| 1 | 1 | | THE SENATE S.B. NO. 441 THIRTY-SECOND LEGISLATURE, 2023 STATE OF HAWAII A BILL FOR AN ACT relating to taxation. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: |
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| 3 | 3 | | THE SENATE S.B. NO. 441 |
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| 4 | 4 | | THIRTY-SECOND LEGISLATURE, 2023 |
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| 5 | 5 | | STATE OF HAWAII |
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| 7 | 7 | | THE SENATE |
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| 9 | 9 | | S.B. NO. |
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| 11 | 11 | | 441 |
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| 13 | 13 | | THIRTY-SECOND LEGISLATURE, 2023 |
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| 17 | 17 | | STATE OF HAWAII |
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| 31 | 31 | | A BILL FOR AN ACT |
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| 37 | 37 | | relating to taxation. |
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| 43 | 43 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: |
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| 47 | 47 | | SECTION 1. Section 237-24, Hawaii Revised Statutes, is amended to read as follows: "§237-24 Amounts not taxable. This chapter shall not apply to the following amounts: (1) Amounts received under life insurance policies and contracts paid by reason of the death of the insured; (2) Amounts received (other than amounts paid by reason of death of the insured) under life insurance, endowment, or annuity contracts, either during the term or at maturity or upon surrender of the contract; (3) Amounts received under any accident insurance or health insurance policy or contract or under workers' compensation acts or employers' liability acts, as compensation for personal injuries, death, or sickness, including also the amount of any damages or other compensation received, whether as a result of action or by private agreement between the parties on account of the personal injuries, death, or sickness; (4) The value of all property of every kind and sort acquired by gift, bequest, or devise, and the value of all property acquired by descent or inheritance; (5) Amounts received by any person as compensatory damages for any tort injury to the person, or to the person's character reputation, or received as compensatory damages for any tort injury to or destruction of property, whether as the result of action or by private agreement between the parties (provided that amounts received as punitive damages for tort injury or breach of contract injury shall be included in gross income); (6) Amounts received as salaries or wages for services rendered by an employee to an employer; (7) Amounts received as alimony and other similar payments and settlements; (8) Amounts collected by distributors as fuel taxes on "liquid fuel" imposed by chapter 243, and the amounts collected by such distributors as a fuel tax imposed by any Act of the Congress of the United States; (9) Taxes on liquor imposed by chapter 244D on dealers holding permits under that chapter; (10) The amounts of taxes on cigarettes [and], tobacco products, e-liquid cartridges, and open system e‑liquid imposed by chapter 245 on wholesalers or dealers holding licenses under that chapter and selling the products at wholesale; (11) Federal excise taxes imposed on articles sold at retail and collected from the purchasers thereof and paid to the federal government by the retailer; (12) The amounts of federal taxes under chapter 37 of the Internal Revenue Code, or similar federal taxes, imposed on sugar manufactured in the State, paid by the manufacturer to the federal government; (13) An amount up to, but not in excess of, $2,000 a year of gross income received by any blind, deaf, or totally disabled person engaging, or continuing, in any business, trade, activity, occupation, or calling within the State; a corporation all of whose outstanding shares are owned by an individual or individuals who are blind, deaf, or totally disabled; a general, limited, or limited liability partnership, all of whose partners are blind, deaf, or totally disabled; or a limited liability company, all of whose members are blind, deaf, or totally disabled; (14) Amounts received by a producer of sugarcane from the manufacturer to whom the producer sells the sugarcane, where: (A) The producer is an independent cane farmer, so classed by the Secretary of Agriculture under the Sugar Act of 1948 (61 Stat. 922, chapter 519) as the Act may be amended or supplemented; (B) The value or gross proceeds of sale of the sugar, and other products manufactured from the sugarcane, is included in the measure of the tax levied on the manufacturer under section 237‑13(1) or (2); (C) The producer's gross proceeds of sales are dependent upon the actual value of the products manufactured therefrom or the average value of all similar products manufactured by the manufacturer; and (D) The producer's gross proceeds of sales are reduced by reason of the tax on the value or sale of the manufactured products; (15) Money paid by the State or eleemosynary child-placing organizations to foster parents for their care of children in foster homes; (16) Amounts received by a cooperative housing corporation from its shareholders in reimbursement of funds paid by such corporation for lease rental, real property taxes, and other expenses of operating and maintaining the cooperative land and improvements; provided that such a cooperative corporation is a corporation: (A) Having one and only one class of stock outstanding; (B) Each of the stockholders of which is entitled solely by reason of the stockholder's ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building owned or leased by the corporation; and (C) No stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earnings and profits of the corporation except in a complete or partial liquidation of the corporation; and (17) Amounts received by a contractor of the Patient-Centered Community Care program that is established by the United States Department of Veterans Affairs pursuant to title 38 United States Code section 8153, as amended, for the actual costs or advancements to third party health care providers pursuant to a contract with the United States." SECTION 2. Section 237-25, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows: "(a) Any provision of law to the contrary notwithstanding, there shall be exempted from, and excluded from the measures of, the tax imposed by chapter 237 all sales, and the gross proceeds of all sales, of: (1) Intoxicating liquor, as defined in chapter 281, hereafter sold by any person licensed under chapter 281 to the United States (including any agency or instrumentality of the United States that is wholly owned or otherwise so constituted as to be immune from the levy of a tax under chapter 238 or 244D but not including national banks), or to any organization to which that sale is permitted by the proviso of "Class 3" of section 281-31, located on any Army, Navy, or Air Force reservation, but the person making the sale shall nevertheless, within the meaning of chapters 237, 244D, and 281 be deemed to be a licensed seller; (2) Tobacco products [and], cigarettes, e-liquid cartridges, and open system e-liquid, as defined in chapter 245, sold by any person licensed under the chapter to the United States (including any agency or instrumentality thereof that is wholly owned or otherwise so constituted as to be immune from the levy of a tax under chapter 238 or 245 but not including national banks), but the person making the sale shall nevertheless, within the meaning of chapters 237 and 245, be deemed to be a licensed seller; (3) Other tangible personal property sold by any person licensed under this chapter to the United States (including any agency, instrumentality, or federal credit union thereof but not including national banks), and to any state-chartered credit union, but the person making such sale shall nevertheless, within the meaning of this chapter, be deemed a licensed seller; and (4) When the amount of property sold by a licensee turns upon the amount of the property sold through a vending machine or similar device to the customer using the device, there shall not be deemed to have occurred any sale covered by an exemption under paragraph (1), (2), or (3)." SECTION 3. Section 238-3, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows: "(g) The tax imposed by this chapter shall not apply to any intoxicating liquor as defined in chapter 244D and cigarettes [and], tobacco products, e-liquid cartridges, and open system e-liquid as defined in chapter 245, imported into the State and sold to any person or common carrier in interstate commerce, whether ocean-going or air, for consumption out-of-state by the person, crew, or passengers on the shipper's vessels or airplanes." SECTION 4. Chapter 245, Hawaii Revised Statutes, is amended by amending its title to read as follows: "CHAPTER 245 CIGARETTE TAX [AND], TOBACCO TAX, AND E-LIQUID TAX LAW" SECTION 5. Section 245-1, Hawaii Revised Statutes, is amended as follows: 1. By adding five new definitions to be appropriately inserted and to read: ""E-liquid" means any solution containing nicotine that is designed or sold for use with an electronic smoking device. "E-liquid cartridge" means any prefilled and sealed disposable container of e-liquid that can be used with an electronic smoking device. "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 an electronic cigarette, electronic cigar, electronic cigarillo, or electronic pipe, and any cartridge or other component of the device or related product. "Open system e-liquid" means e-liquid that is not sold in a cartridge. "Unit of open system e-liquid" means any measurable amount of open system e-liquid." 2. By amending the definition of "business location" or "place of business" to read: ""Business location" or "place of business" means the entire premises occupied by a retail tobacco and e-liquid permit applicant or an entity required to hold a retail tobacco and e‑liquid permit under this chapter and shall include but is not limited to any store, stand, outlet, vehicle, cart, location, vending machine, or structure from which cigarettes [or], tobacco products, electronic smoking devices, e-liquid cartridges, or units of open system of e-liquid are sold or distributed to a consumer." 3. By amending the definitions of "consumer" and "dealer" to read: ""Consumer" means a person who acquires or possesses a cigarette [or], a tobacco product, an electronic smoking device, or e-liquid for personal consumption and not for resale or distribution. "Dealer" means any person coming into the possession of cigarettes [or], tobacco products [which], electronic smoking devices, e-liquid cartridges, or units of open system e-liquid that 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, e-liquid cartridges, or units of open system e-liquid that have not been acquired from a licensee and who distributes or uses [such] cigarettes [or], tobacco products[.], electronic smoking devices, e-liquid cartridges, or units of open system e-liquid." 4. By amending the definition of "license" to read: ""License" means a license granted under this chapter[,] that authorizes the holder to engage in the business of a wholesaler or dealer of cigarettes [or], tobacco products, electronic smoking devices, or e-liquid in the State. For purposes of any action brought pursuant to section 231-35, the term "license" shall include a retail tobacco and e-liquid permit required under this chapter." 