CS FOR SENATE BILL NO. 45(FIN) "An Act raising the minimum age to purchase, sell, exchange, or possess tobacco, a product containing nicotine, or an electronic smoking product; relating to selling a tobacco product; relating to possession of tobacco, electronic smoking products, or products containing nicotine by a person under 21 years of age; relating to the definition of 'nicotine'; relating to transporting tobacco, a product containing nicotine, or an electronic smoking product; relating to the taxation of electronic smoking products; relating to electronic smoking products; relating to the marketing of electronic smoking products; relating to tobacco products; and providing for an effective date." 1:48:02 PM Co-Chair Merrick relayed that the meeting would continue consideration of amendments to SB 45. [Secretary Note: The amendments were also considered during the morning meeting, 05/05/22 9:00 A.M.] Representative Rasmussen MOVED to ADOPT Amendment 4 Replacement, 32-LS0311\D.16 (Nauman, 5/5/22)(copy on file): Page 7, line 30: Delete "or" Page 8, lines 1 - 2: Delete all material. Reletter the following subparagraphs accordingly. Page 8, lines 10 - 13: Delete "or marijuana products and intended for sale only in a retail marijuana store; in this subparagraph, "marijuana," "marijuana products," and "retail marijuana store" have the meanings given in AS 17.38.900" Insert ", marijuana products, hemp, or hemp products; for purposes of meeting the requirements of this subparagraph, the department shall accept a notarized affidavit from the seller attesting to the intended use of the product; or (3) marijuana, marijuana products, hemp, or hemp products if the marijuana, marijuana product, hemp, or hemp product does not contain nicotine" Page 8, following line 13: Insert a new bill section to read: "* Sec. 17. AS 43.50.310 is amended by adding a new subsection to read: (c) In this section, (1) "1 hemp" and "hemp products" means hemp or a hemp product produced by an individual registered under AS 03.05.076; (2) "marijuana" and "marijuana products" have the meanings given in AS 17.38.900." Renumber the following bill sections accordingly. Page 11, following line 5: Insert a new bill section to read: "* Sec. 22. AS 43.50.330 is amended by adding a new subsection to read: (c) A licensee is not required to file a return under this section if the licensee (1) either (A) sells only products exempt under AS 43.50.310(b)(2)(C) or (b)(3) from the tax under this chapter; or (B) is an individual registered under AS 03.05.076; and (2) provides a notarized affidavit attesting to the licensee's qualification under (1) of this subsection." Renumber the following bill sections accordingly. Page 17, line 28: Delete "sec. 19" Insert "sec. 20" Page 17, line 29: Delete "sec. 33" Insert "sec. 35" Representative Wool OBJECTED. Representative Rasmussen asked her staff and the bill sponsor's staff to explain the changes in the new amendment. CRYSTAL KOENEMAN, STAFF, REPRESENTATIVE SARAH RASMUSSEN, explained the amendment. She explained that the amendment exempted marijuana, marijuana products, hemp, and hemp products from the tax. The original language in Amendment 4 created an unintended loophole for industrial hemp license holders operating another business and they would not be subject to the tax. She clarified that was not the sponsors intention and assured the committee that any nicotine and other taxable products outside of marijuana and hemp were subject to the tax. She shared that the sponsor worked with Mr. Lamkin to correct the issue. Representative Rasmussen asked to hear comments from the bill sponsor's staff. 1:49:59 PM TIM LAMKIN, STAFF, SENATOR GARY STEVENS, answered that the amendment had been negotiated for a specific carve out for the hemp industry. He communicated that the hemp industry was in its inception and the sponsor wanted to let the program grow before considering taxing its products. He pointed to page 2, line 15 of the amendment that reads: (B) is an individual registered under AS 03.05.076; Mr. Lamkin cautioned that someone that had a tobacco endorsement and was registered as a hemp grower could still be exempted from the tax. He recommended conceptually striking line 15. Representative Rasmussen moved Conceptual Amendment 1 to Amendment 4 Replacement to delete line 15 on page 2. Representative Wool OBJECTED for discussion. Representative Wool stated his understanding of the conceptual amendment. He thought it seemed strange that someone with an industrial hemp license would also operate a retail store selling tobacco products. 