Legislature(2009 - 2010)CAPITOL 106
02/23/2010 03:00 PM House HEALTH & SOCIAL SERVICES
| Audio | Topic |
|---|---|
| Start | |
| HB188 | |
| HB309 | |
| HB265 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 188 | TELECONFERENCED | |
| *+ | HB 309 | TELECONFERENCED | |
| *+ | HB 265 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 188-TAX ON MOIST SNUFF
CO-CHAIR KELLER announced that the first order of business would
be HOUSE BILL NO. 188, "An Act relating to the taxation of moist
snuff tobacco, and amending the definition of 'tobacco product'
in provisions levying an excise tax on those products." [In
front of the committee was CSHB 188, Version 26-LS0714\N,
Bullock, 4/09/09 which was adopted as the working draft on
4/14/09.]
3:09:00 PM
CO-CHAIR HERRON explained that HB 188 was a disincentive for the
use of snuff products.
3:10:15 PM
ROB EARL, Staff to Representative Bob Herron, Alaska State
Legislature, paraphrased the sponsor statement, which read
[original punctuation provided]:
Currently in state law, cigarettes are taxed at 10
cents per cigarette ($2 a pack) and all other tobacco
products (OTP) are taxed ad valorem at 75% of their
wholesale price. Moist snuff tobacco (more commonly
called "dipping tobacco") presently falls under the
OTP tax regime.
HB 188 distinguishes between two types of moist snuff
tobacco (MST): spitless MST and all other MST. The
former are light-weight products that come in teabag-
like pouches and obviate the need for expectoration.
HB 188 taxes these dangerous new light-weight products
that are being targeted towards youth at 100% ad
valorem. All other MST will be taxed on a weight-
based system of $1.88 per ounce. All other OTPs
remain taxed at an ad valorem rate of 75%.
Taxing MST (excluding spitless MST) at a $1.88 per
ounce is designed to reduce the price disparity
between discount and premium MST products. $1.88 per
ounce is currently roughly equal to what the premium
brands pay under the ad valorem system. The tax on
discount brands will increase dramatically - the tax
on premium brands will remain about the same; however,
if the wholesale prices on these premium products
increase over time (inflation), then the tax would not
rise commensurately since it is by weight. The bill
does include a sunset provision, whereby the $1.88 per
ounce tax on non-spitless MST products, barring
further legislative action, would revert back to a 75%
ad valorem rate after 3 years.
There is a nation-wide movement afoot to move to
weight-based taxation systems for smokeless products
(15 states currently use such a method, with 13 of
those having changed to weight-based in the last 9
years).
This new taxation system will produce additional state
revenue, by raising the taxes paid by discount MST
brands. The Dept. of Revenue has estimated tax
revenue would increase by $1.1 million, although
that's assuming the same amount of product is
purchased as before the tax increase. Also, some
popular MST companies lowered prices recently, having
the net effect that this bill might result in as much
as $1.8 million in additional revenue.
According to the American Lung Association,
"Increasing excise taxes on tobacco products is a
proven way to reduce use, particularly among kids."
This bill also increases funding for the education and
cessation fund by sending 25% of the annual tax
revenue collected on MST to this fund, which may be
used for tobacco education and cessation programs.
Currently, if you order cigarettes for personal use
over the Internet, you must pay state taxes on those
purchases. But in current state law, you do not have
to pay taxes on any OTP products imported for personal
use. This bill closes that loophole.
The bill also requires that cigars be sold in packages
of at least five; that loose tobacco be sold in
packages weighing at least one ounce; and that single
dose units be sold in the original manufacturer's
packaging.
The committee took an at-ease from 3:13 p.m. to 3:14 p.m.
3:14:15 PM
MR. EARL, referring to the Tax Table [Included in the committee
packets.], noted that the first column, titled Tobacco Product,
would, under current law, only have two products listed,
Cigarettes and Other Tobacco Products (OTP). He pointed out
that HB 188 would split the OTP into three categories: Moist
Snuff (except Spitless), Spitless Moist Snuff, and Everything
Else. He compared the current taxation for each of these to the
current proposed tax under HB 188, and he explained each change.
3:16:01 PM
MR. EARL directed attention to the Tax Per Dose Calculation
Sheet, also on the Tax Table. He reported that cigarettes were
taxed at 10 cents per dose. He compared the different rates of
proposed taxes for both Spitless Moist Snuff and Moist Snuff
Dipping Tobacco.