5. By amending the definition of "permittee" to read: ""Permittee" means the holder of a retail tobacco and e‑liquid permit in accordance with this chapter." 6. By amending the definition of "retailer" to read: ""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." 7. By amending the definitions of "retail sale", "tobacco retailing", and "retail tobacco permit", and amending the term "tobacco retailing" to read: ""Retail sale" or "[tobacco] retailing" means the practice of selling cigarettes [or], tobacco products, electronic smoking devices, or e-liquid to consumers and includes the sale of cigarettes [or], tobacco, electronic smoking devices, or e‑liquid through a vending machine. "Retail tobacco and e-liquid permit" means a permit granted under this chapter that authorizes an entity to engage in the business of selling cigarettes [and], tobacco products, and e‑liquid to consumers." 8. By amending the definition of "sale" or "sold" to read: ""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." 9. By amending the definitions of "wholesale price" and "wholesaler" to read: ""Wholesale price", in addition to any other meaning of the term, means in the case of a tax upon the use of tobacco products, e-liquid cartridges, or open system 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, e-liquid cartridges, or open system 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, e-liquid cartridges, or open system 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 6. Section 245-2.5, Hawaii Revised Statutes, is amended to read as follows: "[[]§245-2.5[]] Retail tobacco and e-liquid permit. (a) [Beginning December 1, 2006, every] Every retailer engaged in the retail sale of cigarettes [and other], tobacco products, e‑liquid cartridges, or open system e-liquid upon which a tax is required to be paid under this chapter shall obtain a retail tobacco and e-liquid permit. (b) [Beginning March 1, 2007, it] It shall be unlawful for any retailer engaged in the retail sale of cigarettes [and other], tobacco products, e-liquid cartridges, or open system 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, e-liquid cartridges, or open system e-liquid for retail sale unless a retail tobacco and e-liquid permit has been issued to the retailer under this section and the retail tobacco and e-liquid permit is in full force and effect. (c) The retail tobacco and e-liquid 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 and e-liquid permit is defaced, destroyed, or lost, or the permittee relocates the permittee's business, the department may issue a duplicate retail tobacco and e-liquid permit to the permittee for a fee of $5 per copy. (d) A separate retail tobacco and e-liquid permit shall be obtained for each place of business owned, controlled, or operated by a retailer. A retailer that owns or controls more than one place of business may submit a single application for more than one retail tobacco and e-liquid permit. Each retail tobacco and e-liquid permit issued shall clearly describe the place of business where the operation of the business is conducted. (e) Any entity that operates as a dealer or wholesaler and also sells cigarettes [or other], tobacco products, e-liquid cartridges, or open system e-liquid to consumers at retail shall acquire a separate retail tobacco and e-liquid permit. (f) A retail tobacco and e-liquid permit shall be nonassignable and nontransferable from one entity to another entity. A retail tobacco and e-liquid permit may be transferred from one business location to another business location after an application has been filed with the department requesting that transfer and approval has been obtained from the department. (g) A retail tobacco and e-liquid permit issued under this section shall be displayed at all times in a conspicuous place at the place of business requiring the retail tobacco and e‑liquid permit. (h) Any sales of cigarettes [or], tobacco products, e‑liquid cartridges, or open system e-liquid made through a cigarette [or], tobacco product, electronic smoking device, e‑liquid cartridge, or open system e-liquid vending machine are subject to the terms, conditions, and penalties of this chapter. A retail tobacco and e-liquid permit need not be displayed on cigarette [or], tobacco product, electronic smoking device, e‑liquid cartridge, or open system e-liquid vending machines if the retail tobacco and e-liquid permit holder is the owner of the cigarette [or], tobacco product, electronic smoking device, e-liquid cartridge, or open system e-liquid vending machines and the [cigarette or tobacco product] vending machines are operated at the location described in the retail tobacco and e-liquid permit. (i) No retailer shall purchase any pack of cigarettes without the appropriate tax stamp being affixed to the bottom of the pack as required by this chapter. (j) A vehicle from which cigarettes [or], tobacco products, e-liquid cartridges, or units of open system e-liquid are sold is considered a place of business and requires a retail tobacco and e-liquid permit. Retail tobacco and e-liquid 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 and e-liquid permits for vehicles shall not be moved from one vehicle to another. (k) A permittee shall be subject to the inspection and investigation requirements of this chapter and shall provide the department or the attorney general with any information deemed necessary to verify compliance with the requirements of this chapter. (l) A permittee shall keep a complete and accurate record of the permittee's cigarette [or], tobacco product, e-liquid cartridge, or open system 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[;], e-liquid cartridges, and open system e-liquid; (B) The date of delivery, quantity, trade name or brand, and price of the cigarettes [and], tobacco products[;], e-liquid cartridges, and open system 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, e-liquid cartridges, and open system 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. (m) The department may suspend or, after hearing, revoke or decline to renew any retail tobacco and e-liquid permit issued under this chapter whenever the department finds that the applicant or permittee has failed to comply with this chapter or any rule adopted under this chapter, or for any other good cause. Good cause includes [but is not limited to] to instances where an applicant or permittee has: (1) Submitted a false or fraudulent application or provided a false statement in an application; or (2) Possessed or displayed a false or fraudulent retail tobacco and e-liquid permit. Upon suspending or revoking any retail tobacco and e-liquid permit, the department shall request that the permittee immediately surrender any retail tobacco and e-liquid permit or duplicate issued to the permittee, and the permittee shall surrender the permit or duplicate promptly to the department as requested. (n) Whenever the department suspends, revokes, or declines to renew a retail tobacco and e-liquid permit, the department shall notify the applicant or permittee immediately and afford the applicant or permittee a hearing, if requested and if a hearing has not already been afforded. After the hearing, the department shall: (1) Rescind its order of suspension; (2) Continue the suspension; (3) Revoke the retail tobacco and e-liquid permit; (4) Rescind its order of revocation; (5) Decline to renew the retail tobacco and e-liquid permit; or (6) Renew the retail tobacco and e-liquid permit. (o) Any cigarette, package of cigarettes, carton of cigarettes, container of cigarettes, tobacco product, package of tobacco products, [or any] container of tobacco products, e‑liquid cartridges, package of e-liquid cartridges, or unit of open system 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 7. Section 245-2.6, Hawaii Revised Statutes, is amended to read as follows: "[[]§245‑2.6[]] Unlawful tobacco or e-liquid retailing in the first degree. (a) [Beginning March 1, 2007, a] A person or entity required to obtain a retail tobacco and e-liquid permit commits the offense of unlawful tobacco or e-liquid retailing in the first degree if the person or entity knowingly fails to obtain a valid permit required under section 245-2.5 and, for the purposes of retail sale, recklessly sells, possesses, stores, acquires, distributes, or transports five thousand or more cigarettes. (b) Unlawful tobacco or e-liquid retailing in the first degree is a misdemeanor, except that any offense under [subsection (a)] this section that occurs within five years of a prior conviction for [unlawful tobacco retailing in the first degree] an offense under this section is a class C felony." SECTION 8. Section 245-2.7, Hawaii Revised Statutes, is amended to read as follows: "[[]§245‑2.7[]] Unlawful tobacco or e-liquid retailing in the second degree. (a) [Beginning March 1, 2007, a] A person or entity required to obtain a retail tobacco and e-liquid permit commits the offense of unlawful tobacco or e-liquid retailing in the second degree if the person or entity recklessly fails to obtain a valid permit required under section 245-2.5 and, for the purposes of retail sale, recklessly sells, possesses, stores, acquires, distributes, or transports [fewer]: (1) Fewer than five thousand cigarettes; or [any] (2) Any quantity of tobacco products[.], e-liquid cartridges, or open system e-liquid. (b) Unlawful tobacco or e-liquid retailing in the second degree is [[]a[]] petty misdemeanor, except that any offense under [subsection (a)] this section that occurs within five years of a prior conviction for [unlawful tobacco retailing in the first or second degree] an offense under this section or section 245-2.6 is a misdemeanor." SECTION 9. Section 245-3, Hawaii Revised Statutes, is amended to read as follows: "§245-3 Taxes. (a) Every wholesaler or dealer, in addition to any other taxes provided by law, shall pay for the privilege of conducting business and other activities in the State: (1) An excise tax equal to 5.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, 1998, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (2) An excise tax equal to 6.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after September 30, 2002, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (3) An excise tax equal to 6.50 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, 2003, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (4) An excise tax equal to 7.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, 2004, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (5) An excise tax equal to 8.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after September 30, 2006, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (6) An excise tax equal to 9.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after September 30, 2007, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (7) An excise tax equal to 10.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after September 30, 2008, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (8) An excise tax equal to 13.