1:52:54 PM Mr. Lamkin answered that he could not imagine that a hemp farmer would open a shop on their farm. He exemplified a retailer of tobacco, vape, and hemp products in an urban center who could also own a hemp farm in Delta Junction. He clarified that line 15 indicates that a registered hemp grower was exempted from paying taxes on products at their vape shop. Representative Wool WITHDREW his OBJECTION. There being NO further OBJECTION, conceptual Amendment 1 to Amendment 4 Replacement was ADOPTED. Representative Josephson asked what was lost by the removal of the language retail marijuana store from subsection (d) on page 2, line 18 to 19 from the original Amendment 4: (d) In this section, retail marijuana store has the meaning given in AS17.38.900. Mr. Lamkin replied that elimination of the subsection removed the potential loopholes where if someone only sold to marijuana stores, they would be exempt and removed the incentive for retailers to sell both nicotine products and cannabis. Representative Wool recalled that when marijuana was first legalized in the state, a marijuana shop could not sell Cannabidiol (CBD) oil because they lacked the proper license, but a grocery store could. He was uncertain what marijuana stores could sell and if that included selling tobacco with a proper license. 1:55:14 PM Mr. Lamkin answered that he was not a student of the marijuana statutes. He indicated that the amendment clarified that if something like Representative Wools example happened the products would not automatically be exempt from the tax. Representative Wool referenced CBD oil. He was previously unaware that there was a vape product without THC. He asked if the amendment meant the item was exempt from the tobacco tax and the marijuana tax. Mr. Lamkin answered it was correct provided it did not also contain nicotine. He stated that once a product contained nicotine it triggered the tax. Representative Wool recalled that in an earlier discussion vape liquid that did not contain nicotine was taxed as a tobacco product because the action of vaping mimics how tobacco products were consumed and could lead to consuming tobacco. He voiced that he did not object to taxing all vape liquid. He thought the amendment seemed contradictory to an earlier statement. 1:58:05 PM Mr. Lamkin clarified that if products were approved by the Food and Drug Administration (FDA) for a therapeutic purpose such as cessation they would be exempt from the bill. He deduced that certain CBD products might fall under the FDA exemption. He added that the research strongly suggested that when products claimed not to contain nicotine, when tested they found nicotine in varying amounts. He qualified that the hemp and CBD carve out did not imply that consuming the products was safe. He relayed that a consumer alert and some growing research questioned their safety and whether it was safe or not was not known. The carve out was merely a negotiated concession. Ms. Koeneman pointed to a definition for hemp and hemp products at the top of page 2 of the amendment. She explained that it applied to products that were registered under the current hemp statute AS 03.05.076 and would remove products containing nicotine or other substances. She elaborated that one of the main reasons people used CBD was for medical ailments including seizures, anxiety, and other issues. She understood unknown health or safety reasons regarding CBD but there were medical reasons for its use. She thought that many times the risk of CBD was offset by the benefit provided to patients. 2:00:39 PM Co-Chair Merrick interjected that there was a request for the department to comment. DAVID SCHADE, DIRECTOR, DIVISION OF AGRICULTURE, DEPARTMENT OF NATURAL RESOURCES (via teleconference), clarified that three types of industrial hemp registrations existed under the program: producer, manufacturer, and retail sale registrations. He elaborated that the definition in the amendment referred to hemp or hemp products produced under AS 03.05.076. He delineated that the problem with the language was that it did not contemplate the fact that what was done to ensure product safety was via an endorsement. The products were endorsed and proven to be safe and free of unintended products. He emphasized that currently there were no endorsed products that contained nicotine and the division did not intend to allow nicotine in industrial hemp products sold in the state. He ascertained that the definition needed to be expanded to ensure it did not contain nicotine. Representative Wool understood the carveout and negotiation. He was not taking a jab at the marijuana and hemp industry. He spoke to the intent of the bill to tax vaped nicotine products. He thought vaping as a mode of ingestion should be taxed because it mimicked ingesting tobacco products, which the bill was attempting to discourage. He felt carving out CBD oil was antithetical to the bills motives. 