THE SENATE	S.B. NO.	1147
THIRTY-FIRST LEGISLATURE, 2021		S.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO TOBACCO PRODUCTS.

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

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. Consequently, 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.

Furthermore, 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 also finds that electronic smoking devices, also known as e-cigarettes, are battery-operated products designed to deliver nicotine, flavor, and other chemicals. E-cigarettes have quickly evolved since entering the U.S. marketplace in 2007. Initial products were disposable, resembled the size and shape of conventional cigarettes, and used free-base nicotine. However, newer products are rechargeable, resemble common objects (e.g., USB flash drives and highlighters), and typically deliver nicotine salts that allow higher levels of nicotine to be inhaled more easily by the user.

The e-cigarette industry, which includes the production of e‑liquid in a variety of forms, has grown rapidly. E-cigarettes have been the most commonly used tobacco product among American youths since 2014. The United States Surgeon General first issued a warning in 2016 about the dangers of these products, stating use among the nation's youth and young adults had become a major public health concern. In response to the continuing rise in use, in 2018 the Surgeon General made the unprecedented move of classifying the danger of youth usage of e-cigarettes as an epidemic.

The 2019 Youth Risk Behavior Survey reported that the use of electronic smoking devices among high school seniors increased nationally from 24.1 per cent in 2015 to 37.7 per cent in 2019. In Hawaii, 48.3 per cent of public high school students report having experimented with e-cigarettes and 30.6 per cent are current users of e-cigarettes.

The legislature additionally finds that e‑cigarette use among youth and young adults is also strongly associated with the use of other tobacco products, including combustible tobacco products. Toxicologists have also warned that e-liquids pose significant risks to public health, particularly to children. According to the Surgeon General's report, if the contents of prefilled cartridges or bottles are consumed, ingestion of e-liquids containing nicotine can cause acute toxicity and possibly death.

In the September 9, 2020, Morbidity and Mortality Report, the Centers for Disease Control and Prevention stated that from November of 2016 to August of 2019, total e-cigarette unit sales in the U.S. increased nearly three hundred per cent. Continued monitoring of e-cigarette sales and use is critical to inform strategies to minimize risk among our most vulnerable youth users. Further, e-cigarette use is markedly higher among youths than adults.

The Surgeon General's report 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.

Additionally, the rapid growth of the electronic smoking device industry, including retail businesses selling e-cigarettes or e-liquid, necessitates further regulations to protect consumers, such as requiring retailers of e-liquid to obtain a retail tobacco permit.

The federal Food and Drug Administration has expanded its regulatory authority to all tobacco products, including e-cigarettes, cigars, and hookah and pipe tobacco. However, there is currently no state tobacco tax attached to e-liquid, even though electronic smoking devices are now regulated by the federal government as tobacco products. Furthermore, tobacco products, other than cigarettes, are currently taxed at a lower rate than cigarettes, even though their use carries similar health risks. Research has shown that increasing cigarette prices, such as through cigarette taxes, can reduce the rate of smoking by adult and youth smokers.

The purpose of this Act is to:

(1) Make unlawful the sale of flavored tobacco products, mislabeling of e-liquid products containing nicotine, and sale of tobacco products other than through retail sales via in-person exchange;

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

(3) Include e-liquid and electronic smoking devices within the definition of "tobacco products" as used in the cigarette tax and tobacco tax law, thereby:

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

(B) Requiring retailers of tobacco products to obtain a retail tobacco permit to sell, possess, keep, acquire, distribute, or transport tobacco products;

(C) Prohibiting persons from engaging in the business of a wholesaler or dealer of tobacco products without first obtaining a license from the department of taxation; and

(D) Applying other requirements of chapter 245, Hawaii Revised Statutes;

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

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

(6) 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 is met:

(1) The tobacco products are exempt from taxes as provided by section 245-3(b); 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 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 with a value of less than $10,000 in violation of subsection (a).

