03/02/2016 03:15 PM House LABOR & COMMERCE

        HB 304-ELECTRNC TAX RETURNS;TOBACCO & E-CIGS TAX                                                                    
                                                                                                                                
CHAIR OLSON announced  that the final order of  business would be                                                               
HOUSE BILL NO.  304, "An Act requiring  the electronic submission                                                               
of  a  tax return  or  report  with  the Department  of  Revenue;                                                               
relating to the taxes on  cigarettes and tobacco products; taxing                                                               
electronic smoking  products; adding a definition  of 'electronic                                                               
smoking product'; and providing for an effective date."                                                                         
                                                                                                                                
4:46:40 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON reopened public testimony on HB 304.                                                                                
                                                                                                                                
4:47:30 PM                                                                                                                    
                                                                                                                                
STEPHANIE CHILTON,  Owner, High Voltage Vapes,  urged members not                                                               
to support  HB 304 because  it would  cripple her business.   Her                                                               
husband  previously worked  in the  oil  field and  her home  and                                                               
livelihood depends on the success  of her business to support her                                                               
family  of five.   She  has  closed one  shop and  laid off  four                                                               
employees already.  The bill will  cause the state to lose income                                                               
from  the  taxes that  businesses  are  currently paying  because                                                               
customers   will  shop   online  instead   of  supporting   local                                                               
businesses.                                                                                                                     
                                                                                                                                
4:48:49 PM                                                                                                                    
                                                                                                                                
TRISTAN  TALIESIN informed  the committee  he began  vaping seven                                                               
months ago  and successfully quit smoking  tobacco products after                                                               
twenty-eight years.   The  bill would force  him to  buy products                                                               
online and if  the local shop raises its prices  he will not shop                                                               
locally.    He votes  and  lives  in  Alaska  and served  in  the                                                               
military.   Mr.  Taliesin stressed  that e-cigarettes  and vaping                                                               
are  a  consumer-driven  market  as  an  alternative  to  smoking                                                               
tobacco products;  laws may cause him  to spend his money  out of                                                               
state or overseas.                                                                                                              
                                                                                                                                
4:50:35 PM                                                                                                                    
                                                                                                                                
SETH  PARKER  said vaping  saved  his  life  when he  started  in                                                               
January 2015.   The bill would hurt local  businesses and destroy                                                               
the vaper  industry in Alaska, and  will force him as  a consumer                                                               
to  take  his money  out-of-state,  even  if  he prefers  to  buy                                                               
locally.                                                                                                                        
                                                                                                                                
4:51:59 PM                                                                                                                    
                                                                                                                                
JORDAN EDWARDS  said he  has lived  in Alaska for  30 years.   He                                                               
said he  smoked for ten  years and quit  five years ago  by using                                                               
vaper products.   He urged  the committee to consider  the impact                                                               
of HB  304 on  small shops,  local consumers,  and the  public in                                                               
Alaska.   He opined  that vaping  is not smoking  as stated  in a                                                               
recent legal case.  If a  100 percent wholesale tax takes effect,                                                               
shops will  not be able  to compete and all  of the shops  in the                                                               
Matanuska-Susitna area will  close.  Mr. Edwards  warned that all                                                               
vapers will return  to smoking or will  purchase products online,                                                               
and the  first line  of defense against  underage vaping  will be                                                               
stopped.  Currently, shops ask  for identification, and kids will                                                               
turn  to online  purchases by  the use  of prepaid  credit cards.                                                               
All consumers will turn to  Internet purchases, resulting in lost                                                               
jobs, lost  taxes, lost  in-state commerce  and revenue,  and the                                                               
state  will suffer  far  greater  than if  a  realistic tax  were                                                               
chosen.   He concluded,  saying that during  the next  decade one                                                               
billion people will die  worldwide from tobacco-related illnesses                                                               
if vaping products are demonized.                                                                                               
                                                                                                                                