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after July 1, 2009, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (9) An excise tax equal to 11.00 cents for each little cigar sold, used, or possessed by a wholesaler or dealer on and after October 1, 2009, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (10) An excise tax equal to 15.00 cents for each cigarette or little cigar sold, used, or possessed by a wholesaler or dealer on and after July 1, 2010, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (11) An excise tax equal to 16.00 cents for each cigarette or little cigar sold, used, or possessed by a wholesaler or dealer on and after July 1, 2011, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; (12) An excise tax equal to seventy per cent of the wholesale price of each article or item of tobacco products, other than large cigars, sold by the wholesaler or dealer on and after September 30, 2009, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; [and] (13) An excise tax equal to fifty per cent of the wholesale price of each large cigar of any length, sold, used, or possessed by a wholesaler or dealer on and after September 30, 2009, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer[.]; (14) An excise tax equal to 25 cents for each e-liquid cartridge sold, used, or possessed by a wholesaler or dealer on and after July 1, 2023, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; and (15) An excise tax equal to fifteen per cent of the wholesale price of open system e-liquid sold, used, or possessed by a wholesaler or dealer on and after July 1, 2023, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer. Where the tax imposed has been paid on cigarettes, little cigars, [or] tobacco products, e-liquid cartridges, or units of open system e-liquid that thereafter become the subject of a casualty loss deduction allowable under chapter 235, the tax paid shall be refunded or credited to the account of the wholesaler or dealer. The tax shall be applied to cigarettes through the use of stamps. (b) The taxes, however, are subject to the following limitations: (1) The measure of the taxes shall not include any cigarettes [or], tobacco products, e-liquid cartridges, or units of open system e-liquid exempted, and so long as the same are exempted, from the imposition of taxes by the Constitution or laws of the United States; (2) The measure of taxes shall exempt and exclude all sales of cigarettes [and], tobacco products, e-liquid cartridges, and units of open system e-liquid to the United States (including any agency or instrumentality thereof that is wholly owned or otherwise so constituted as to be immune from the levy of a tax under this chapter), sold by any person licensed under this chapter; and (3) The taxes shall be paid only once with respect to the same cigarettes [or], tobacco product[.], e-liquid cartridge, or unit of open system e-liquid. This limitation shall not prohibit the imposition of the excise tax on receipts from sales of tobacco products under subsection (a)(5); provided that the amount subject to the tax on each sale shall not include amounts previously taxed under this chapter." SECTION 10. Section 245-5, Hawaii Revised Statutes, is amended to read as follows: "§245-5 Returns. Every wholesaler or dealer, on or before the twentieth day of each month, shall file with the department a return showing the cigarettes [and], tobacco products, e‑liquid cartridges, and open system e-liquid sold, possessed, or used by the wholesaler or dealer during the preceding calendar month and of the taxes chargeable against the taxpayer in accordance with this chapter. The form of the return shall be prescribed by the department and shall include: (1) A separate statement of the number and wholesale price of cigarettes; (2) The amount of stamps purchased and used; (3) The wholesale price of tobacco products, sold, possessed, or used; [and] (4) The number of e-liquid cartridges sold, possessed, or used; (5) The wholesale price of open system e-liquid sold, possessed, or used; and [(4)] (6) Any other information that the department may deem necessary, for the proper administration of this chapter." SECTION 11. Section 245-8, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows: "(a) Each wholesaler or dealer shall keep a record of: (1) Every sale or use of cigarettes [and], tobacco products, e-liquid cartridges, and units of open system e-liquid by the wholesaler or dealer; (2) The number and wholesale price of cigarettes; (3) The wholesale price of tobacco products[,] sold, possessed, or used; (4) The taxes payable on tobacco products sold, possessed, or used, if any; [and] (5) The number of e-liquid cartridges sold, possessed, or used, if any; (6) The taxes payable on e-liquid cartridges sold, possessed, or used, if any; (7) The wholesale price of open system e-liquid sold, possessed, or used, if any; (8) The taxes payable on open system e-liquid sold, possessed, or used, if any; and [(5)] (9) The amounts of stamps purchased and used, in a form as the department may prescribe. The records shall be offered for inspection and examination at any time upon demand by the department or the attorney general, and shall be preserved for a period of five years, except that the department and the attorney general, in writing, shall both consent to their destruction within the five-year period or either the department or the attorney general may require that they be kept longer. The department, by rule, may require the wholesaler or dealer to keep other records as it may deem necessary for the proper enforcement of this chapter." SECTION 12. Section 245-9, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows: "(a) The department and the attorney general may examine all records, including tax returns and reports under section 245-31, required to be kept or filed under this chapter, and books, papers, and records of any person engaged in the business of wholesaling or dealing cigarettes [and], tobacco products, e‑liquid cartridges, and open system e-liquid, to verify the accuracy of the payment of the taxes imposed by this chapter. Every person in possession of any books, papers, and records, and the person's agents and employees, are directed and required to give the department and the attorney general the means, facilities, and opportunities for the examinations. (b) The department and the attorney general may inspect the operations, premises, and storage areas of any entity engaged in the sale of cigarettes, or the contents of a specific vending machine, during regular business hours. This inspection shall include inspection of all statements, books, papers, and records in whatever format, including electronic format, pertaining to the acquisition, possession, transportation, sale, or use of packages of cigarettes [and], tobacco products other than cigarettes, e-liquid cartridges, and open system e-liquid, to verify the accuracy of the payment of taxes imposed by this chapter, and of the contents of cartons and shipping or storage containers to ascertain that all individual packages of cigarettes have an affixed stamp of proper denomination as required by this chapter. This inspection may also verify that all stamps were produced under the authority of the department. Every entity in possession of any books, papers, and records, and the entity's agents and employees, are directed and required to give the department and the attorney general the means, facilities, and opportunities for the examinations. For purposes of this chapter "entity" means one or more individuals, a company, corporation, a partnership, an association, or any other type of legal entity." SECTION 13. Section 245-17, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows: "(f) For the purposes of this section[: "Delivery], "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 14. Section 245-31, Hawaii Revised Statutes, is amended as follows: 1. By amending its title to read: "§245-31 Monthly report on distributions of cigarettes [and], tobacco products, e-liquid cartridges, and open system e-liquid, and purchases of stamps." 2. By amending subsection (b) to read: "(b) On or before the twentieth day of each month, every licensee shall file on forms prescribed by the department: (1) A report of the licensee's distributions of tobacco products and the wholesale costs of tobacco products during the preceding month; [and] (2) A report of the licensee's distributions of e-liquid cartridges and units of open system e-liquid, and the wholesale costs of e-liquid cartridges and units of open system e-liquid during the preceding month; and [(2)] (3) Any other information that the department may require to carry out this part." SECTION 15. Section 245-32, Hawaii Revised Statutes, is amended to read as follows: "[[]§245-32[]] Tax refund or credit for cigarettes [and], tobacco products, e-liquid cartridges, and open system e-liquid shipped for sale or use outside the State. (a) The department shall adopt rules to provide a [tobacco] tax refund or credit to a licensee [who] on the tax the licensee has paid [a tobacco tax] pursuant to section 245-3 on the distribution of cigarettes [or], tobacco products, e-liquid cartridges, or units of open system e-liquid that are shipped to a point outside the State for subsequent sale or use outside the State. (b) This part shall not apply to cigarettes [or], tobacco products, e-liquid cartridges, or units of open system e-liquid that are distributed in this State to consumers and that are subsequently taken outside the State." SECTION 16. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date. SECTION 17. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. SECTION 18. This Act shall take effect on July 1, 2023. INTRODUCED BY: _____________________________ |
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| 48 | 48 | | |
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| 49 | 49 | | SECTION 1. Section 237-24, Hawaii Revised Statutes, is amended to read as follows: |
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| 50 | 50 | | |
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| 51 | 51 | | "§237-24 Amounts not taxable. This chapter shall not apply to the following amounts: |
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| 52 | 52 | | |
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| 53 | 53 | | (1) Amounts received under life insurance policies and contracts paid by reason of the death of the insured; |
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| 54 | 54 | | |
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| 55 | 55 | | (2) Amounts received (other than amounts paid by reason of death of the insured) under life insurance, endowment, or annuity contracts, either during the term or at maturity or upon surrender of the contract; |
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| 56 | 56 | | |
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| 57 | 57 | | (3) Amounts received under any accident insurance or health insurance policy or contract or under workers' compensation acts or employers' liability acts, as compensation for personal injuries, death, or sickness, including also the amount of any damages or other compensation received, whether as a result of action or by private agreement between the parties on account of the personal injuries, death, or sickness; |
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| 58 | 58 | | |
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| 59 | 59 | | (4) The value of all property of every kind and sort acquired by gift, bequest, or devise, and the value of all property acquired by descent or inheritance; |
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| 60 | 60 | | |