(e) For 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 this chapter 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. Chapter 712, Hawaii Revised Statutes, is amended by adding a new section to part IV to be appropriately designated and to read as follows:

"§712-   Sale of tobacco products; flavored; nicotine-free; remote retail sales. (1) Beginning July 1, 2021, it shall be unlawful for any retailer or any agents or employees of the retailer to:

(a) Sell, offer for sale, or possess with the intent to sell or offer for sale, a flavored tobacco product or e-liquid;

(b) Mislabel as nicotine-free, or sell or market for sale as nicotine-free, any e-liquid product that contains nicotine; and

(c) Have tobacco products, including electronic smoking devices, e-liquid, and electronic smoking device accessories delivered or sold to end consumers other than through retail sales through a direct, face-to-face, or over-the-counter exchange between a licensed retailer and a consumer at a tobacco retail location. This restriction includes a prohibition on sales performed through mail, curbside pickup, or delivery anywhere outside a licensed retail location.

(2) A statement or claim, including but not limited to text, color, or images on the tobacco product's labeling or packaging, that is used to explicitly or implicitly communicate that the tobacco product has a flavor other than tobacco, made by a manufacturer or an agent or employee of the manufacturer in the course of the person's agency or employment, and directed to consumers or the public that a tobacco product is flavored, shall be prima facie evidence that the tobacco product is a flavored tobacco product.

(3) Any flavored tobacco product found in a retailer's possession that is in violation of this section shall be considered contraband, promptly seized, and subject to immediate forfeiture and destruction or disposal as hazardous waste following the conclusion of an administrative or judicial proceeding finding that a violation of subsection (1) has been committed, and shall not be subject to the procedures set forth in chapter 712A.

(4) Any retailer who violates this section shall be punished as follows:

(a) For the first offense, a fine of $1,000;

(b) For the second offense, a fine of $2,000; and

(c) For a third and subsequent offense, a fine of $5,000.

All fines shall be paid to and deposited into the Hawaii tobacco prevention and control trust fund established pursuant to section 328L-5. Retailers shall be responsible for all costs associated with disposing of their confiscated product found to be in violation of this section.

(5) Notwithstanding any other law to the contrary, any county may adopt a rule or ordinance that places greater restrictions on the access to tobacco or electronic smoking device products than provided for in this section. In the case of a conflict between the restrictions in this section and any county rule or ordinance, the more stringent restrictions shall prevail.

(6) For the purposes of this section:

"Distinguishable" means perceivable by either the sense of smell or taste.

"Electronic smoking device" has the same meaning as defined in section 712-1258(7).

"E-liquid" means any liquid or like substance, which may or may not contain nicotine, that is capable of being used in an electronic smoking device, whether or not packaged in a cartridge or other container.

"Flavored tobacco product" means any tobacco product that contains a taste or smell, other than the taste or smell of tobacco, that is distinguishable by an ordinary consumer either prior to, or during the consumption of, a tobacco product, including but not limited to any taste or smell relating to fruit, mint, wintergreen, chocolate, cocoa, vanilla, honey, molasses, or any candy, dessert, alcoholic beverage, herb, or spice. "Flavored tobacco product" does not include tobacco products that contain a taste or smell of menthol.

"Labeling" means written, printed, pictorial, or graphic matter upon a tobacco product or any of its packaging.

"Packaging" means a pack, box, carton, or container of any kind, or if no other container, wrapping, including cellophane, in which a tobacco product is sold or offered for sale to a consumer.

"Retailer" means an entity that sells, offers for sale, or exchanges or offers to exchange for any form of consideration tobacco products or e-liquids to consumers. "Retailer" includes the owner of a tobacco retail location.

"Tobacco product" means any:

(a) Product containing, made of, or derived from tobacco or nicotine that is intended for human consumption or is likely to be consumed, whether inhaled, absorbed, or ingested by any other means, including but not limited to a cigarette, cigar, pipe tobacco, chewing tobacco, snuff, or snus;

(b) Electronic smoking device and any substances that may be aerosolized or vaporized by such device, whether or not the substance contains nicotine; or

(c) Component, part, or accessory of paragraph (a) or (b), whether or not any of these contains tobacco or nicotine, including but not limited to filters, rolling papers, blunt or hemp wraps, hookahs, and pipes.

"Tobacco product" 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; medical cannabis, or manufactured cannabis products under chapter 329D.

"Tobacco retail location" means any premises where tobacco products are sold or distributed to a consumer, including but not limited to any store, bar, lounge, cafe, vending machine, or structure."

