SB2689.DOC

SECTION 1. The legislature finds that the public health rationale for the regulation of cigarettes and tobacco products is well developed, as tobacco use is the single most preventable cause of disease, disability, and death in the United States. In addition to substantive laws in the State governing specific aspects of tobacco production, sales, and use, Hawaii law requires retailers, wholesalers, and dealers of cigarettes or tobacco products to obtain a special license or permit. These licenses and permits facilitate the enforcement of the cigarette tax and tobacco tax law under chapter 245, Hawaii Revised Statutes. However, the current license fee for wholesalers and dealers is only $2.50 a year, while retail tobacco permit fees cost only $20 a year. To ensure continued tobacco regulation and enforcement of relevant tax laws, the legislature concludes that these fees should be increased and the law updated to include electronic smoking devices and e-liquid.

Accordingly, the purpose of this Act is to:

(1) Add and amend various definitions in chapter 245, Hawaii Revised Statutes, to ensure that dealers, retailers, and wholesalers of electronic smoking devices and e-liquid obtain the applicable license or permit;

(2) Increase the license fee for persons engaged as a wholesaler or dealer of cigarettes or tobacco products; and

(3) Increase the retail tobacco permit fee for retailers engaged in the retail sale of cigarettes, tobacco products, electronic smoking devices, and e-liquid.

SECTION 2. Section 245-1, Hawaii Revised Statutes, is amended as follows:

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

""Disposable electronic smoking device" means an electronic smoking device that is designed or intended not to be reused or refilled.

"Electronic smoking device" means any electronic product that can be used to aerosolize and deliver nicotine to the person inhaling from the device, including but not limited to an electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, hookah pipe, or hookah pen, and any component of the device or related product, whether or not sold separately, including but not limited to, atomizers, coils, drip tips, and tanks.

"E-liquid" means any liquid containing nicotine that is designed or intended to be used in a reusable electronic smoking device, whether or not packaged in a cartridge or other container.

"Reusable electronic smoking device" means an electronic smoking device that is designed or intended to be reused or refilled."

2. By amending the definitions of "dealer", "retailer", "sale" or "sold", "wholesale price", and "wholesaler" to read as follows:

""Dealer" means any person coming into the possession of cigarettes [or], tobacco products, electronic smoking devices, or e-liquid which have not been acquired from an authorized permit holder or licensee under this chapter, or any person rendering a distribution service who buys and maintains, at the person's place of business, a stock of cigarettes [or], tobacco products, electronic smoking devices, or e-liquid that have not been acquired from a licensee and who distributes or uses such cigarettes [or], tobacco products[.], electronic smoking devices, or e-liquid.

"Retailer" means an entity that engages in the practice of selling cigarettes [or], tobacco products, electronic smoking devices, or e-liquid to consumers and includes the owner of a cigarette [or], tobacco product, electronic smoking device, or e-liquid vending machine.

"Sale" or "sold" includes any delivery of cigarettes [or], tobacco products, electronic smoking devices, or e-liquid whether cash is actually paid therefor or not.

"Wholesale price", in addition to any other meaning of the term, means in the case of a tax upon the use of tobacco products, electronic smoking devices, or e-liquid, or upon a sale not made at wholesale:

(1) If made by a person who during the month preceding the accrual of the tax made substantial sales to retailers of like tobacco products, electronic smoking devices, or e-liquid, the average price of the sales, and

(2) If made by any other person, the average price of sales to retailers of like tobacco products, electronic smoking devices, or e-liquid, made by other taxpayers in the same county during the month preceding the accrual of the tax.

"Wholesaler" means a person rendering a distribution service who buys and maintains, at the person's place of business, a stock of cigarettes [or], tobacco products, electronic smoking devices, or e-liquid that the person uses, possesses, or distributes only to retailers, or other wholesalers, or both."

SECTION 3. 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 4. Section 245-2.5, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to (c) to read:

"(a) Beginning December 1, 2006, every retailer engaged in the retail sale of cigarettes [~~and~~], other tobacco products, electronic smoking devices, or e-liquid upon which a tax is required to be paid under this chapter shall obtain a retail tobacco permit.

(b) Beginning March 1, 2007, it shall be unlawful for any retailer engaged in the retail sale of cigarettes [~~and~~], other tobacco products, electronic smoking devices, or e-liquid upon which a tax is required to be paid under this chapter to sell, possess, keep, acquire, distribute, or transport cigarettes [or], other tobacco products, electronic smoking devices, or e‑liquid for retail sale unless a retail tobacco permit has been issued to the retailer under this section and the retail tobacco permit is in full force and effect.

(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."

2. By amending subsection (e) to read:

"(e) Any entity that operates as a dealer or wholesaler and also sells cigarettes [or], other tobacco products, electronic smoking devices, or e-liquid to consumers at retail shall acquire a separate retail tobacco permit."

3. By amending subsection (h) to read:

"(h) Any sales of cigarettes [or], tobacco products, electronic smoking devices, or e-liquid made through a [~~cigarette or tobacco product~~] vending machine are subject to the terms, conditions, and penalties of this chapter. A retail tobacco permit need not be displayed on [~~cigarette or tobacco product~~] vending machines if the retail tobacco permit holder is the owner of the [~~cigarette or tobacco product~~] vending machines and the [~~cigarette or tobacco product~~] vending machines are operated at the location described in the retail tobacco permit."

4. By amending subsection (j) to read:

"(j) A vehicle from which cigarettes [or], tobacco products, electronic smoking devices, or e-liquid are sold is considered a place of business and requires a retail tobacco permit. Retail tobacco permits for a vehicle shall be issued bearing a specific motor vehicle identification number and are valid only when physically carried in the vehicle having the corresponding motor vehicle identification number. Retail tobacco permits for vehicles shall not be moved from one vehicle to another."

5. By amending subsection (l) to read:

"(l) A permittee shall keep a complete and accurate record of the permittee's cigarette [or], tobacco product, electronic smoking devices, and e-liquid inventory. The records shall:

(1) Include:

(A) A written statement containing the name and address of the permittee's source of its cigarettes [~~and~~], tobacco products[;], electronic smoking devices, and e-liquid;

(B) The date of delivery, quantity, trade name or brand, and price of the cigarettes [~~and~~], tobacco products[;], electronic smoking devices, and e‑liquid; and

(C) Documentation in the form of any purchase orders, invoices, bills of lading, other written statements, books, papers, or records in whatever format, including electronic format, which substantiate the purchase or acquisition of the cigarettes [~~and~~], tobacco products, electronic smoking devices, and e-liquid stored or offered for sale; and

(2) Be offered for inspection and examination within twenty-four hours of demand by the department or the attorney general, and shall be preserved for a period of three years; provided that:

(A) Specified records may be destroyed if the department and the attorney general both consent to their destruction within the three-year period; and

(B) Either the department or the attorney general may adopt rules pursuant to chapter 91 that require specified records to be kept longer than a period of three years."

6. By amending subsection (o) to read:

"(o) Any cigarette, package of cigarettes, carton of cigarettes, container of cigarettes, tobacco product, package of tobacco products, [or] any container of tobacco products, electronic smoking devices, or e-liquid unlawfully sold, possessed, kept, stored, acquired, distributed, or transported in violation of this section may be seized and ordered forfeited pursuant to chapter 712A."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on January 1, 2017.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2689
TWENTY-EIGHTH LEGISLATURE, 2016
STATE OF HAWAII