SB3119

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 Hawaii. The Centers for Disease Control and Prevention's State Tobacco Activities Tracking and Evaluation System estimates tobacco causes approximately one thousand four hundred deaths per year among adults. In a 2014 report titled "The Health Consequences of Smoking: 50 Years of Progress," the United States Surgeon General projected an estimated twenty-one thousand children now under the age of eighteen and alive in Hawaii will die prematurely from smoking. Consequently, tobacco use poses a heavy burden on Hawaii's health care system and economy. According to the Centers for Disease Control and Prevention's 2014 "Best Practices for Tobacco Control Programs" guide, $526,000,000 in health care expenditures and $387,300,000 in lost productivity are directly attributed to smoking.

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.

Electronic smoking devices, also known as e-cigarettes, are battery-operated products designed to deliver nicotine, flavor, and other chemicals to the user. E-cigarettes 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, newer products are rechargeable, resemble common objects, including flash drives and highlighters, and typically deliver nicotine salts, which 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. In the September 18, 2020 Morbidity and Mortality Weekly Report, the Centers for Disease Control and Prevention reported that e-cigarettes 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 about the dangers of these products, stating that 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 in the Surgeon General's Advisory on E-Cigarette Use Among Youth.

The 2019 Youth Risk Behavior Survey issued by the Centers for Disease Control and Prevention 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. The same survey reported that 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. Further, in the 2016 report titled "E-Cigarette Use Among Youth and Adults" (Surgeon General's Report), the United States Surgeon General stated 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 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.

The Centers for Disease Control and Prevention reported in the September 18, 2020 Morbidity and Mortality Weekly Report, that from November of 2016 to August of 2019, total e-cigarette unit sales in the United States increased nearly 300 per cent. Continued monitoring of e-cigarette sales and use is critical to inform strategies to minimize risk among Hawaii’s most vulnerable youth users.

According to the Behavioral Risk Factors Surveillance System, e-cigarette use is markedly higher among young adults in Hawaii, between the ages of 18 and 24 years, than young adults on the mainland. In 2019, 6.2 per cent of Hawaii residents ages 18 and older reported current vaping, about one-third higher than the 4.5 per cent reporting current e-cigarette use nationally.

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 e‑cigarettes by youth, increasing taxes upon e-cigarettes, increasing prices of retail licensure, and regulating 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 2016 Surgeon General's Report found that children and youth are especially vulnerable to the targeted online social and digital media marketing of inexpensive e-cigarettes offered in enticing flavors and concealable forms.

The United States Food and Drug Administration has expanded its regulatory authority to all tobacco products, including e-cigarettes, cigars, and hookah and pipe tobacco. While there is federal consensus that electronic smoking devices are tobacco products, Hawaii has no State tobacco tax attached to e-cigarettes and e-liquids. While the use of tobacco products other than cigarettes carries similar health risks, these products are currently taxed at a lower rate than cigarettes. Decades of research have shown that increasing cigarette prices, such as through 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 other tobacco products to reduce youth consumption.

Taxing e-liquids and e-cigarettes, similar to other tobacco products, will provide pricing parity between products on the market. Pricing parity between tobacco products on the market will result in positive health benefits, including encouraging young, price-conscious consumers to quit, sustaining cessation, preventing youth initiation, and reducing consumption among those who continue to use them.

The purposes of this Act are to:

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

(2) 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;

(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 chapter 245, Hawaii Revised Statutes.

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

(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 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 as follows:

1. By adding two 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 designed or intended to be used in an electronic smoking device, whether or not packaged in a cartridge or other container. "E-liquid" shall not include prescription drugs; cannabis for medical use or manufactured cannabis products pursuant to 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).

"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. "Electronic smoking device" includes any component, part, or accessory of the device, and also includes any substance that may be aerosolized or vaporized by the device, whether or not the substance contains nicotine. 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 the Federal Food, Drug, and Cosmetic Act.

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 whether inhaled, absorbed, or ingested by any other means, including but not limited to large cigars and any substitutes thereof other than cigarettes that bear the semblance thereof, and including snuff, snus, chewing or smokeless tobacco, and smoking or pipe tobacco[.], or

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

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

"Tobacco products" does not mean 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, upon its approval, shall take effect on January 1, 2023.

INTRODUCED BY:

_____________________________

BY REQUEST

THE SENATE	S.B. NO.	3119
THIRTY-FIRST LEGISLATURE, 2022
STATE OF HAWAII