THE SENATE	S.B. NO.	975
THIRTY-SECOND LEGISLATURE, 2023		S.D. 2
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO HEALTH.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Tobacco use is the single most preventable cause of disease, disability, and death in the United States. Tobacco use continues to be a problem in Hawai`i, causing approximately one thousand four hundred deaths per year among adults. An estimated twenty-one thousand children in Hawai`i currently under the age of eighteen will ultimately die prematurely from smoking. Tobacco use poses a heavy burden on Hawai`i's health care system and economy. Each year, smoking costs approximately $526,000,000 in direct health care expenditures and $387,300,000 in lost productivity in the State.

Tobacco products are addictive and inherently dangerous, causing various types of cancer, heart disease, and other serious illnesses. Hawai`i has a substantial interest in reducing the number of individuals of all ages who use tobacco products, and a particular interest in protecting adolescents from tobacco dependence and illnesses and premature death associated with tobacco use.

Electronic smoking devices, also known as e-cigarettes, are battery-operated products designed to deliver nicotine, flavor, and other chemicals to the user. Electronic smoking devices have quickly evolved since entering the United States marketplace in 2007. Initial products were disposable, resembled the size and shape of conventional cigarettes, and used free-base nicotine; however, the products have evolved to better entice new and younger users. Current products are rechargeable and resemble common objects, such as candy or juice boxes with cartoon charters on them. Products also come in the form of flash drives and highlighters, and typically deliver nicotine salts, which allow higher levels of nicotine to be inhaled more easily by the user.

The electronic smoking device industry, including the production of e-liquid in a variety of forms, has grown rapidly. In its Morbidity and Mortality Weekly Report dated September 18, 2020, the Centers for Disease Control and Prevention (CDC) reported that electronic smoking devices have been the most commonly used tobacco product among United States youths since 2014. The United States Surgeon General first issued a warning in 2016 stating that use of electronic smoking devices among the nation's youth and young adults had become a major public health concern. In 2018, the Surgeon General classified the danger of youth use of electronic smoking devices as an epidemic.

According to a report titled "E-Cigarette Use Among Youth and Young Adults", the United States Surgeon General explained that ninety-five per cent of all smokers start smoking before the age of twenty-one. As there has been an overall decline in the use of combustible cigarettes over the last decade, there has been a dramatic increase in the use of electronic smoking devices by Hawai`i's youth. The rise in use of electronic smoking devices among Hawai`i youth is higher than the national average. Between 2011 to 2015, the proportion of youth experimenting with electronic smoking devices increased six-fold among middle school youth and four-fold among high school youth. In 2017, twenty-seven per cent of public middle school students and forty-two per cent of public high school students tried electronic smoking devices. By 2019, thirty-one per cent of public middle school students and forty-eight per cent of public high school students had used an electronic smoking device. In 2020, eight in ten youth who currently use e-cigarettes reported using a flavored product. These rates are higher than the national average, demonstrate an alarming increase in Hawai`i youth nicotine use, and serve to illustrate a bleak future of nicotine addiction in the next generation.

Toxicologists have warned that e-liquids pose significant risks to public health, particularly to children. The 2016 Surgeon General's Report further states that if the contents of prefilled cartridges or bottles of e-liquids containing nicotine are ingested, they may cause acute toxicity and possibly death.

According to CDC's Morbidity and Mortality Weekly Report dated September 18, 2020, from November of 2016 to August of 2019, total electronic smoking device unit sales in the United States increased nearly three hundred per cent. Continued monitoring of electronic smoking device sales and use is critical to inform strategies to minimize risk among Hawai`i's most vulnerable populations, including youth users.

The 2016 Surgeon General's Report found that there are numerous policies and practices that can be implemented at state and local levels to address electronic smoking device use among youth and young adults, including preventing access to electronic smoking devices by youth, increasing taxes imposed upon electronic smoking devices, increasing prices of retail licensure, and regulating electronic smoking device marketing.

Additionally, the rapid growth of the electronic smoking device industry, including retail businesses selling electronic smoking devices or e-liquid, necessitates further regulations to protect consumers, such as requiring retailers of e-liquid to obtain a retail tobacco permit. The 2016 Surgeon General's Report found that children and youth are especially vulnerable to the targeted online social and digital media marketing of inexpensive electronic smoking devices offered in enticing concealable forms and e-liquids in various flavors.

The United States Food and Drug Administration has expanded its regulatory authority to all tobacco products, including electronic smoking devices, cigars, and hookah and pipe tobacco. While there is federal consensus that electronic smoking devices are tobacco products, Hawai`i has no state tobacco tax imposed on electronic smoking devices and e-liquids. While the use of electronic smoking devices and e-liquids also carry the risk of adverse health consequences, these products are currently taxed at a much lower rate than cigarettes. Decades of research have shown that increasing cigarette prices, such as through the imposition of cigarette taxes, can reduce the rate of smoking by adult and youth smokers. As outlined in the 2016 Surgeon General's Report, current findings show this public health policy can likewise be applied to electronic smoking devices and e-liquids to reduce youth consumption.