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| 61 | 61 | | (5) Amounts received by any person as compensatory damages for any tort injury to the person, or to the person's character reputation, or received as compensatory damages for any tort injury to or destruction of property, whether as the result of action or by private agreement between the parties (provided that amounts received as punitive damages for tort injury or breach of contract injury shall be included in gross income); |
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| 62 | 62 | | |
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| 63 | 63 | | (6) Amounts received as salaries or wages for services rendered by an employee to an employer; |
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| 64 | 64 | | |
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| 65 | 65 | | (7) Amounts received as alimony and other similar payments and settlements; |
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| 66 | 66 | | |
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| 67 | 67 | | (8) Amounts collected by distributors as fuel taxes on "liquid fuel" imposed by chapter 243, and the amounts collected by such distributors as a fuel tax imposed by any Act of the Congress of the United States; |
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| 68 | 68 | | |
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| 69 | 69 | | (9) Taxes on liquor imposed by chapter 244D on dealers holding permits under that chapter; |
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| 70 | 70 | | |
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| 71 | 71 | | (10) The amounts of taxes on cigarettes [and], tobacco products, e-liquid cartridges, and open system e‑liquid imposed by chapter 245 on wholesalers or dealers holding licenses under that chapter and selling the products at wholesale; |
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| 72 | 72 | | |
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| 73 | 73 | | (11) Federal excise taxes imposed on articles sold at retail and collected from the purchasers thereof and paid to the federal government by the retailer; |
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| 74 | 74 | | |
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| 75 | 75 | | (12) The amounts of federal taxes under chapter 37 of the Internal Revenue Code, or similar federal taxes, imposed on sugar manufactured in the State, paid by the manufacturer to the federal government; |
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| 76 | 76 | | |
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| 77 | 77 | | (13) An amount up to, but not in excess of, $2,000 a year of gross income received by any blind, deaf, or totally disabled person engaging, or continuing, in any business, trade, activity, occupation, or calling within the State; a corporation all of whose outstanding shares are owned by an individual or individuals who are blind, deaf, or totally disabled; a general, limited, or limited liability partnership, all of whose partners are blind, deaf, or totally disabled; or a limited liability company, all of whose members are blind, deaf, or totally disabled; |
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| 78 | 78 | | |
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| 79 | 79 | | (14) Amounts received by a producer of sugarcane from the manufacturer to whom the producer sells the sugarcane, where: |
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| 80 | 80 | | |
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| 81 | 81 | | (A) The producer is an independent cane farmer, so classed by the Secretary of Agriculture under the Sugar Act of 1948 (61 Stat. 922, chapter 519) as the Act may be amended or supplemented; |
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| 82 | 82 | | |
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| 83 | 83 | | (B) The value or gross proceeds of sale of the sugar, and other products manufactured from the sugarcane, is included in the measure of the tax levied on the manufacturer under section 237‑13(1) or (2); |
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| 84 | 84 | | |
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| 85 | 85 | | (C) The producer's gross proceeds of sales are dependent upon the actual value of the products manufactured therefrom or the average value of all similar products manufactured by the manufacturer; and |
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| 86 | 86 | | |
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| 87 | 87 | | (D) The producer's gross proceeds of sales are reduced by reason of the tax on the value or sale of the manufactured products; |
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| 88 | 88 | | |
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| 89 | 89 | | (15) Money paid by the State or eleemosynary child-placing organizations to foster parents for their care of children in foster homes; |
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| 90 | 90 | | |
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| 91 | 91 | | (16) Amounts received by a cooperative housing corporation from its shareholders in reimbursement of funds paid by such corporation for lease rental, real property taxes, and other expenses of operating and maintaining the cooperative land and improvements; provided that such a cooperative corporation is a corporation: |
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| 92 | 92 | | |
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| 93 | 93 | | (A) Having one and only one class of stock outstanding; |
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| 94 | 94 | | |
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| 95 | 95 | | (B) Each of the stockholders of which is entitled solely by reason of the stockholder's ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building owned or leased by the corporation; and |
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| 96 | 96 | | |
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| 97 | 97 | | (C) No stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earnings and profits of the corporation except in a complete or partial liquidation of the corporation; and |
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| 98 | 98 | | |
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| 99 | 99 | | (17) Amounts received by a contractor of the Patient-Centered Community Care program that is established by the United States Department of Veterans Affairs pursuant to title 38 United States Code section 8153, as amended, for the actual costs or advancements to third party health care providers pursuant to a contract with the United States." |
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| 100 | 100 | | |
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| 101 | 101 | | SECTION 2. Section 237-25, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows: |
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| 102 | 102 | | |
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| 103 | 103 | | "(a) Any provision of law to the contrary notwithstanding, there shall be exempted from, and excluded from the measures of, the tax imposed by chapter 237 all sales, and the gross proceeds of all sales, of: |
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| 104 | 104 | | |
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| 105 | 105 | | (1) Intoxicating liquor, as defined in chapter 281, hereafter sold by any person licensed under chapter 281 to the United States (including any agency or instrumentality of the United States that is wholly owned or otherwise so constituted as to be immune from the levy of a tax under chapter 238 or 244D but not including national banks), or to any organization to which that sale is permitted by the proviso of "Class 3" of section 281-31, located on any Army, Navy, or Air Force reservation, but the person making the sale shall nevertheless, within the meaning of chapters 237, 244D, and 281 be deemed to be a licensed seller; |
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| 106 | 106 | | |
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| 107 | 107 | | (2) Tobacco products [and], cigarettes, e-liquid cartridges, and open system e-liquid, as defined in chapter 245, sold by any person licensed under the chapter to the United States (including any agency or instrumentality thereof that is wholly owned or otherwise so constituted as to be immune from the levy of a tax under chapter 238 or 245 but not including national banks), but the person making the sale shall nevertheless, within the meaning of chapters 237 and 245, be deemed to be a licensed seller; |
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| 108 | 108 | | |
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| 109 | 109 | | (3) Other tangible personal property sold by any person licensed under this chapter to the United States (including any agency, instrumentality, or federal credit union thereof but not including national banks), and to any state-chartered credit union, but the person making such sale shall nevertheless, within the meaning of this chapter, be deemed a licensed seller; and |
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| 110 | 110 | | |
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| 111 | 111 | | (4) When the amount of property sold by a licensee turns upon the amount of the property sold through a vending machine or similar device to the customer using the device, there shall not be deemed to have occurred any sale covered by an exemption under paragraph (1), (2), or (3)." |
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| 112 | 112 | | |
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| 113 | 113 | | SECTION 3. Section 238-3, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows: |
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| 114 | 114 | | |
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| 115 | 115 | | "(g) The tax imposed by this chapter shall not apply to any intoxicating liquor as defined in chapter 244D and cigarettes [and], tobacco products, e-liquid cartridges, and open system e-liquid as defined in chapter 245, imported into the State and sold to any person or common carrier in interstate commerce, whether ocean-going or air, for consumption out-of-state by the person, crew, or passengers on the shipper's vessels or airplanes." |
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| 116 | 116 | | |
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| 117 | 117 | | SECTION 4. Chapter 245, Hawaii Revised Statutes, is amended by amending its title to read as follows: |
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| 118 | 118 | | |
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| 119 | 119 | | "CHAPTER 245 |
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| 120 | 120 | | |
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| 121 | 121 | | CIGARETTE TAX [AND], TOBACCO TAX, AND |
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| 122 | 122 | | |
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| 123 | 123 | | E-LIQUID TAX LAW" |
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| 124 | 124 | | |
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| 125 | 125 | | SECTION 5. Section 245-1, Hawaii Revised Statutes, is amended as follows: |
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| 126 | 126 | | |