3:18:01 PM
REPRESENTATIVE T. WILSON asked to list the OTPs.
3:18:20 PM
MR. EARL, referring to page 5 and page 6 of HB 188, listed
cigar, cheroot, and perique.
3:19:01 PM
CO-CHAIR KELLER opened public testimony.
3:19:13 PM
EMILY NENON, Alaska State Director, American Cancer Society
Cancer Action Network (ACS CAN), said that ACS CAN supported the
intent and the effort for HB 188. She reported that chewing
tobacco was a huge problem in Alaska, specifically in the Yukon-
Kuskokwim (Y-K) Delta region. She reported that the rate for
use of chewing tobacco among pregnant women was higher than
anywhere in the world. She stated that ACS CAN did not support
a weight based tax. She pointed out that tobacco marketing was
focused toward kids, as adults did not start using tobacco
products. She offered some examples of chewing tobacco, noting
that it was "berry blend," and some examples of others that were
"citrus blend." She passed around some cigars, declaring the
similarity to "scented magic markers." She referred to Camel
Snus, noted that it had a spearmint bubblegum smell, and pointed
out that it was very lightweight and would be under taxed with a
weight based tax. She declared that the most equitable decision
would be for whichever tax was greater, ad valorem or weight
based. She expressed support for an increase to the ad valorem
tax. She declared that ACS CAN did not support a straight
weight based tax, but would be open to other tax options.
3:24:10 PM
REPRESENTATIVE T. WILSON asked Ms. Nenon for a suggested tax
solution.
3:24:30 PM
MS. NENON explained that the automatic escalator for the
percentage of wholesale price allowed the tax to increase with
the price. She stated that the wholesale price for chewing
tobacco was higher for premium brands than for bargain brands
and reflected that the weight based tax would equalize these.
She stated that more marketing dollars were used by the tobacco
companies for the premium brands, and these were the most
popular brands with kids. She expressed the importance for
maintaining a high tax on the premium brands.
3:25:51 PM
REPRESENTATIVE T. WILSON asked for statistics on sales
popularity.
3:26:04 PM
MS. NENON replied that she would supply those statistics.
3:26:49 PM
MARK SPRINGER, Director, Delta Tobacco Control Alliance, stated
that tobacco had an "extraordinary public health impact." He
declared support for HB 188, and agreed with the American Cancer
Society comments. He stated that the tobacco industry was
marketing nicotine as an addictive chemical that was safe for
unlimited use. He declared that the tobacco industry made no
attempt to discourage its use. He suggested that the tax be
used as a disincentive to potential consumers for tobacco use
and to discourage behaviors that had a negative cost to society.
3:30:54 PM
MR. SPRINGER, in response to Representative Seaton, said that
these tobacco products were designed as a gateway to use, and
that the tobacco industry was not interested in occasional
users, but was marketing for a long term customer base.
3:32:09 PM
REPRESENTATIVE T. WILSON asked if the tax would stop underage
use of tobacco products.
3:32:21 PM
MR. SPRINGER offered his belief that it would. He stated that
the current tobacco products were easier to use and easier to
procure.
3:33:11 PM
REPRESENTATIVE T. WILSON opined that this was an enforcement
issue.
3:33:30 PM
MR. SPRINGER replied that it was more difficult to stop the use
of chew than to enforce non-smoking. He announced that the
disincentive was to increase the cost, as a young person had a
limited amount of discretionary money.
3:35:05 PM
CARRIE NYSSEN, Senior Director of Advocacy, American Lung
Association in Alaska, expressed appreciation for the intent of
HB 188 as a disincentive for youth to use tobacco. She stated
that the American Lung Association could not support the bill in
its current form, as there were concerns for the long term
effects. She opined that the proposed taxation would not keep
up with inflation and the product price increases for moist
snuff. She offered that the American Lung Association could
support an amendment for the greater tax amount from either an
ad valorem or weight based system.
3:36:54 PM
MONTE WILLIAMS, Lobbyist, US Smokeless Tobacco, stated that HB
188 would fix a broken tax system. He explained that excise tax
was traditionally based on a unit of measurement for an
individual consumer item. He described the history of the tax
in Alaska and noted that it was difficult to find a single unit
for all tobacco products. When all the prices were the same,
the tax was the same; however the marketplace had changed as
there were now many more products with many varied prices. He
shared that discounted tobacco products were now 32 percent of
the Alaska market. He indicated that, as the price went down,
so did the tax revenue. He compared this to cigarette tax,
which remained constant no matter the price of the product. He
said that a weight based tax was more fair and equitable, as it
did not reward a product for lowering its price.
