasing
tobacco taxes result in fewer kids starting to smoke and more
adults quitting, while at the same time providing revenue to the
state. She further noted that low-income smokers are more
likely to quit than high income smokers in response to a tax
increase. Furthermore, the FDA has not found any e-cigarette
products that are safe and effective in helping smokers quit.
Consequently, e-cigarette products can no longer legally
advertise themselves as a cessation or harm reduction tool.
4:11:40 PM
EMILY NENON, Government Relations Director, American Cancer
Society Cancer Action Network, expressed her concern about the
epidemic of e-cigarette use by youths. She noted that over the
past few years it has grown at an increasingly alarming rate.
She reported that the taxation of tobacco products is one of the
most effective tools for keeping kids from ever starting to use
tobacco. She urged the passage of HB 94.
REPRESENTATIVE FIELDS asked if Ms. Nenon finds it ironic that
big tobacco companies that sell and promote e-cigarettes claim
their products are for smoking cessation, while marketing them
to young people who have never smoked before.
MS. NENON said whether she finds it ironic is less significant
than the fact that its illegal for them to market [e-
cigarettes] as cessation products.
4:14:50 PM
VIKKI JO KENNEDY shared several personal anecdotes. She
expressed her support for implementing a tax on e-cigarettes.
She pointed out that no one knows how bad they might be, adding
that people once thought tobacco was safe too. She urged the
passage of HB 94 and specifically thanked Representatives Hannan
and Fields.
4:16:55 PM
JOHN SONIN echoed the sentiments of the previous testifier. He
expressed his concern about kids using e-cigarettes and thanked
the committee for hearing the bill.
4:18:44 PM
STEVEN TAYLOR stated that he is in favor of increasing the
tobacco tax on e-cigarettes. He observed that tobacco companies
are advertising to young adults and children with their flavors
alone. He stated that they are not cessation products and are
full of harmful chemicals. He expressed his hope that the tax
will help prevent people from ever starting a bad habit like
tobacco. He urged the committee to pass HB 94.
4:20:20 PM
REPRESENTATIVE FIELDS questioned whether the state could tax
online sales from online distributers if HB 94 were to pass. He
also asked if additional language is required for the Department
of Revenue to collect taxes from online sales.
REPRESENTATIVE HANNAN explained that when she introduced HB 94
one year ago, the Department of Revenue conveyed that they
wanted to help structure the bill in a way that allows them to
collect the most revenue. They department also knows that a
large volume of [e-cigarettes] are sold over the internet. She
recounted Mr. Spanos communicating that the department would
figure out a way to collect the revenue if given the authority.
She noted that there is no graceful way to do it because most
states have a state sales tax, which provides them with an easy
mechanism to collect.
REPRESENTATIVE FIELDS said he is glad that the record reflects
the sponsors intent. He opined that the plain language of the
bill enables the department to collect the taxes on e-
cigarettes, including those sold online, in the most efficient
manner possible. He further noted that the annual social cost
of tobacco products in the United States is $300 billion, adding
that the youth death and hospitalization rate from COVID-19 in
the U.S. is higher than in other countries partly from chronic
conditions, including respiratory conditions. He said its a
critical public health issue and expressed his appreciation for
the bill.
CHAIR SPOHNHOLZ agreed. She shared an anecdotal example about
the difficulty of quitting cigarettes and how they are marketed
to young people. She added that preventing children from
picking up e-cigarettes is a laudable public health goal. She
reiterated that the committees intention is for online sales to
be taxed and for the bill to be passed expeditiously.
REPRESENTATIVE HANNAN responded to several comments made by
testifiers.
4:25:30 PM
REPRESENTATIVE GILLIS asked if under current law, age
verification is required for vaping.
REPRESENTATIVE HANNAN answered yes.
REPRESENTATIVE GILLIS questioned whether most online purchases
are for personal consumption or if people order large volumes of
product.
REPRESENTATIVE HANNAN said she does not know. She added that
after spending a career with teenagers, she would not put it
past them to lie about their age on an online age verification
system.
4:26:42 PM
REPRESENTATIVE STUTES moved to report CSHB 94, Version LS0441\K,
Nauman, 3/13/20, out of committee with individual
recommendations and the accompanying fiscal notes. Without
objection, CSHB 94(L&C) was moved from the House Labor and
Commerce Standing Committee.
4:27:22 PM
The committee took an at-ease from 4:27 to 4:29 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 94 Explanation of Changes, Ver. U to Ver. K 3.16.2020.pdf |
HL&C 3/20/2020 3:15:00 PM |
HB 94 |
| HB 94 Work Draft Ver. K 3.16.2020.pdf |
HL&C 3/20/2020 3:15:00 PM |
HB 94 |
| SB 195 Letter of Support - Alaska National Insurance Company (3.2.20).pdf |
HL&C 3/20/2020 3:15:00 PM |
SB 195 |
| SB 195 Sectional Analysis ver. A.PDF |
HL&C 3/20/2020 3:15:00 PM |
SB 195 |
| SB 195 Letter of Support - MODA (2.26.20).pdf |
HL&C 3/20/2020 3:15:00 PM |
SB 195 |
| SB 195 Sponsor Statement ver. A.PDF |
HL&C 3/20/2020 3:15:00 PM |
SB 195 |
| HB 84 Labor and Commerece Committee Question Responses 2.26.20.pdf |
HL&C 2/28/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 84 |
| HB 84 APEI Letter of Opposition 02.25.2020.pdf |
HL&C 2/28/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 84 |
| HB 84 Labor and Commerece Committee Question Responses 2.26.20.pdf |
HL&C 3/20/2020 3:15:00 PM |
HB 84 |
| HB 84 Letter of Support ACOA 2.26.20.pdf |
HL&C 2/28/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 84 |
| HB 84 Supporting Document- Women Firefighters Biomonitoring Collaborative Research Update.pdf |
HL&C 2/28/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 84 |
| HB 146 Work Draft Committee Substitute v. S 2.19.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Sponsor Statement v. S 2.25.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Sectional Analysis v. S 2.25.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - Alaska Automobile Dealers Association Bill Narrative 2.25.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - AS. 45.25.400-45.25.990 Motor Vehicle Dealer Practices 11.25.2019.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - Dealer Licensing Requirements (WA, TX, HI, OR, MT, DE, OH, AK) 2.25.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - Letters Received by 2.25.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - Alaska Automobile Dealers Association Bill Narrative 2.25.2020.pdf |
HL&C 3/13/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - Letter received 3.11.2020.pdf |
HL&C 3/13/2020 3:15:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 84 Fiscal Note DOA RM 02.25.2020.pdf |
HL&C 3/20/2020 3:15:00 PM |
HB 84 |