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| 127 | 127 | | 1. By adding five new definitions to be appropriately inserted and to read: |
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| 128 | 128 | | |
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| 129 | 129 | | ""E-liquid" means any solution containing nicotine that is designed or sold for use with an electronic smoking device. |
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| 130 | 130 | | |
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| 131 | 131 | | "E-liquid cartridge" means any prefilled and sealed disposable container of e-liquid that can be used with an electronic smoking device. |
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| 132 | 132 | | |
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| 133 | 133 | | "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 an electronic cigarette, electronic cigar, electronic cigarillo, or electronic pipe, and any cartridge or other component of the device or related product. |
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| 134 | 134 | | |
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| 135 | 135 | | "Open system e-liquid" means e-liquid that is not sold in a cartridge. |
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| 136 | 136 | | |
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| 137 | 137 | | "Unit of open system e-liquid" means any measurable amount of open system e-liquid." |
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| 138 | 138 | | |
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| 139 | 139 | | 2. By amending the definition of "business location" or "place of business" to read: |
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| 140 | 140 | | |
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| 141 | 141 | | ""Business location" or "place of business" means the entire premises occupied by a retail tobacco and e-liquid permit applicant or an entity required to hold a retail tobacco and e‑liquid permit under this chapter and shall include but is not limited to any store, stand, outlet, vehicle, cart, location, vending machine, or structure from which cigarettes [or], tobacco products, electronic smoking devices, e-liquid cartridges, or units of open system of e-liquid are sold or distributed to a consumer." |
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| 142 | 142 | | |
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| 143 | 143 | | 3. By amending the definitions of "consumer" and "dealer" to read: |
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| 144 | 144 | | |
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| 145 | 145 | | ""Consumer" means a person who acquires or possesses a cigarette [or], a tobacco product, an electronic smoking device, or e-liquid for personal consumption and not for resale or distribution. |
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| 146 | 146 | | |
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| 147 | 147 | | "Dealer" means any person coming into the possession of cigarettes [or], tobacco products [which], electronic smoking devices, e-liquid cartridges, or units of open system e-liquid that 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, e-liquid cartridges, or units of open system e-liquid that have not been acquired from a licensee and who distributes or uses [such] cigarettes [or], tobacco products[.], electronic smoking devices, e-liquid cartridges, or units of open system e-liquid." |
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| 148 | 148 | | |
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| 149 | 149 | | 4. By amending the definition of "license" to read: |
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| 150 | 150 | | |
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| 151 | 151 | | ""License" means a license granted under this chapter[,] that authorizes the holder to engage in the business of a wholesaler or dealer of cigarettes [or], tobacco products, electronic smoking devices, or e-liquid in the State. For purposes of any action brought pursuant to section 231-35, the term "license" shall include a retail tobacco and e-liquid permit required under this chapter." |
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| 152 | 152 | | |
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| 153 | 153 | | 5. By amending the definition of "permittee" to read: |
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| 154 | 154 | | |
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| 155 | 155 | | ""Permittee" means the holder of a retail tobacco and e‑liquid permit in accordance with this chapter." |
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| 156 | 156 | | |
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| 157 | 157 | | 6. By amending the definition of "retailer" to read: |
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| 158 | 158 | | |
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| 159 | 159 | | ""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." |
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| 160 | 160 | | |
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| 161 | 161 | | 7. By amending the definitions of "retail sale", "tobacco retailing", and "retail tobacco permit", and amending the term "tobacco retailing" to read: |
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| 162 | 162 | | |
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| 163 | 163 | | ""Retail sale" or "[tobacco] retailing" means the practice of selling cigarettes [or], tobacco products, electronic smoking devices, or e-liquid to consumers and includes the sale of cigarettes [or], tobacco, electronic smoking devices, or e‑liquid through a vending machine. |
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| 164 | 164 | | |
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| 165 | 165 | | "Retail tobacco and e-liquid permit" means a permit granted under this chapter that authorizes an entity to engage in the business of selling cigarettes [and], tobacco products, and e‑liquid to consumers." |
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| 166 | 166 | | |
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| 167 | 167 | | 8. By amending the definition of "sale" or "sold" to read: |
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| 168 | 168 | | |
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| 169 | 169 | | ""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." |
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| 170 | 170 | | |
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| 171 | 171 | | 9. By amending the definitions of "wholesale price" and "wholesaler" to read: |
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| 172 | 172 | | |
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| 173 | 173 | | ""Wholesale price", in addition to any other meaning of the term, means in the case of a tax upon the use of tobacco products, e-liquid cartridges, or open system e-liquid, or upon a sale not made at wholesale: |
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| 174 | 174 | | |
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| 175 | 175 | | (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, e-liquid cartridges, or open system e-liquid, the average price of the sales[,]; and |
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| 176 | 176 | | |
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| 177 | 177 | | (2) If made by any other person, the average price of sales to retailers of like tobacco products, e-liquid cartridges, or open system e-liquid made by other taxpayers in the same county during the month preceding the accrual of the tax. |
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| 178 | 178 | | |
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| 179 | 179 | | "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." |
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| 180 | 180 | | |
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| 181 | 181 | | SECTION 6. Section 245-2.5, Hawaii Revised Statutes, is amended to read as follows: |
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| 182 | 182 | | |
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| 183 | 183 | | "[[]§245-2.5[]] Retail tobacco and e-liquid permit. (a) [Beginning December 1, 2006, every] Every retailer engaged in the retail sale of cigarettes [and other], tobacco products, e‑liquid cartridges, or open system e-liquid upon which a tax is required to be paid under this chapter shall obtain a retail tobacco and e-liquid permit. |
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| 184 | 184 | | |
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| 185 | 185 | | (b) [Beginning March 1, 2007, it] It shall be unlawful for any retailer engaged in the retail sale of cigarettes [and other], tobacco products, e-liquid cartridges, or open system 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, e-liquid cartridges, or open system e-liquid for retail sale unless a retail tobacco and e-liquid permit has been issued to the retailer under this section and the retail tobacco and e-liquid permit is in full force and effect. |
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| 186 | 186 | | |
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| 187 | 187 | | (c) The retail tobacco and e-liquid 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 and e-liquid permit is defaced, destroyed, or lost, or the permittee relocates the permittee's business, the department may issue a duplicate retail tobacco and e-liquid permit to the permittee for a fee of $5 per copy. |
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| 188 | 188 | | |
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| 189 | 189 | | (d) A separate retail tobacco and e-liquid permit shall be obtained for each place of business owned, controlled, or operated by a retailer. A retailer that owns or controls more than one place of business may submit a single application for more than one retail tobacco and e-liquid permit. Each retail tobacco and e-liquid permit issued shall clearly describe the place of business where the operation of the business is conducted. |
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| 190 | 190 | | |
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| 191 | 191 | | (e) Any entity that operates as a dealer or wholesaler and also sells cigarettes [or other], tobacco products, e-liquid cartridges, or open system e-liquid to consumers at retail shall acquire a separate retail tobacco and e-liquid permit. |
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| 192 | 192 | | |
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| 193 | 193 | | (f) A retail tobacco and e-liquid permit shall be nonassignable and nontransferable from one entity to another entity. A retail tobacco and e-liquid permit may be transferred from one business location to another business location after an application has been filed with the department requesting that transfer and approval has been obtained from the department. |
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| 194 | 194 | | |
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| 195 | 195 | | (g) A retail tobacco and e-liquid permit issued under this section shall be displayed at all times in a conspicuous place at the place of business requiring the retail tobacco and e‑liquid permit. |