Taxing e-liquids and electronic smoking devices as tobacco products will provide pricing parity between products on the market, which will result in consumer clarity and positive health benefits, including encouraging young, price-conscious consumers to quit smoking or sustain cessation, preventing youth initiation, and reducing consumption among those who continue to use them.

The purpose of this Act is to:

(1) Establish the criminal offense of unlawful shipment of tobacco products;

(2) Amend the definition of "tobacco products" as used in the State's cigarette tax and tobacco tax law to include e-liquid and electronic smoking devices, thereby:

(A) Subjecting e-liquids and electronic smoking devices to the excise tax on tobacco products;

(B) Requiring retailers of e-liquids or electronic smoking devices to obtain a retail tobacco permit to sell, possess, keep, acquire, distribute, or transport e-liquids or electronic smoking devices;

(C) Prohibiting persons from engaging in the business of a wholesaler or dealer of e-liquids or electronic smoking devices without first obtaining a license from the department of taxation; and

(D) Applying other requirements of the cigarette tax and tobacco tax law to e-liquids and electronic smoking devices;

(3) Increase the license fee for persons engaged as wholesalers or dealers of cigarettes and tobacco products;

(4) Increase the retail tobacco permit fee for retailers engaged in the retail sale of cigarettes and tobacco products; and

(5) Repeal various statutory provisions relating to electronic smoking devices to avoid conflict with taxation and regulation under the cigarette tax and tobacco tax law.

SECTION 2. Chapter 245, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:

"§245-    Unlawful shipment of tobacco products; penalty; liability for unpaid taxes. (a) A person or entity commits the offense of unlawful shipment of tobacco products if the person or entity:

(1) Is engaged in the business of selling tobacco products; and

(2) Knowingly ships or causes to be shipped any tobacco products to a person or entity in this State that is not a licensee under this chapter.

(b) This section shall not apply to the shipment of tobacco products if any of the following conditions are met:

(1) The tobacco products are exempt from taxes as provided by section 245-3(b); or

(2) All applicable State taxes on the tobacco products are paid in accordance with the requirements of this chapter.

(c) Unlawful shipment of tobacco products is a class C felony if the person or entity knowingly ships or causes to be shipped tobacco products having a value of $10,000 or more, in violation of subsection (a).

(d) Unlawful shipment of tobacco products is a misdemeanor if the person or entity knowingly ships or causes to be shipped tobacco products having a value of less than $10,000, in violation of subsection (a).

(e) Notwithstanding the existence of other remedies at law, any person or entity that purchases, uses, controls, or possesses any tobacco products for which the applicable taxes imposed under title 14 have not been paid, shall be liable for the applicable taxes, plus any penalty and interest as provided for by law.

(f) For purposes of this section:

(1) A person or entity is a licensee if the person's or entity's name appears on a list of authorized licensees published by the department; and

(2) "Value" means the retail fair market value at the time of the offense."

SECTION 3. Section 245-1, Hawaii Revised Statutes, is amended as follows:

1. By adding two new definitions to be appropriately inserted and to read:

""Electronic smoking device" means any device that may be used to deliver any aerosolized or vaporized substance to the person inhaling from the device, including but not limited to an electronic cigarette, electronic cigar, electronic pipe, vape pen, or electronic hookah. The term includes any component, part, or accessory of the device, and any substance that may be aerosolized or vaporized by the device, whether or not the substance contains nicotine. The term does not include drugs, devices, or combination products authorized for sale by the United States Food and Drug Administration, as those terms are defined in the Federal Food, Drug, and Cosmetic Act.

"E-liquid" means any liquid or like substance, whether or not the substance contains nicotine, that is designed or intended to be used in an electronic smoking device, whether or not packaged in a cartridge or other container. The term does not include prescription drugs; cannabis for medical use governed by chapter 329; manufactured cannabis products governed by chapter 329D; or medical devices used to aerosolize, inhale, or ingest prescription drugs, including manufactured cannabis products manufactured or distributed in accordance with section 329D‑10(a)."

2. By amending the definition of "tobacco products" to read:

""Tobacco products" means [tobacco in any form,]:

(1) Any product containing, made of, or derived from tobacco or nicotine, other than cigarettes or little cigars, that is [prepared or] intended for human consumption [or for personal use by humans,] or is likely to be consumed by inhalation, absorption, or any other means of ingestion, including large cigars and any substitutes thereof other than cigarettes that bear the semblance thereof, snuff, snus, chewing or smokeless tobacco, and smoking or pipe tobacco[.];

(2) Any electronic smoking device as defined in this section and any substance, including e-liquids, that may be aerosolized or vaporized by the device, whether or not the substance contains nicotine; or

(3) Any component, part, or accessory of any item described in paragraph (1) or (2), whether or not the component, part, or accessory contains tobacco or nicotine, including but not limited to filters, rolling papers, blunt or hemp wraps, hookahs, and pipes.