4:54:00 PM                                                                                                                    
                                                                                                                                
ELIZABETH RIPLEY,  Executive Director, Mat-Su  Health Foundation,                                                               
informed  the committee  her  organization's  board of  directors                                                               
strongly supports  HB 304 for  the following reasons:   increased                                                               
tobacco taxes reduce youth and  adult smoking rates; the proposed                                                               
tax includes  e-cigarette products,  which are  currently outside                                                               
of Alaska's laws and tax  structures.  Higher taxes prevent youth                                                               
tobacco use and  reduce health care costs; for  example, in 2005,                                                               
a tax  of $1 per  pack in the Matanuska-Susitna  (Mat-Su) Borough                                                               
and  an additional  $1  per  pack state  tax  were effective  and                                                               
decreased  smoking  58 percent  for  Mat-Su  middle schoolers,  8                                                               
percent   for  traditional   high  schoolers,   22  percent   for                                                               
alternative  high schoolers,  and  35 percent  for  adults.   Ms.                                                               
Ripley said  these decreases were  a health and economic  win for                                                               
affected individuals,  their families, and for  communities.  The                                                               
foundation  also  supports  the   bill  because  it  includes  e-                                                               
cigarette  products, which  are  perceived by  adolescents to  be                                                               
safer than traditional  cigarettes.  She said  e-cigarettes are a                                                               
"grooming tool," which allows kids  to become addicted to tobacco                                                               
and nicotine  using flavors such as  bubble gum and Skittles.   A                                                               
report in  2015 showed  that ninth  graders who  use e-cigarettes                                                               
were three  times more  likely to  switch to  combustible tobacco                                                               
products [report not provided].   She urged the committee to pass                                                               
HB  304 in  order  to protect  all of  Alaska's  children and  to                                                               
improve the health of the Alaska population.                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON   asked  Ms.  Ripley  to   provide  the                                                               
committee with the abovementioned report.                                                                                       
                                                                                                                                
4:57:06 PM                                                                                                                    
                                                                                                                                
ALISON HALPIN stated  her opposition to HB 304.   Ms. Halpin said                                                               
she is  an [e-liquid]  manufacturer, a vape  shop manager,  and a                                                               
consumer who  would be  affected by the  proposed tax.   Firstly,                                                               
she  would  be  taxed  for manufacturing  [e-liquids]  for  sale;                                                               
secondly, her  retail location would  be taxed; and  finally, she                                                               
would have  to pay a  higher price for  products.  The  tax would                                                               
decimate an industry which helps  people stop smoking, as she was                                                               
able to with a personalized  vaporizer, and she has helped others                                                               
quit smoking.  The tax  would push customers to online retailers.                                                               
Ms. Halpin said vape shops are  the first line of defense against                                                               
underage vaping.  Demographics indicate  the people who smoke are                                                               
individuals who  suffer from depression  and mental  illness, are                                                               
low-income, and  are in high-stress environments;  the bill would                                                               
remove vaping as an option for those who want to stop.                                                                          
                                                                                                                                
4:58:47 PM                                                                                                                    
                                                                                                                                
ERIC VARGASON  said he opposes  the tax because shops  will close                                                               
and force people  to shop online, and consumers  will not receive                                                               
instruction on  battery safety and support  for quitting smoking.                                                               
Most  importantly,  vape  shops  check  identification  and  shun                                                               
people under the  age of 19 away  from vaping.  The  tax will put                                                               
people out of  work, close shops, and remove  the opportunity for                                                               
people to quit smoking.                                                                                                         
                                                                                                                                
5:00:32 PM                                                                                                                    
                                                                                                                                
ANGELA CARROLL said she was speaking  on behalf of members of the                                                               
Smoke-Free  Alternatives Trade  Association.   If HB  304 becomes                                                               
law,  the  bill  would  tax  vape  products  at  100  percent  of                                                               
wholesale  price   and  treat  alternative  products   just  like                                                               
cigarettes.    According  to the  Department  of  Revenue,  small                                                               
operations would be required to  carry tobacco licenses issued by                                                               
the state  as if they  were selling tobacco products,  which they                                                               
are not.  She said categorizing  vape products into a tobacco tax                                                               
scheme  is  the  wrong  approach.    Ms.  Carroll  described  the                                                               
paperwork required  by the bill,  and she urged the  committee to                                                               
review  the  forms.   The  remainder  of  her testimony  will  be                                                               
submitted in written form.                                                                                                      
                                                                                                                                
5:02:53 PM                                                                                                                    
                                                                                                                                
JAMES  BRIGGS  said he  owns  an  e-liquid company  called  Peche                                                               
Foggin  Sauce.   Mr. Briggs  expressed his  opposition to  HB 304                                                               
because the  proposed wholesale tax  will hurt him as  a consumer                                                               
and  drive  him out  of  business.    The  tax will  close  local                                                               
businesses  and  drive  consumers  to  online  sales.    E-liquid                                                               
contains  "pg,  vg,"  artificial   and  natural  flavorings,  and                                                               
sometimes nicotine.   The ingredients vary in price  from $30 per                                                               
gallon to  $200 per gallon,  and nicotine costs $300  per gallon.                                                               
The tax  will double his costs  and the price of  his product, so                                                               
consumers will  turn to online vendors,  ultimately hurting state                                                               
taxes.   Also, some will  return to combustible  cigarettes which                                                               
contain 4,000 chemicals and known  carcinogens.  Mr. Briggs urged                                                               
the committee to oppose the tax.                                                                                                
                                                                                                                                
5:04:34 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON closed public testimony.                                                                                            
                                                                                                                                
[HB 304 was held over.]