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| 196 | 196 | | |
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| 197 | 197 | | (h) Any sales of cigarettes [or], tobacco products, e‑liquid cartridges, or open system e-liquid made through a cigarette [or], tobacco product, electronic smoking device, e‑liquid cartridge, or open system e-liquid vending machine are subject to the terms, conditions, and penalties of this chapter. A retail tobacco and e-liquid permit need not be displayed on cigarette [or], tobacco product, electronic smoking device, e‑liquid cartridge, or open system e-liquid vending machines if the retail tobacco and e-liquid permit holder is the owner of the cigarette [or], tobacco product, electronic smoking device, e-liquid cartridge, or open system e-liquid vending machines and the [cigarette or tobacco product] vending machines are operated at the location described in the retail tobacco and e-liquid permit. |
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| 198 | 198 | | |
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| 199 | 199 | | (i) No retailer shall purchase any pack of cigarettes without the appropriate tax stamp being affixed to the bottom of the pack as required by this chapter. |
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| 200 | 200 | | |
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| 201 | 201 | | (j) A vehicle from which cigarettes [or], tobacco products, e-liquid cartridges, or units of open system e-liquid are sold is considered a place of business and requires a retail tobacco and e-liquid permit. Retail tobacco and e-liquid 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 and e-liquid permits for vehicles shall not be moved from one vehicle to another. |
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| 202 | 202 | | |
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| 203 | 203 | | (k) A permittee shall be subject to the inspection and investigation requirements of this chapter and shall provide the department or the attorney general with any information deemed necessary to verify compliance with the requirements of this chapter. |
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| 204 | 204 | | |
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| 205 | 205 | | (l) A permittee shall keep a complete and accurate record of the permittee's cigarette [or], tobacco product, e-liquid cartridge, or open system e-liquid inventory. The records shall: |
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| 206 | 206 | | |
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| 207 | 207 | | (1) Include: |
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| 208 | 208 | | |
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| 209 | 209 | | (A) A written statement containing the name and address of the permittee's source of its cigarettes [and], tobacco products[;], e-liquid cartridges, and open system e-liquid; |
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| 210 | 210 | | |
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| 211 | 211 | | (B) The date of delivery, quantity, trade name or brand, and price of the cigarettes [and], tobacco products[;], e-liquid cartridges, and open system e-liquid; and |
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| 212 | 212 | | |
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| 213 | 213 | | (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, e-liquid cartridges, and open system e-liquid stored or offered for sale; and |
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| 214 | 214 | | |
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| 215 | 215 | | (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: |
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| 216 | 216 | | |
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| 217 | 217 | | (A) Specified records may be destroyed if the department and the attorney general both consent to their destruction within the three-year period; and |
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| 218 | 218 | | |
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| 219 | 219 | | (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. |
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| 220 | 220 | | |
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| 221 | 221 | | (m) The department may suspend or, after hearing, revoke or decline to renew any retail tobacco and e-liquid permit issued under this chapter whenever the department finds that the applicant or permittee has failed to comply with this chapter or any rule adopted under this chapter, or for any other good cause. Good cause includes [but is not limited to] to instances where an applicant or permittee has: |
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| 222 | 222 | | |
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| 223 | 223 | | (1) Submitted a false or fraudulent application or provided a false statement in an application; or |
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| 224 | 224 | | |
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| 225 | 225 | | (2) Possessed or displayed a false or fraudulent retail tobacco and e-liquid permit. |
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| 226 | 226 | | |
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| 227 | 227 | | Upon suspending or revoking any retail tobacco and e-liquid permit, the department shall request that the permittee immediately surrender any retail tobacco and e-liquid permit or duplicate issued to the permittee, and the permittee shall surrender the permit or duplicate promptly to the department as requested. |
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| 228 | 228 | | |
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| 229 | 229 | | (n) Whenever the department suspends, revokes, or declines to renew a retail tobacco and e-liquid permit, the department shall notify the applicant or permittee immediately and afford the applicant or permittee a hearing, if requested and if a hearing has not already been afforded. After the hearing, the department shall: |
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| 230 | 230 | | |
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| 231 | 231 | | (1) Rescind its order of suspension; |
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| 232 | 232 | | |
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| 233 | 233 | | (2) Continue the suspension; |
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| 234 | 234 | | |
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| 235 | 235 | | (3) Revoke the retail tobacco and e-liquid permit; |
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| 236 | 236 | | |
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| 237 | 237 | | (4) Rescind its order of revocation; |
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| 238 | 238 | | |
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| 239 | 239 | | (5) Decline to renew the retail tobacco and e-liquid permit; or |
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| 240 | 240 | | |
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| 241 | 241 | | (6) Renew the retail tobacco and e-liquid permit. |
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| 242 | 242 | | |
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| 243 | 243 | | (o) Any cigarette, package of cigarettes, carton of cigarettes, container of cigarettes, tobacco product, package of tobacco products, [or any] container of tobacco products, e‑liquid cartridges, package of e-liquid cartridges, or unit of open system 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." |
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| 244 | 244 | | |
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| 245 | 245 | | SECTION 7. Section 245-2.6, Hawaii Revised Statutes, is amended to read as follows: |
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| 246 | 246 | | |
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| 247 | 247 | | "[[]§245‑2.6[]] Unlawful tobacco or e-liquid retailing in the first degree. (a) [Beginning March 1, 2007, a] A person or entity required to obtain a retail tobacco and e-liquid permit commits the offense of unlawful tobacco or e-liquid retailing in the first degree if the person or entity knowingly fails to obtain a valid permit required under section 245-2.5 and, for the purposes of retail sale, recklessly sells, possesses, stores, acquires, distributes, or transports five thousand or more cigarettes. |
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| 248 | 248 | | |
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| 249 | 249 | | (b) Unlawful tobacco or e-liquid retailing in the first degree is a misdemeanor, except that any offense under [subsection (a)] this section that occurs within five years of a prior conviction for [unlawful tobacco retailing in the first degree] an offense under this section is a class C felony." |
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| 250 | 250 | | |
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| 251 | 251 | | SECTION 8. Section 245-2.7, Hawaii Revised Statutes, is amended to read as follows: |
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| 252 | 252 | | |
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| 253 | 253 | | "[[]§245‑2.7[]] Unlawful tobacco or e-liquid retailing in the second degree. (a) [Beginning March 1, 2007, a] A person or entity required to obtain a retail tobacco and e-liquid permit commits the offense of unlawful tobacco or e-liquid retailing in the second degree if the person or entity recklessly fails to obtain a valid permit required under section 245-2.5 and, for the purposes of retail sale, recklessly sells, possesses, stores, acquires, distributes, or transports [fewer]: |
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| 254 | 254 | | |
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| 255 | 255 | | (1) Fewer than five thousand cigarettes; or [any] |
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| 256 | 256 | | |
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| 257 | 257 | | (2) Any quantity of tobacco products[.], e-liquid cartridges, or open system e-liquid. |
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| 258 | 258 | | |
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| 259 | 259 | | (b) Unlawful tobacco or e-liquid retailing in the second degree is [[]a[]] petty misdemeanor, except that any offense under [subsection (a)] this section that occurs within five years of a prior conviction for [unlawful tobacco retailing in the first or second degree] an offense under this section or section 245-2.6 is a misdemeanor." |
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| 260 | 260 | | |
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| 261 | 261 | | SECTION 9. Section 245-3, Hawaii Revised Statutes, is amended to read as follows: |
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| 262 | 262 | | |
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| 263 | 263 | | "§245-3 Taxes. (a) Every wholesaler or dealer, in addition to any other taxes provided by law, shall pay for the privilege of conducting business and other activities in the State: |
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| 264 | 264 | | |
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| 265 | 265 | | (1) An excise tax equal to 5.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, 1998, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 266 | 266 | | |
