03/11/2020 03:15 PM House LABOR & COMMERCE

         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.