COM. REP. NO. 635
RE: H.B. No. 476
Honorable Scott K. Saiki
Speaker, House of Representatives
Thirty-First State Legislature
Regular Session of 2021
State of Hawaii
Your Committee on Consumer Protection & Commerce, to which was referred H.B. No. 476, H.D. 1, entitled:
"A BILL FOR AN ACT RELATING TO TAXATION,"
begs leave to report as follows:
purpose of this measure is to make various amendments to the
State's cigarette tax and tobacco tax law to treat e-liquid and e-liquid
cartridges like cigarettes and tobacco products, including:
(1) Imposing a fifty percent tax on products with a modified risk tobacco product order issued by the Secretary of the United States Department of Health and Human Services;
(2) Imposing an excise tax on the sale of each e-liquid cartridge or unit of open system e-liquid sold, used, or possessed by a wholesaler or dealer;
(3) Requiring wholesalers and retailers of e-liquid and e-liquid cartridges to obtain licenses and permits to operate;
(4) Amending definitions; and
(5) Making other conforming amendments.
Your Committee received testimony in support of this measure
from the Department of Health, Hawaii Substance Abuse Coalition, Hawaii State
Teachers Association, and AlohaCare.
Your Committee received testimony in opposition to this measure from Black
Lava Vape; Americans for Tax Reforms; Hawaii Cigar Association; Kauai Cigar
Company; Premium Cigar Association; American Vaping Association; Smoke-Free Alternatives
Trade Association; Volcano; Cigar Rights of American, Hawai‘i;
Retail Merchants of Hawaii; Hawaii Smokers Alliance; and numerous individuals. Your Committee received comments on this
measure from the Department of Taxation, Tax Foundation of Hawaii, Hawaii
Primary Care Association, American Heart Association, Coalition for a
Tobacco-Free Hawai‘i, Campaign for Tobacco-Free Kids, American
Cancer Society Cancer Action Network, American Lung Association in Hawaii, and
Your Committee finds that electronic smoking devices produce an
aerosol by heating a liquid that usually contains nicotine, flavorings, and
other chemicals that help make the aerosol.
The aerosol is inhaled into the user's lungs and, when exhaled by the
user, may be inhaled by bystanders. Your
Committee further finds that the federal Centers for Disease Control and
Prevention have stated that electronic smoking devices are not safe for youth,
young adults, and pregnant adults.
However, the use of electronic smoking devices has been increasing
exponentially among youth in Hawaii.
While the use of electronic smoking devices by youth have risen
nationally, use in Hawaii by youths is even higher. Your Committee also finds that the rapid
growth of the electronic smoking device industry necessitates further
regulation to protect consumers. Your
Committee believes that certain measures must be taken to deter the use of
electronic smoking devices, especially by the youth.
Your Committee notes that in Hawaii, electronic smoking devices
are not taxed like other tobacco products and can often be purchased at lower
prices than cigarettes. The State's
existing tax laws also do not cover solutions containing nicotine, such as
e-liquids, that are designed or sold for use with electronic smoking devices. Your Committee further finds that increasing
the price of tobacco products is the single most effective way to reduce
consumption. Achieving tax parity for
all tobacco products, as proposed by this measure, will therefore protect
against price disparities and serve as an important tool to combat the youth
vaping epidemic in Hawaii.
Your Committee has amended this measure by specifying that the taxation of modified risk tobacco products is equal to fifty percent of the wholesale price of every wholesaler for each modified risk tobacco product sold, used, or possessed by a wholesaler.
As affirmed by the record of votes of the members of your Committee on Consumer Protection & Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 476, H.D. 1, as amended herein, and recommends that it be referred to your Committee on Finance in the form attached hereto as H.B. No. 476, H.D. 2.
Respectfully submitted on behalf of the members of the Committee on Consumer Protection & Commerce,
AARON LING JOHANSON, Chair