The term does not include drugs, devices, or combination products authorized for sale by the United States Food and Drug Administration, as those terms are defined in the Federal Food, Drug, and Cosmetic Act."

SECTION 4. Section 245-2, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The license shall be issued by the department upon application therefor, in such form and manner as shall be required by rule of the department, and the payment of a fee of [$2.50,] $250, and shall be renewable annually on July 1 for the twelve months ending the succeeding June 30."

SECTION 5. Section 245-2.5, Hawaii Revised Statutes, is amended by amending subsections (c) and (d) to read as follows:

"(c) The retail tobacco permit shall be issued by the department upon application by the retailer in the form and manner prescribed by the department, and the payment of a fee of [$20.] $50. Permits shall be valid for one year, from December 1 to November 30, and renewable annually. Whenever a retail tobacco permit is defaced, destroyed, or lost, or the permittee relocates the permittee's business, the department may issue a duplicate retail tobacco permit to the permittee for a fee of $5 per copy.

(d) A separate retail tobacco permit shall be obtained for each place of business owned, controlled, or operated by a retailer. In seeking a retail tobacco permit, the applicant shall specify whether each place of business sells e-liquid, electronic smoking devices, or both. A retailer that owns or controls more than one place of business may submit a single application for more than one retail tobacco permit. Each retail tobacco permit issued shall clearly describe the place of business where the operation of the business is conducted[.] and whether the place of business sells e-liquid, electronic smoking devices, or both."

SECTION 6. Chapter 28, part XII, Hawaii Revised Statutes, is repealed.

SECTION 7. Section 245-17, Hawaii Revised Statutes, is repealed.

["[§245-17] Delivery sales. (a) No person shall conduct a delivery sale or otherwise ship or transport, or cause to be shipped or transported, any electronic smoking device in connection with a delivery sale to any person under the age of twenty-one.

(b) A person who makes delivery sales shall not accept a purchase or order from any person without first obtaining the full name, birth date, and address of that person and verifying the purchaser's age by:

(1) An independently operated third-party database or aggregate of databases that are regularly used by government and businesses for the purpose of age and identity verification and authentication;

(2) Receiving a copy of a government issued identification card from the purchaser; or

(3) Requiring age and signature verification in the shipment process and upon and before actual delivery.

(c) The purchaser shall certify their age before completing the purchaser's order.

(d) Any person who violates this section shall be fined $500 for the first offense. Any subsequent offenses shall subject the person to a fine of no less than $500 but no more than $2,000. Any person under twenty-one years of age who violates this section shall be fined $10 for the first offense; provided that any subsequent offense shall subject the person to a fine of $50, no part of which shall be suspended, or the person shall be required to perform no less than forty-eight hours but no more than seventy-two hours of community service during hours when the person is not employed or attending school.

(e) The department shall not adopt rules prohibiting delivery sales.

(f) For the purposes of this section:

"Delivery sale" means any sale of an electronic smoking device to a purchaser in the State where either:

(1) The purchaser submits the order for sale by means of a telephonic or other method of voice transmission, the mail or any other delivery service, or the internet or other online service; or

(2) The electronic smoking device is delivered by use of the mail or any other delivery service.

The foregoing sales of electronic smoking devices shall constitute a delivery sale regardless of whether the seller is located within or without the State.

"Electronic smoking device" means any electronic product that can be used to aerosolize and deliver nicotine or other substances to the person inhaling from the device, including but not limited to an electronic cigarette, electronic cigar, electronic cigarillo, or electronic pipe, and any cartridge or other component of the device or related product."]

SECTION 8. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 9. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect on December 31, 2050.

Report Title:

Tobacco Products; E-Liquid; Electronic Smoking Devices; Unlawful Shipment; License Fee; Retail Permit Fee

Description:

Establishes the criminal offense of unlawful shipment of tobacco products. Amends the definition of "tobacco products" under the Cigarette Tax and Tobacco Tax Law to include electronic smoking devices and e-liquids. Increases the license fee for persons engaged as wholesalers or dealers of cigarettes and tobacco products and the retail tobacco permit fee for retailers engaged in the retail sale of cigarettes and tobacco products. Repeals state laws that establish and govern the Electronic Smoking Device Retailer Registration Unit within the Department of the Attorney General and provisions of the Cigarette Tax and Tobacco Tax Law that govern delivery sales. Effective 12/31/2050. (SD2)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.