2:04:24 PM Representative Rasmussen thought the bill specifically pertained to nicotine and marijuana products already fell under a certain tax. She believed that not adopting the amendment would inadvertently double tax the products which was not the purpose of the bill. Mr. Lamkin was not personally convinced that CBD was completely safe to inhale. He remarked that the studies were still in progress. He noted that some common vape base ingredients were polyethylene glycol, vegetable glycerin, and vitamin E acetate, etc. He maintained that the hemp carve out had been a negotiation to not injure a new industry; however, the heartbeat of the bill was to prevent nicotine products use before the age of 21. He delineated that if initiation to nicotine could be avoided up to the age of 21 the likelihood of a lifetime of addiction was substantially lower. He shared that he began smoking in his youth and quit 20 years ago. 2:07:30 PM Representative Rasmussen appreciated the sponsor's office stating that the underlying intention of the bill was to prevent addiction to nicotine. She believed that many ingested substances had harmful consequences like ibuprofen and fast food that were not taxed to prevent use. She understood that the intention of the bill was to prevent nicotine addiction therefore, she offered Amendment 4 Replacement to offer clarity and focus on the underlying intention of the bill. Representative Wool referenced the phrase double tax used by Representative Rasmussen. He understood that CBD oil sold in a marijuana store, was taxed under marijuana laws, and if sold in a convenience store it would currently have no tax but if the bill was passed it would be taxed under SB 45. He ascertained that it would not be double taxed. He wondered whether he was correct. Mr. Lamkin knew that the hemp and marijuana statutes were separate and distinct and did not overlap. Hemp was tested to confirm that it did not contain THC and was not taxed under marijuana laws. He noted that only products containing THC were taxed under marijuana laws. He confirmed that a CBD product sold in a marijuana store was not taxed. Representative Wool referenced the point about preventing nicotine use. He agreed that the act of smoking tobacco should be discouraged. He understood that the point was to not have youth mimicking smoking. He supported taxing all vape products under the bill. 2:11:07 PM Representative Josephson asked if the amendment was acceptable to the sponsor. Mr. Lamkin stated that Senator Stevens currently found the amendment agreeable. He guessed that sometime in the future the sponsor might introduce a bill taxing hemp under the program. Representative Wool MAINTAINED his OBJECTION to Amendment 4 Replacement as amended. A roll call vote was taken on the motion. IN FAVOR: LeBon, Rasmussen, Carpenter, Josephson, Foster, Merrick OPPOSED: Ortiz, Wool, Edgmon, Johnson The MOTION PASSED (6/4). There being NO further OBJECTION, Amendment 4 Replacement was ADOPTED as amended. 2:12:56 PM Representative Rasmussen MOVED to ADOPT Amendment 5, 32- LS0311\D.12 (Nauman, 5/3/22)(copy on file): Page 7, line 6: Delete "45" Insert "15" Representative Josephson OBJECTED. Representative Rasmussen explained that the amendment would reduce the tax from 45 percent to 15 percent as a compromise to create revenue for health education. She believed that taxing vape products was the wrong approach by creating barriers to less harmful alternatives to combustible cigarettes. 2:14:06 PM Representative Josephson asked the sponsors staff if the bill contained a 75 percent tax before its referral to the House Labor and Commerce Committee (HL&C). Mr. Lamkin answered in the affirmative. He pointed to a document in the members files titled Local Level Tobacco Products Taxation Rates in Alaska (copy on file). He explained that there were three types of nicotine taxes: Cigarette tax, Other Tobacco Products, and an E-cigarette tax. He noted that in the other tobacco column the same percent of wholesale was applied to the e-cigarette tax in any community. He corrected and error and reported that the City of Fairbanks had an 8 percent e-cigarette tax. He informed the committee that the national average tax was currently 45 percent. He reiterated that the bill originally had a 75 percent tax, and that 45 percent was the average between 15 percent and 75 percent. He was not speaking on behalf of what percentage he thought the sponsor would support. 2:16:30 PM Representative Josephson asked what the tax resources would be used for. Mr. Lamkin answered that the funds would be used for education programs and rehabilitation. He noted that the Division of Behavioral Health was available for additional information. 2:17:17 PM Representative Josephson repeated the question. KATIE STEFFENS, DEPUTY PROGRAM MANAGER, TOBACCO PREVENTION AND CONTROL PROGRAM, DEPARTMENT OF HEALTH AND SOCIAL SERVICES (via teleconference), answered that the tax revenue would be deposited into the general fund and was available for educational programs, healthcare, etc. and was not directly dedicated to the program. She deferred to the tax division as well for further clarification 2:18:53 PM AT EASE 2:31:03 PM RECONVENED Vice-Chair Ortiz MOVED to ADOPT conceptual amendment 1 to Amendment 5 that would insert 25 percent instead of 15 percent. Representative Josephson OBJECTED. Representative Carpenter asked for clarification. Co-Chair Merrick clarified that the language was on page 7, line 6 of the bill and on the amendment, it was found on line 3. 