3:44:09 PM
MS. NENON pointed to page 1, "Brand Preferences: Percentage of
Youth Users" [Included in the committee packets.] and noted the
smokeless brand users by age group. She directed attention to
the high use of Copenhagen and Skoal by youth 12- 25. She
stated that high taxation on tobacco products was one of the
most effective deterrents, and that Alaska had good youth sale
enforcement.
3:46:29 PM
CO-CHAIR KELLER closed public testimony.
3:47:34 PM
REPRESENTATIVE SEATON moved to adopt Amendment 1, Version 26-
LS0714\N.2, Bullock, 2/23/10, which read:
Page 1, line 7, following "products;":
Insert "relating to the offense of selling
tobacco to a minor;"
Page 1, line 9:
Insert a new bill section to read:
"* Section 1. AS 11.76.100(a) is amended to read:
(a) A person commits the offense of selling or
giving tobacco or nicotine to a minor if the person
(1) negligently sells a cigarette, a cigar,
tobacco, or a product containing tobacco or nicotine
to a person under 19 years of age;
(2) is 19 years of age or older and
negligently exchanges or gives a cigarette, a cigar,
tobacco, or a product containing tobacco or nicotine
to a person under 19 years of age;
(3) maintains a vending machine that
dispenses cigarettes, cigars, tobacco, or products
containing tobacco or nicotine; or
(4) holds a business license endorsement
under AS 43.70.075 and allows a person under 19 years
of age to sell a cigarette, a cigar, tobacco, or a
product containing tobacco or nicotine."
Page 1, line 10:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
Page 3, line 3:
Delete "sec. 4"
Insert "sec. 5"
Page 6, line 21:
Delete "Sections 1 - 4 and 6 - 17"
Insert "Sections 2 - 5 and 7 - 18"
Page 6, line 23:
Delete "Section 5"
Insert "Section 6"
Page 6, line 24:
Delete "sec. 5"
Insert "sec. 6"
Page 6, line 25:
Delete "Section 5"
Insert "Section 6"
Delete "sec. 4"
Insert "sec. 5"
Page 6, line 27:
Delete "sec. 19"
Insert "sec. 20"
3:47:47 PM
CO-CHAIR KELLER objected for discussion.
3:47:56 PM
REPRESENTATIVE SEATON explained that proposed Amendment 1 would
include nicotine in the same category with tobacco.
3:49:00 PM
CO-CHAIR HERRON explained that nicotine products had expanded
beyond just tobacco products. He offered his support for
proposed Amendment 1.
3:49:48 PM
CO-CHAIR KELLER removed his objection. Seeing no objection,
Amendment 1 was adopted.
3:50:22 PM
REPRESENTATIVE SEATON moved to adopt Amendment 2, Version 26-
LS0714\N.3, Bullock, 2/23/10, which read:
Page 3, line 16:
Delete "sold"
Page 3, line 17, following "(1)":
Insert "sold"
Page 3, line 19, following the second occurrence of
"in":
Insert "packages of not less than 10 units and
in"
REPRESENTATIVE SEATON explained that proposed Amendment 2 would
declare the tax to be on no less than units of 10.
3:51:30 PM
Seeing no objection, Amendment 2 was adopted.
3:51:45 PM
REPRESENTATIVE HOLMES moved to adopt Amendment 3, Version 26-
LS0714\N.4, Bullock, 2/23/10, which read:
Page 1, lines 1 - 2:
Delete ", including spitless moist snuff tobacco"
Page 2, line 14:
Delete "at the rate in (b) of this section [RATE"
Insert "in the amounts described in (b) of this
section [AT THE RATE"
Page 2, line 26:
Delete "rate"
Page 2, line 27:
Delete ", other than spitless moist snuff
tobacco, is"
Insert "is an amount equal to the wholesale
price, but may not be less than"
Page 2, line 30:
Delete all material.
Renumber the following paragraph accordingly.
Page 2, line 31, through page 3, line 1:
Delete "subject to the tax rates in (1) and (2)
of this subsection is 75 percent of"
Insert "is an amount equal to"
Page 3, lines 3 - 11:
Delete all material.
