HB598 HD2

SECTION 1. The legislature finds that 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 Hawaii, causing approximately one thousand four hundred deaths per year among adults. An estimated twenty-one thousand children in Hawaii currently under the age of eighteen will ultimately die prematurely from smoking. Tobacco use poses a heavy burden on Hawaii'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.

The legislature further finds that tobacco products are addictive and inherently dangerous, causing many different types of cancer, heart disease, and other serious illnesses. Hawaii 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 the illnesses and premature death associated with tobacco use.

The legislature additionally finds that electronic smoking devices, also known as e-cigarettes, are battery-operated products designed to deliver flavor and chemicals to the user by turning the chemicals, including highly addictive nicotine, into an aerosol or vapor that is inhaled by the user. Consumers may choose from varying strengths of e-liquid nicotine as well as liquids consisting of different flavors.

The electronic smoking device industry is growing rapidly. On December 18, 2018, the United States Surgeon General made the unprecedented move of classifying the danger of youth usage of electronic smoking devices as an epidemic. Since the Surgeon General first issued a warning in 2016 about the dangers of these products, data has shown a historic rise in use by youth and young adults. According to the 2016 report from the Surgeon General, e‑cigarette use amongst the nation's youth and young adults has become a major public health concern. The Surgeon General's report noted that e-cigarette use has increased considerably in recent years, growing an astounding nine hundred per cent among high school students from 2011 to 2015. In a 2018 study conducted by the National Institute on Drug Abuse, the use of electronic smoking devices among high school seniors increased nationally from 27.8 per cent to 37.3 per cent in a twelve-month period. The increase translates to 1,300,000 more teens using electronic smoking devices in a single year. E‑cigarette use among youth and young adults is also strongly associated with the use of other tobacco products, including combustible tobacco products. The Surgeon General's report also found that there are numerous policies and practices that can be implemented at the state and local levels to address electronic smoking device use among youth and young adults, including preventing access to e‑cigarettes by youth, significant increases in tax and price of e-cigarettes, retail licensure, and regulation of e-cigarette marketing.

The legislature additionally finds that the rapid growth of the electronic smoking device industry, including retail businesses selling electronic smoking devices, necessitates further regulations to protect consumers, such as requiring retailers of electronic smoking devices to obtain a retail tobacco permit.

The purpose of this Act is to:

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

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

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

(4) Fund health education and prevention programs concerning the risks and dangers of the use of electronic smoking devices for youth; and

(5) Repeal various statutory provisions relating to electronic smoking devices.

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

"§245- Unlawful shipment of tobacco products; penalty; reports; 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) 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 are otherwise exempt from the applicability of this chapter as provided by section 245-62; or

(2) All applicable Hawaii 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 with a value of $10,000 or more.

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

(e) For the purposes of this section, a person or entity is a licensee if the person or entity's name appears on a list of authorized licensees published by the department.

(f) 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.

(g) For the purpose of this section:

"Value" means the fair market value at the time of the offense."

SECTION 3. Section 245-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Electronic smoking device" means any device that can be used to deliver aerosolized or vaporized nicotine to the person inhaling from the device, including but not limited to an e‑cigarette, e-cigar, e-pipe, vape pen or e-hookah. "Electronic smoking device" includes any component, part, or accessory of such device, whether or not sold separately, and includes any substance intended to be aerosolized or vaporized during the use of the device. "Electronic smoking device" does not include any battery or battery charger when sold separately. In addition, "electronic smoking device" 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 title 21 United States Code chapter 9."

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.~~] $300. 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 applying for or renewing a retail tobacco permit, the applicant shall specify whether each place of business sells electronic smoking devices. 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 electronic smoking devices."

SECTION 6. Section 245-15, Hawaii Revised Statutes, is amended to read as follows:

"§245-15 Disposition of revenues. All moneys collected pursuant to this chapter shall be paid into the state treasury as state realizations to be kept and accounted for as provided by law; provided that, of the moneys collected under the tax imposed pursuant to:

(1) Section 245-3(a)(5), after September 30, 2006, and prior to October 1, 2007, 1.0 cent per cigarette shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures;

(2) Section 245-3(a)(6), after September 30, 2007, and prior to October 1, 2008:

(A) 1.5 cents per cigarette shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures;

(B) 0.25 cents per cigarette shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5; and

(C) 0.25 cents per cigarette shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234;

(3) Section 245-3(a)(7), after September 30, 2008, and prior to July 1, 2009:

(A) 2.0 cents per cigarette shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures;

(B) 0.5 cents per cigarette shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5;

(C) 0.25 cents per cigarette shall be deposited to the credit of the community health centers special fund established pursuant to section 321‑1.65; and

(D) 0.25 cents per cigarette shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234;

(4) Section 245-3(a)(8), after June 30, 2009, and prior to July 1, 2013:

(B) 0.75 cents per cigarette shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5;

(C) 0.75 cents per cigarette shall be deposited to the credit of the community health centers special fund established pursuant to section 321‑1.65; and

(D) 0.5 cents per cigarette shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321-234;

(5) Section 245-3(a)(11), after June 30, 2013, and prior to July 1, 2015:

(B) 1.5 cents per cigarette shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5;

(C) 1.25 cents per cigarette shall be deposited to the credit of the community health centers special fund established pursuant to section 321‑1.65; and

(D) 1.25 cents per cigarette shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234; [~~and~~]

(6) Section 245-3(a)(11), after June 30, 2015, and thereafter:

(B) 1.125 cents per cigarette, but not more than $7,400,000 in a fiscal year, shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5;

(C) 1.25 cents per cigarette, but not more than $8,800,000 in a fiscal year, shall be deposited to the credit of the community health centers special fund established pursuant to section 321‑1.65; and

(D) 1.25 cents per cigarette, but not more than $8,800,000 in a fiscal year, shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234[.]; and

(7) Section 245-3(a)(12), on July 1, 2020, and every July 1 thereafter, $750,000 shall be deposited to the credit of the Hawaii tobacco prevention and control trust fund established pursuant to section 328L-5 to support health education and prevention programs concerning the risks and danger of the use of electronic smoking devices for youth.

The department shall provide an annual accounting of these dispositions to the legislature."

SECTION 7. Section 328L-5, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) There is established the Hawaii tobacco prevention and control trust fund as a separate fund of a nonprofit entity having a board of directors and qualifying under section 501(c)(3) of the Internal Revenue Code of 1986, as amended, into which shall be deposited moneys received as provided under [~~section~~] sections 245-15(7) and 328L-2(b)(2). The director of health with the concurrence of the governor, shall select, in accordance with law, the entity based upon the proven record of accomplishment of the entity in administering a similar trust fund."

2. By amending subsection (e) to read:

"(e) The assets of the Hawaii tobacco prevention and control trust fund shall consist of:

(1) Moneys appropriated under section 328L‑2(b)(2);

(2) Moneys collected pursuant to section 245-15(7);

[~~(2)~~] (3) Moneys appropriated to the Hawaii tobacco prevention and control trust fund by the state, county, or federal government;

[~~(3)~~] (4) Private contributions of cash or property; and

[~~(4)~~] (5) Income and capital gains earned by the trust fund."

SECTION 8. Chapter 28, part XII, Hawaii Revised Statutes, is repealed.

SECTION 9. 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 10. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 11. 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 12. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 13. This Act shall take effect on July 1, 2050.

HOUSE OF REPRESENTATIVES	H.B. NO.	598
THIRTY-FIRST LEGISLATURE, 2021		H.D. 2
STATE OF HAWAII