2:32:13 PM Representative Josephson shared that according to a prior United States (US) surgeon general, taxation was one way to deter use of tobacco products. He noted that research by the Campaign for Tobacco Free Kids concluded that if the price of vape products were increased usage decreased. He voiced that the HL&C committee already reduced the tax to 45 percent. He noted the prevalence of a 45 percent tax used by municipalities according to the document. He related that e-cigarettes were not considered a harm reduction device per the FDA and believed that they were hazardous and unhealthy. He opposed the amendment. Representative Carpenter stated that his community was not on the list. His municipality had not chosen to tax the product. He supported the conceptual amendment only because less tax meant less government. 2:34:48 PM Representative Rasmussen MOVED to call the question. 2:35:01 PM AT EASE 2:35:30 PM RECONVENED Representative Rasmussen WITHDREW her motion to call the question. Representative Wool opposed the conceptual amendment. Representative Edgmon opposed the conceptual amendment because the rational in favor of the high taxation was based on cause and effect. He wanted to hear an explanation and justification why 25 percent would provide the prevention the bill was meant to achieve. He thought 25 percent was insufficient and arbitrary. 2:36:41 PM Representative Rasmussen felt it was a fair compromise as Representative Carpenter noted his community had not taxed the products. She appreciated the amendment as a fair compromise and thought it struck a balance between the municipalities tax levels. Representative Edgmon noted that the previous comments did not answer his question about the regulatory aspect of a 25 percent tax. 2:37:27 PM Co-Chair Merrick deduced that some people prefer no tax, and some prefer lower taxes, so that any tax was a compromise. Representative Rasmussen noted that in communities with 75 and 90 percent taxes some people were still using the product, but its use was limited to those that could afford it. She believed that it did not halt use and the amendment was a compromise. Senator Stevens commented that studies had found less consumption every time tobacco tax was increased. He heard that the governor would veto anything over 25 percent. He stated that something was better than nothing and hoped the bill would not be vetoed by the governor. He declared that he would introduce a bill with a higher tax next year. 2:39:13 PM Vice-Chair Ortiz related that his amendment was offered in the spirit of compromise. He fully agreed with the concerns raised by those that oppose the amendment. Representative Josephson MAINTAINED his OBJECTION. A roll call vote was taken on the motion. IN FAVOR: Ortiz, Rasmussen, Carpenter, Johnson, LeBon, Merrick, Foster OPPOSED: Wool, Edgmon, Josephson The MOTION PASSED (7/3). There being NO further OBJECTION, conceptual Amendment 1 to Amendment 5 was ADOPTED. 2:40:38 PM Co-Chair Merrick addressed Amendment 5 as amended. Co-Chair Foster voiced his support of the 75 percent tax and believed that it was a deterrent but based on Senator Stevens statement he supported the amendment. Vice-Chair Ortiz stated that no one liked paying taxes; however, he believed sometimes taxes were necessary. 2:41:48 PM Representative Josephson appreciated the senators position. He warned of a Masons Manual provision that prohibited talking about the administration's position during deliberations. He opposed the amendment but would support moving the bill out of committee. Representative Wool opposed the amendment. He agreed that if taxes were raised, consumption would decrease. He noted that the states alcohol taxes were the highest in the nation, but no one supported lowering them. He thought that vaping products were not taxed because they were relatively new compared to standard tobacco products. 2:43:44 PM Representative Rasmussen provided wrap up on Amendment 5 as amended and asked for support. Representative Edgmon MAINTAINED his OBJECTION to Amendment 5 as amended. A roll call vote was taken on the motion. IN FAVOR: Rasmussen, Carpenter, Johnson, LeBon, Ortiz, Foster, Merrick OPPOSED: Wool, Edgmon, Josephson The MOTION PASSED (7/3). There being NO further OBJECTION, Amendment 5 was ADOPTED as amended. 2:44:39 PM Co-Chair Merrick noted that Amendment 7 had been withdrawn. Representative Edgmon supported Representative Josephsons comments. He strongly objected to the executive branch influencing what was happening in committee during the meeting. He believed it was unfair and pierced the veil of the separation of powers doctrine. 2:45:33 PM Co-Chair Foster MOVED to REPORT HCS CSSB 45(FIN) out of committee with individual recommendations and the accompanying fiscal notes. HCS CSSB 45(FIN) was REPORTED out of committee with one "do pass" recommendation, five "no recommendation" recommendations and four "amend" recommendations and with one new fiscal impact note from the Department of Revenue and two previously published zero fiscal notes: FN4 (DHS/DOH) and FN6 (GOV/Combined). 2:46:07 PM RECESSED 3:58:24 PM RECONVENED