SECTION 4. Section 245-1, Hawaii Revised Statutes, is amended as follows:

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

""E-liquid" means any liquid or like substance, which may or may not contain nicotine, that is capable of being used in an electronic smoking device, whether or not packaged in a cartridge or other container. "E-liquid" does not include prescription drugs, devices, or a combination of products approved for sale by the United States Food and Drug Administration as those terms are defined in the Federal Food, Drug, and Cosmetic Act; medical cannabis; or manufactured cannabis products under chapter 329D, including devices uses to aerosolize, inhale, or ingest manufactured cannabis products manufactured or distributed in accordance with section 329D-10(a).

"Electronic smoking device" means any electronic product, or part thereof, whether for one-time use or reusable that can be used to deliver nicotine or another substance to a person inhaling from the device including but not limited to electronic cigarettes, electronic cigars, electronic cigarillos, electronic pipes, vaping pens, hookah pens, and other similar devices that rely on vaporization or aerosolization, and any cartridge or component part of the device or product. "Electronic smoking device" includes any liquid or gel capable of use in such electronic device that can be used by a person to simulate smoking in the delivery of nicotine or any other substance, intended for human consumption, through inhalation of vapor or aerosol from the product. "Electronic smoking device" does not include:

(1) Cigarettes;

(2) A product that has been approved by the United States Food and Drug Administration for the sale of or use as a tobacco cessation product or for other medical purposes and is marketed and sold or prescribed exclusively for that approved purpose;

(3) Prescription drugs;

(4) Medical cannabis or manufactured cannabis products under chapter 329D; and

(5) Medical devices used to aerosolize, inhale, or ingest prescription drugs, including manufactured cannabis products manufactured or distributed in accordance with section 329D-10(a).

"Smoke" or "smoking" means inhaling, exhaling, burning, carrying, or possessing any activated, lighted, or heated tobacco product, plant product, or any similar substance intended for human consumption or inhalation, including the use of an electronic smoking device."

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

""Tobacco products" means [tobacco]:

(1) Tobacco in any form, other than cigarettes or little cigars[, that is prepared or intended for consumption or for personal use by humans, including large cigars and any substitutes thereof other than cigarettes that bear the semblance thereof, snuff, chewing or smokeless tobacco, and smoking or pipe tobacco.]; or

(2) Electronic smoking devices.

"Tobacco products" includes but is not limited to large cigars and any substitutes thereof other than cigarettes that bear the semblance thereof, pipe tobacco, chewing or smokeless tobacco, snuff, snus, e-liquid, electronic smoking devices containing e-liquid, and components or parts containing e-liquid."

SECTION 5. 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,] $    , and shall be renewable annually on July 1 for the twelve months ending the succeeding June 30."

SECTION 6. 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.] $    . 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 or 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 e-liquid or electronic smoking devices."

SECTION 7. Section 706-643, Hawaii Revised Statutes, is amended by amending subsection (2) to read as follows:

"(2) All fines and other final payments received by a clerk or other officer of a court shall be accounted for, with the names of persons making payment, and the amount and date thereof, being recorded. All such funds shall be deposited with the director of finance to the credit of the general fund of the State. With respect to fines and bail forfeitures that are proceeds of the wildlife revolving fund under section 183D-10.5, fines that are proceeds of the Hawaii tobacco prevention and control trust fund under section 328L-5, and fines that are proceeds of the compliance resolution fund under sections 26-9(o) and 431:2-410, the director of finance shall transmit the fines and forfeitures to the respective funds."

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 January 1, 2050.

Report Title:

Unlawful Shipment of Tobacco Products; E‑liquid; Electronic Smoking Devices; License Fee; Retail Permit Fee

Description:

Makes unlawful the sale of flavored tobacco products, mislabeling of e-liquid products containing nicotine, and sale of tobacco products other than through retail sales via in-person exchange. Establishes the offense of unlawful shipment of tobacco products. Includes e-liquid and electronic smoking devices within the definition of "tobacco products", as used in the cigarette tax and tobacco tax law. Increases the license fee for persons engaged as a wholesaler or dealer of cigarettes and tobacco products. Increases the retail tobacco permit fee for retailers engaged in the retail sale of cigarettes and tobacco products. Repeals certain provisions of the Hawaii Revised Statutes relating to electronic smoking devices. Provides for the disposition of fines paid for the unlawful shipment of tobacco products into the Hawaii Tobacco Prevention and Control Trust Fund. Effective 1/1/2050.

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