Renumber the following bill sections accordingly.
Page 4, line 16, following "tobacco;":
Insert "and"
Page 4, lines 17 - 18:
Delete " other than spitless moist snuff tobacco;
and
(3) spitless moist snuff tobacco"
Page 6, line 12:
Delete "(I), and (9)"
Insert "and (I)"
Page 6, lines 12 - 16:
Delete ";
(9) "spitless moist snuff tobacco" means
moist snuff tobacco that is typically steam-
pasteurized smokeless tobacco in a tea-bag-like pouch
designed to be placed between the cheek and gum and is
manufactured to obviate the need for spitting"
Page 6, line 21:
Delete "(a) Sections 1 - 4 and 6 - 17"
Insert "Sections 1 - 16"
Page 6, lines 23 - 26:
Delete all material.
Renumber the following bill section accordingly.
Page 6, line 27:
Delete "Except as provided in sec. 19 of this
Act, this"
Insert "This"
CO-CHAIR KELLER objected for discussion.
REPRESENTATIVE HOLMES explained that this proposed amendment put
moist snuff tobacco and spitless, moist snuff tobacco into the
same category; it provided that the tax would be at the greater
of weight based or ad valorem; and it would eliminate the three
year sunset provision. She offered her belief that this
amendment would address the concerns of the American Cancer
Society.
3:53:06 PM
REPRESENTATIVE SEATON declared that companies were trying to
"game the system" by changing the packaging to reduce the tax
per dose. He noted that having a tax for the greater amount
would ensure that taxes were significant and at the full value.
He offered his belief that this amendment would get to the
problem so that companies could not get around the taxes.
3:55:35 PM
REPRESENTATIVE HOLMES, in response to Representative T. Wilson
and referring to the earlier referenced Tax Per Dose Calculation
Sheet, compared the moist snuff dipping tobacco ad valorem and
weight based tax, and stated that the higher of the two would be
the tax. She explained that should the pricing structure of
this product change, the tax was guaranteed to be set at the
higher level.
3:57:11 PM
REPRESENTATIVE T. WILSON asked if this would put a burden on
small business.
3:57:53 PM
CO-CHAIR KELLER offered his opinion that it had a disparity of
treatment for various producers. He shared his support of a
weight based tax.
3:58:56 PM
JANIS HALES, Income and Excise Tax Specialist, Department of
Revenue (DOR), stated that the weight based pricing was a bit
easier than ad valorem pricing, as it was not necessary to know
the wholesale price. She declared that the DOR had no
preference to either tax.
3:59:44 PM
REPRESENTATIVE T. WILSON asked if the tax was determined at the
time of sale.
4:00:03 PM
MS. HALES agreed that a tax at the point of sale would become
more complex. She noted that a form would be necessary.
4:00:18 PM
CO-CHAIR HERRON reported that [HB 188] Version N maximized
revenue for the state with a straightforward taxation process.
He explained that the sunset clause was put into HB 188 so the
bill would be reviewed in 3 years. He declared his opposition
to proposed Amendment 3.
4:01:53 PM
REPRESENTATIVE SEATON stated that nicotine products could be of
significantly different weights. He pointed to the nicotine
strips and announced that the low weight would avoid most of the
tax. He pointed out that the tobacco products were not
consistent in weight. He declared his support of the amendment
as it did not allow tobacco producers to escape the tax.
4:03:56 PM
REPRESENTATIVE CISSNA said that Alaska leads the country in per
capita health care spending. She opined that it was difficult
to change habits. She offered her belief that the amendment
would act as a deterrent.
4:05:47 PM
REPRESENTATIVE T. WILSON expressed her concern for small
businesses trying to implement proposed Amendment 3.
4:06:57 PM
REPRESENTATIVE HOLMES stated that both moist snuff and spitless
snuff ad valorem taxation was currently calculated on the
wholesale price. She asked if DOR supplied support information
to businesses.
4:07:54 PM
MS. HALES explained that the current method for tax
determination was for the retailers to attach invoices listing
the wholesale price.
4:08:25 PM
REPRESENTATIVE HOLMES stated that proposed Amendment 3 would
follow the same current procedure.
4:08:34 PM
CO-CHAIR KELLER replied that there was a fundamental difference,
and that "a tax per weight just leveled the playing field for
all business and we can revisit that rate anytime we like."