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| 267 | 267 | | (2) An excise tax equal to 6.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after September 30, 2002, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 268 | 268 | | |
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| 269 | 269 | | (3) An excise tax equal to 6.50 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, 2003, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 270 | 270 | | |
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| 271 | 271 | | (4) An excise tax equal to 7.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, 2004, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 272 | 272 | | |
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| 273 | 273 | | (5) An excise tax equal to 8.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after September 30, 2006, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 274 | 274 | | |
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| 275 | 275 | | (6) An excise tax equal to 9.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after September 30, 2007, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 276 | 276 | | |
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| 277 | 277 | | (7) An excise tax equal to 10.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after September 30, 2008, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 278 | 278 | | |
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| 279 | 279 | | (8) An excise tax equal to 13.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after July 1, 2009, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 280 | 280 | | |
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| 281 | 281 | | (9) An excise tax equal to 11.00 cents for each little cigar sold, used, or possessed by a wholesaler or dealer on and after October 1, 2009, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 282 | 282 | | |
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| 283 | 283 | | (10) An excise tax equal to 15.00 cents for each cigarette or little cigar sold, used, or possessed by a wholesaler or dealer on and after July 1, 2010, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 284 | 284 | | |
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| 285 | 285 | | (11) An excise tax equal to 16.00 cents for each cigarette or little cigar sold, used, or possessed by a wholesaler or dealer on and after July 1, 2011, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; |
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| 286 | 286 | | |
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| 287 | 287 | | (12) An excise tax equal to seventy per cent of the wholesale price of each article or item of tobacco products, other than large cigars, sold by the wholesaler or dealer on and after September 30, 2009, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; [and] |
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| 288 | 288 | | |
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| 289 | 289 | | (13) An excise tax equal to fifty per cent of the wholesale price of each large cigar of any length, sold, used, or possessed by a wholesaler or dealer on and after September 30, 2009, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer[.]; |
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| 290 | 290 | | |
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| 291 | 291 | | (14) An excise tax equal to 25 cents for each e-liquid cartridge sold, used, or possessed by a wholesaler or dealer on and after July 1, 2023, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; and |
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| 292 | 292 | | |
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| 293 | 293 | | (15) An excise tax equal to fifteen per cent of the wholesale price of open system e-liquid sold, used, or possessed by a wholesaler or dealer on and after July 1, 2023, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer. |
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| 294 | 294 | | |
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| 295 | 295 | | Where the tax imposed has been paid on cigarettes, little cigars, [or] tobacco products, e-liquid cartridges, or units of open system e-liquid that thereafter become the subject of a casualty loss deduction allowable under chapter 235, the tax paid shall be refunded or credited to the account of the wholesaler or dealer. The tax shall be applied to cigarettes through the use of stamps. |
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| 296 | 296 | | |
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| 297 | 297 | | (b) The taxes, however, are subject to the following limitations: |
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| 298 | 298 | | |
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| 299 | 299 | | (1) The measure of the taxes shall not include any cigarettes [or], tobacco products, e-liquid cartridges, or units of open system e-liquid exempted, and so long as the same are exempted, from the imposition of taxes by the Constitution or laws of the United States; |
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| 300 | 300 | | |
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| 301 | 301 | | (2) The measure of taxes shall exempt and exclude all sales of cigarettes [and], tobacco products, e-liquid cartridges, and units of open system e-liquid to the United States (including any agency or instrumentality thereof that is wholly owned or otherwise so constituted as to be immune from the levy of a tax under this chapter), sold by any person licensed under this chapter; and |
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| 302 | 302 | | |
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| 303 | 303 | | (3) The taxes shall be paid only once with respect to the same cigarettes [or], tobacco product[.], e-liquid cartridge, or unit of open system e-liquid. This limitation shall not prohibit the imposition of the excise tax on receipts from sales of tobacco products under subsection (a)(5); provided that the amount subject to the tax on each sale shall not include amounts previously taxed under this chapter." |
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| 304 | 304 | | |
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| 305 | 305 | | SECTION 10. Section 245-5, Hawaii Revised Statutes, is amended to read as follows: |
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| 306 | 306 | | |
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| 307 | 307 | | "§245-5 Returns. Every wholesaler or dealer, on or before the twentieth day of each month, shall file with the department a return showing the cigarettes [and], tobacco products, e‑liquid cartridges, and open system e-liquid sold, possessed, or used by the wholesaler or dealer during the preceding calendar month and of the taxes chargeable against the taxpayer in accordance with this chapter. The form of the return shall be prescribed by the department and shall include: |
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| 308 | 308 | | |
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| 309 | 309 | | (1) A separate statement of the number and wholesale price of cigarettes; |
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| 310 | 310 | | |
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| 311 | 311 | | (2) The amount of stamps purchased and used; |
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| 312 | 312 | | |
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| 313 | 313 | | (3) The wholesale price of tobacco products, sold, possessed, or used; [and] |
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| 314 | 314 | | |
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| 315 | 315 | | (4) The number of e-liquid cartridges sold, possessed, or used; |
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| 316 | 316 | | |
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| 317 | 317 | | (5) The wholesale price of open system e-liquid sold, possessed, or used; and |
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| 318 | 318 | | |
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| 319 | 319 | | [(4)] (6) Any other information that the department may deem necessary, for the proper administration of this chapter." |
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| 320 | 320 | | |
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| 321 | 321 | | SECTION 11. Section 245-8, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows: |
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| 322 | 322 | | |
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| 323 | 323 | | "(a) Each wholesaler or dealer shall keep a record of: |
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| 324 | 324 | | |
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| 325 | 325 | | (1) Every sale or use of cigarettes [and], tobacco products, e-liquid cartridges, and units of open system e-liquid by the wholesaler or dealer; |
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| 326 | 326 | | |
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| 327 | 327 | | (2) The number and wholesale price of cigarettes; |
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| 328 | 328 | | |
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| 329 | 329 | | (3) The wholesale price of tobacco products[,] sold, possessed, or used; |
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| 330 | 330 | | |
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| 331 | 331 | | (4) The taxes payable on tobacco products sold, possessed, or used, if any; [and] |
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| 332 | 332 | | |
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| 333 | 333 | | (5) The number of e-liquid cartridges sold, possessed, or used, if any; |
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| 334 | 334 | | |
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| 335 | 335 | | (6) The taxes payable on e-liquid cartridges sold, possessed, or used, if any; |
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| 336 | 336 | | |
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| 337 | 337 | | (7) The wholesale price of open system e-liquid sold, possessed, or used, if any; |
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| 338 | 338 | | |
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| 339 | 339 | | (8) The taxes payable on open system e-liquid sold, possessed, or used, if any; and |
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| 340 | 340 | | |
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| 341 | 341 | | [(5)] (9) The amounts of stamps purchased and used, |
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| 342 | 342 | | |
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| 343 | 343 | | in a form as the department may prescribe. The records shall be offered for inspection and examination at any time upon demand by the department or the attorney general, and shall be preserved for a period of five years, except that the department and the attorney general, in writing, shall both consent to their destruction within the five-year period or either the department or the attorney general may require that they be kept longer. The department, by rule, may require the wholesaler or dealer to keep other records as it may deem necessary for the proper enforcement of this chapter." |
