HB 94-ELECTRONIC SMOKING PRODUCTS EXCISE TAX  3:19:55 PM CHAIR SPOHNHOLZ announced that the first 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." 3:21:20 PM REPRESENTATIVE HANNAN as prime sponsor, introduced HB 94. She paraphrased the sponsor statement [included in the committee packet], which read in its entirety as follows [original punctuation provided]: House Bill 94 would enact an excise tax on electronic smoking products. Use of E-cigarettes, commonly known as vaping, is booming in the United States, most troublingly among young people. Between 2017 and 2018, the Center of Disease Control's National Youth Tobacco Survey saw a 78- percent increase in use of E-cigarettes by high school studentsfrom just below 12 percent to nearly 21 percent. Nationwide, 80 percent of high school students do not perceive a great risk from using e- cigarettes regularly. However, according to the Truth Initiativethe nation's largest nonprofit public health organization committed to ending tobacco use- teens who vape are four times more likely to start smoking conventional cigarettes. Despite claims that e-cigarettes help adults quit smoking or offer adults a safer alternative to smoking, E-cigarettes have not been found by the Food and Drug Administration (FDA) to be effective in helping smokers actually quit, and neither is there evidence that they are safer. Almost all e-cigarettes contain some amount of addictive nicotine, and some contain as much nicotine as a pack of cigarettes. Meanwhile, tobacco taxes are proven to reduce youth tobacco use, resulting in fewer kids becoming life- long smokers, and thus ultimately reducing healthcare costs. In addition to deterring kids from beginning to use these products, tobacco taxes measurably encourage adults who want to quit to do so. Cigarettes and Other Tobacco Products (OTP) in Alaska are taxed at 75% of the wholesale price. HB 94 proposes to add electronic smoking products to the OTP definition and in turn to tax them at the current rate of 75% of the wholesale price. Thank you for considering this legislation. REPRESENTATIVE HANNAN noted that HB 94 is projected to raise 2.5 million dollars per year once it is fully implemented. She stated that currently, Alaskas statutes fail to include e- cigarettes. She said this bill would add them into the states current tax structure as a category of nicotine taxation. 3:23:38 PM TIM CLARK, Staff, Representative Sara Hannan, Alaska State Legislature, presented the sectional analysis for HB 94 [included in the committee packet] on behalf of Representative Hannan, prime sponsor, which read as follows [original punctuation provided]: Section 1 amends AS 43.50.150(c) so that the state can enter into agreements with municipalities that also tax electronic smoking products (ESPs). Such agreements would be to jointly audit a person (a business) responsible for paying the excise tax the bill addresses. Essentially, this is an enforcement tool both the state and local governments can use to their mutual benefit.   Section 2 amends AS 43.50.300 to include "electronic smoking products" among the other tobacco products already taxed by the state at 75 percent of the wholesale price. This section also describes what types of transactions make a business liable for the tax.   Section 3 amends AS 43.50.310(b) to describe exemptions from the excise tax for electronic smoking products. These exemptions include ? electronic smoking products that are subject to taxation under AS 43.61.010 - 43.61.030, meaning marijuana-related products; or electronic smoking products that don't contain nicotine; ? or an ESP approved for sale by the U.S. Food and Drug Administration as a drug or product used to treat tobacco dependence; ? or if the U.S. Constitution or other federal laws prohibit the state from taxing the product.   Section 4 amends AS 43.50.320(a) to require a person who engages in business as a distributor of ESPs subject to the tax to be licensed by the state.   Section 5 amends existing licensed distributor reporting requirements (AS 43.50.330(a)) to include sales reporting of electronic smoking products.   Section 6 adds ESPs to provisions in 43.50.335, which addresses procedures for receiving refunds or credits for taxes paid on products that have become unfit for sale, are destroyed, or are returned to the manufacturer.   Section 7 amends AS 43.50.340 record keeping requirements for licensed businesses selling tobacco products to include businesses selling ESPs. Such records include tracking sales and product information on ESPs being sold.   Sections 8 and 9 perform "housekeeping," in that they update the definitions of "distributor" and "wholesale price" under this chapter to include ESPs as among products related to them. 3:28:39 PM The committee took an at-ease from 3:28 to 3:35 p.m. 3:35:28 PM MR. CLARK resumed the sectional analysis on Section 10, which read as follows [original punctuation provided]: Section 10 adds to AS 43.50.390 to provide a definition of "electronic smoking product" consistent with use of the phrase elsewhere in statute. It specifies that an ESP means a: "(A) component, solution, vapor product, or other related product that is manufactured and sold for use in an electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or other similar device for the purpose of delivering nicotine or other substances to the person inhaling; "(B) product under (A) of this paragraph that is sold as part of a disposable integrated unit containing a power source and delivery system or as a kit containing a refillable electronic smoking system and power source." Section 11 specifies dates of applicability of various sections of the bill, in order to preempt any confusion about when these measures become effective. Section 12 provides an effective date of January 1st, 2021 for the act. 3:36:59 PM REPRESENTATIVE FIELDS directed attention to Section 3, the exemption for electronic smoking products that dont contain nicotine. He asked if that is consistent with exemptions in other states that tax vaping products. He also asked if there are similarly addictive substances that tobacco companies use in lieu of nicotine for vaping products. MR. CLARK shared his understanding that in other states, there are exemptions on vapor products that are nicotine-free; however, that's not the case in all jurisdictions. REPRESENTATIVE FIELDS questioned whether it's a necessary exemption or if it creates a loophole that makes it easier to sell a vaping device with different addictive products and similar dangers. CHAIR SPOHNHOLZ announced that HB 94 would be held over.