4:09:29 PM
REPRESENTATIVE SEATON asked to verify that businesses submitted
invoices to DOR for verification of tax calculation and that DOR
would inform the taxpayer to the amount of the tax.
4:10:15 PM
MS. HALES replied that all invoices had the price, but not
necessarily the weight for all the Other Tobacco Products (OTP).
She said that weights could vary from product to product.
4:10:54 PM
REPRESENTATIVE SEATON said that HB 188, without proposed
Amendment 3, would require invoices to include weights for DOR
to calculate the tax. He stated that Amendment 3 would
necessitate that DOR notify the seller as to the amount of tax
due, whether it was wholesale price or weight based.
4:11:42 PM
MS. HALES explained that currently the tax payer calculated the
tax due. She detailed that DOR would supply a form to calculate
the tax, and that DOR would verify the tax. However, she
pointed out, the taxpayer would need to calculate and collect
the tax.
4:12:21 PM
CO-CHAIR KELLER retained his objection.
A roll call vote was taken. Representatives Cissna, Holmes, and
Seaton voted in favor of proposed Amendment 3. Representatives
T. Wilson, Lynn, Herron, and Keller voted against it.
Therefore, Amendment 3 failed by a vote of 3-4.
4:13:48 PM
REPRESENTATIVE SEATON moved to adopt Amendment 4, Version 26-
LS0714|N.5, which read:
Page 1, line 7, following "products;":
Insert "relating to the offense of selling
tobacco to a minor;"
Page 6, following line 18:
Insert a new bill section to read:
"* Sec. 18. AS 11.76.100(e) is repealed."
Renumber the following bill sections accordingly.
Page 6, line 27:
Delete "sec. 19"
Insert "sec. 20"
CO-CHAIR KELLER objected for discussion.
REPRESENTATIVE SEATON explained that currently it was illegal to
supply tobacco to a minor, except if a minor was incarcerated at
an adult correction facility. He said that Amendment 4 removed
that exception.
4:14:50 PM
CO-CHAIR HERRON expressed support for proposed Amendment 4.
4:15:00 PM
CO-CHAIR KELLER removed his objection. There being no
objection, Amendment 4 was adopted.
4:15:42 PM
REPRESENTATIVE T. WILSON asked about the proposed sale of cigars
packaged in groups of five.
4:15:51 PM
MR. EARL shared that the intent was that young people could not
buy a single cigar, but that he was unclear where the idea had
originated.
4:16:15 PM
CO-CHAIR HERRON offered to get the information to the committee
members.
4:17:05 PM
REPRESENTATIVE T. WILSON asked if further conversation would
bring support from the anti-tobacco coalitions.
4:17:48 PM
MR. EARL replied that he was unsure that further dialogue would
result in agreement with those organizations.
4:17:57 PM
REPRESENTATIVE T. WILSON asked for a summary of the
disagreement.
4:18:10 PM
MR. EARL, in response to Representative T. Wilson, referred to
the earlier referenced Tax Per Dose Calculation Sheet. He said
that the Spitless MST and the Moist Snuff Dipping Tobacco would
be combined into one category and the amendment would charge the
greater of the ad valorem or weight based tax.
4:18:50 PM
REPRESENTATIVE T. WILSON requested more time to review the bill.
4:19:56 PM
REPRESENTATIVE SEATON, in response to Representative T. Wilson,
directed attention to the Tax Per Dose Calculation Sheet and
compared the Spitless MST cost per dose to that of cigarettes
and the Moist Snuff Dipping Tobacco. He expressed his concern
that the light weight tobacco could have a tax that was less
than 4 cents per dose. He pointed out that a weight based tax
dramatically reduced the tax amount. He opined that this was
the concern of the anti-tobacco coalition.
4:21:37 PM
CO-CHAIR KELLER pointed out that the lighter weight products had
been developed with an ad valorem tax in place, not in a weight
based tax system. He questioned that the tobacco industry would
respond to a tax change by lowering the product weight, as
suggested by Representative Seaton.
4:22:20 PM
REPRESENTATIVE T. WILSON asked if a per dose tax had been
considered.
4:23:06 PM
CO-CHAIR HERRON, in response, said that the suggested tax was a
balance. He cited DOR that this would be the easier means to
collect the tobacco taxes. He directed attention to the policy
issue of the legislation as the most important point. He
declared that he would continue to work with the American Cancer
Society and the American Lung Association.
4:24:24 PM
[HB 188 was held over.]
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