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| 344 | 344 | | |
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| 345 | 345 | | SECTION 12. Section 245-9, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows: |
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| 346 | 346 | | |
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| 347 | 347 | | "(a) The department and the attorney general may examine all records, including tax returns and reports under section 245-31, required to be kept or filed under this chapter, and books, papers, and records of any person engaged in the business of wholesaling or dealing cigarettes [and], tobacco products, e‑liquid cartridges, and open system e-liquid, to verify the accuracy of the payment of the taxes imposed by this chapter. Every person in possession of any books, papers, and records, and the person's agents and employees, are directed and required to give the department and the attorney general the means, facilities, and opportunities for the examinations. |
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| 348 | 348 | | |
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| 349 | 349 | | (b) The department and the attorney general may inspect the operations, premises, and storage areas of any entity engaged in the sale of cigarettes, or the contents of a specific vending machine, during regular business hours. This inspection shall include inspection of all statements, books, papers, and records in whatever format, including electronic format, pertaining to the acquisition, possession, transportation, sale, or use of packages of cigarettes [and], tobacco products other than cigarettes, e-liquid cartridges, and open system e-liquid, to verify the accuracy of the payment of taxes imposed by this chapter, and of the contents of cartons and shipping or storage containers to ascertain that all individual packages of cigarettes have an affixed stamp of proper denomination as required by this chapter. This inspection may also verify that all stamps were produced under the authority of the department. Every entity in possession of any books, papers, and records, and the entity's agents and employees, are directed and required to give the department and the attorney general the means, facilities, and opportunities for the examinations. For purposes of this chapter "entity" means one or more individuals, a company, corporation, a partnership, an association, or any other type of legal entity." |
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| 350 | 350 | | |
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| 351 | 351 | | SECTION 13. Section 245-17, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows: |
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| 352 | 352 | | |
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| 353 | 353 | | "(f) For the purposes of this section[: |
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| 354 | 354 | | |
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| 355 | 355 | | "Delivery], "delivery sale" means any sale of an electronic smoking device to a purchaser in the State where either: |
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| 356 | 356 | | |
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| 357 | 357 | | (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 |
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| 358 | 358 | | |
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| 359 | 359 | | (2) The electronic smoking device is delivered by use of the mail or any other delivery service. |
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| 360 | 360 | | |
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| 361 | 361 | | The foregoing sales of electronic smoking devices shall constitute a delivery sale regardless of whether the seller is located within or without the State. |
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| 362 | 362 | | |
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| 363 | 363 | | ["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.]" |
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| 364 | 364 | | |
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| 365 | 365 | | SECTION 14. Section 245-31, Hawaii Revised Statutes, is amended as follows: |
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| 366 | 366 | | |
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| 367 | 367 | | 1. By amending its title to read: |
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| 368 | 368 | | |
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| 369 | 369 | | "§245-31 Monthly report on distributions of cigarettes [and], tobacco products, e-liquid cartridges, and open system e-liquid, and purchases of stamps." |
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| 370 | 370 | | |
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| 371 | 371 | | 2. By amending subsection (b) to read: |
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| 372 | 372 | | |
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| 373 | 373 | | "(b) On or before the twentieth day of each month, every licensee shall file on forms prescribed by the department: |
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| 374 | 374 | | |
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| 375 | 375 | | (1) A report of the licensee's distributions of tobacco products and the wholesale costs of tobacco products during the preceding month; [and] |
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| 376 | 376 | | |
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| 377 | 377 | | (2) A report of the licensee's distributions of e-liquid cartridges and units of open system e-liquid, and the wholesale costs of e-liquid cartridges and units of open system e-liquid during the preceding month; and |
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| 378 | 378 | | |
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| 379 | 379 | | [(2)] (3) Any other information that the department may require to carry out this part." |
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| 380 | 380 | | |
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| 381 | 381 | | SECTION 15. Section 245-32, Hawaii Revised Statutes, is amended to read as follows: |
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| 382 | 382 | | |
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| 383 | 383 | | "[[]§245-32[]] Tax refund or credit for cigarettes [and], tobacco products, e-liquid cartridges, and open system e-liquid shipped for sale or use outside the State. (a) The department shall adopt rules to provide a [tobacco] tax refund or credit to a licensee [who] on the tax the licensee has paid [a tobacco tax] pursuant to section 245-3 on the distribution of cigarettes [or], tobacco products, e-liquid cartridges, or units of open system e-liquid that are shipped to a point outside the State for subsequent sale or use outside the State. |
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| 384 | 384 | | |
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| 385 | 385 | | (b) This part shall not apply to cigarettes [or], tobacco products, e-liquid cartridges, or units of open system e-liquid that are distributed in this State to consumers and that are subsequently taken outside the State." |
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| 386 | 386 | | |
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| 387 | 387 | | SECTION 16. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date. |
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| 388 | 388 | | |
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| 389 | 389 | | SECTION 17. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. |
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| 390 | 390 | | |
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| 391 | 391 | | SECTION 18. This Act shall take effect on July 1, 2023. |
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| 392 | 392 | | |
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| 393 | 393 | | |
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| 394 | 394 | | |
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| 395 | 395 | | INTRODUCED BY: _____________________________ |
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| 396 | 396 | | |
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| 397 | 397 | | INTRODUCED BY: |
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| 398 | 398 | | |
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| 399 | 399 | | _____________________________ |
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| 400 | 400 | | |
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| 401 | 401 | | |
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| 402 | 402 | | |
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| 403 | 403 | | |
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| 404 | 404 | | |
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| 405 | 405 | | Report Title: Electronic Smoking Devices; E-Liquid; Taxation; Regulation Description: Establishes an excise tax of 25 cents for e-liquid cartridges and fifteen per cent of the wholesale price of open system e‑liquid sold, used, or possessed by a wholesaler or dealer on or after 7/1/2023. Defines and amends related terms. Makes conforming amendments. The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent. |
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| 406 | 406 | | |
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| 407 | 407 | | |
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| 408 | 408 | | |
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| 409 | 409 | | |
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| 410 | 410 | | |
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| 411 | 411 | | Report Title: |
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| 412 | 412 | | |
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| 413 | 413 | | Electronic Smoking Devices; E-Liquid; Taxation; Regulation |
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| 414 | 414 | | |
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| 415 | 415 | | |
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| 416 | 416 | | |
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| 417 | 417 | | Description: |
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| 418 | 418 | | |
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| 419 | 419 | | Establishes an excise tax of 25 cents for e-liquid cartridges and fifteen per cent of the wholesale price of open system e‑liquid sold, used, or possessed by a wholesaler or dealer on or after 7/1/2023. Defines and amends related terms. Makes conforming amendments. |
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| 420 | 420 | | |
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| 421 | 421 | | |
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| 422 | 422 | | |
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| 423 | 423 | | |
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| 424 | 424 | | |
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| 425 | 425 | | |
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| 426 | 426 | | |
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| 427 | 427 | | The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent. |
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