| 1 | 1 | | Senate File 638 - Introduced SENATE FILE 638 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SF 475) (SUCCESSOR TO SSB 1137) A BILL FOR An Act relating to the taxation and regulation of alternative 1 nicotine products and vapor products, creating the 2 Iowa cancer research fund, and including effective date 3 provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1918SZ (2) 91 jm/jh |
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| 3 | 3 | | S.F. 638 Section 1. Section 453A.1, subsections 1 and 29, Code 2025, 1 are amended to read as follows: 2 1. Alternative nicotine product means a product, not 3 consisting of or containing tobacco, that provides for the 4 ingestion into the body of nicotine, or a nicotine analog, 5 whether by chewing, absorbing, dissolving, inhaling, snorting, 6 or sniffing, or by any other means. Alternative nicotine 7 product does not include cigarettes, tobacco products, or vapor 8 products, or a product that is regulated as a drug or device by 9 the United States food and drug administration under chapter V 10 of the federal Food, Drug, and Cosmetic Act. 11 29. a. Vapor product means any noncombustible product, 12 which may or may not contain nicotine or a nicotine analog , 13 that employs a heating element, power source, electronic 14 circuit, or other electronic, chemical, or mechanical means, 15 regardless of shape or size, that can be used to produce vapor 16 from a solution or other substance. Vapor product includes an 17 but is not limited to the following: 18 (1) Any product or device marketed, manufactured, 19 distributed, or sold as an electronic cigarette, electronic 20 cigar, electronic cigarillo, electronic pipe, or similar 21 product or device , and any . 22 (2) Any cartridge or other container of a solution or other 23 substance, which may or may not contain nicotine or a nicotine 24 analog , that is intended to be used with or in an electronic 25 cigarette, electronic cigar, electronic cigarillo, electronic 26 pipe, or similar product or device. 27 (3) Any component, part, or accessory of such a product 28 or device that is used during the operation of the product or 29 device when sold in combination with any substance containing 30 nicotine, a nicotine analog, tobacco, or tobacco derivative. 31 b. Vapor product does not include a any of the following: 32 (1) A product regulated as a drug or device by the United 33 States food and drug administration under chapter V of the 34 federal Food, Drug, and Cosmetic Act. 35 -1- LSB 1918SZ (2) 91 jm/jh 1/ 13 |
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| 5 | 5 | | S.F. 638 (2) Any component, part, or accessory of such a product 1 or device that is used during the operation of the product 2 or device when not sold in combination with any substance 3 containing nicotine, a nicotine analog, tobacco, or tobacco 4 derivative. 5 Sec. 2. Section 453A.1, Code 2025, is amended by adding the 6 following new subsection: 7 NEW SUBSECTION . 18A. Nicotine analog means a substance 8 that has a chemical structure that is substantially similar to 9 nicotine, or that has an effect on the central nervous system 10 that is substantially similar to, or greater than, the effects 11 of nicotine on the central nervous system. 12 Sec. 3. Section 453A.35, subsection 1, paragraph a, Code 13 2025, is amended to read as follows: 14 a. With the exception of revenues credited to the health 15 care trust fund pursuant to paragraph b and revenues credited 16 to the Iowa cancer research fund pursuant to paragraph c , 17 the proceeds derived from the sale of stamps and the payment 18 of fees and penalties provided for under this chapter , and the 19 permit fees received from all permits issued by the department, 20 shall be credited to the general fund of the state. 21 Sec. 4. Section 453A.35, subsection 1, Code 2025, is amended 22 by adding the following new paragraph: 23 NEW PARAGRAPH . c. The revenues generated from the 24 additional tax in section 453A.43A shall be credited to the 25 Iowa cancer research fund created in section 453A.35B. 26 Sec. 5. NEW SECTION . 453A.35B Iowa cancer research fund. 27 1. An Iowa cancer research fund is created in the office of 28 the treasurer of state under the authority of the department of 29 health and human services. The fund consists of the revenues 30 generated from the additional tax in section 453A.43A. Moneys 31 in the fund shall be separate from the general fund of the 32 state and shall not be considered part of the general fund of 33 the state. Moneys in the fund shall be used only as specified 34 in this section and shall be appropriated only for the uses 35 -2- LSB 1918SZ (2) 91 jm/jh 2/ 13 |
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| 7 | 7 | | S.F. 638 specified. Moneys in the fund are not subject to section 8.33 1 and shall not be transferred, used, obligated, appropriated, 2 or otherwise encumbered, except as provided in this section. 3 Notwithstanding section 12C.7, subsection 2, interest or 4 earnings on moneys deposited in the fund shall be credited to 5 the fund. 6 2. Moneys in the fund shall not be disbursed prior to 7 July 1, 2026, and shall only be used for purposes related 8 to supporting and funding cancer research in the state. The 9 department of health and human services shall develop an 10 application process and guidelines for cancer researchers to 11 receive moneys from the fund. 12 3. The department of health and human services shall report 13 on the program pursuant to section 217.21, beginning with the 14 period disbursements commence. 15 Sec. 6. Section 453A.40, subsections 1 and 3, Code 2025, are 16 amended to read as follows: 17 1. All persons required to obtain a permit or to be licensed 18 under section 453A.13 or section 453A.44 having in their 19 possession and held for resale on the effective date of an 20 increase in the tax rate cigarettes, little cigars, or tobacco 21 products , alternative nicotine products, or vapor products upon 22 which the tax under section 453A.6 , or 453A.43 , or 453A.43A 23 has been paid, unused cigarette tax stamps which have been 24 paid for under section 453A.8 , unused metered imprints which 25 have been paid for under section 453A.12 , or tobacco products , 26 alternative nicotine products, or vapor products for which the 27 tax has not been paid under section 453A.46 shall be subject to 28 an inventory tax on the items as provided in this section . 29 3. The rate of the inventory tax on each item subject to 30 the tax as specified in subsection 1 is equal to the difference 31 between the amount paid on each item under section 453A.6 , 32 453A.8 , 453A.12 , or 453A.43 , or 453A.43A prior to the tax 33 increase and the amount that is to be paid on each similar item 34 under section 453A.6 , 453A.8 , 453A.12 , or 453A.43 , or 453A.43A 35 -3- LSB 1918SZ (2) 91 jm/jh 3/ 13 |
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| 9 | 9 | | S.F. 638 after the tax increase except that in computing the rate of the 1 inventory tax any discount allowed or allowable under section 2 453A.8 shall not be considered. 3 Sec. 7. Section 453A.42, subsections 5, 7, 15, and 18, Code 4 2025, are amended to read as follows: 5 5. Distributor means any and each of the following: 6 a. Any person engaged in the business of selling tobacco 7 products , alternative nicotine products, or vapor products 8 in this state who brings, or causes to be brought, into this 9 state from without the state any tobacco products , alternative 10 nicotine products or vapor products for sale ; . 11 b. Any person who makes, manufactures, or fabricates tobacco 12 products , alternative nicotine products, or vapor products in 13 this state for sale in this state ; . 14 c. Any person engaged in the business of selling tobacco 15 products , alternative nicotine products, or vapor products 16 without this state who ships or transports tobacco products , 17 alternative nicotine products or vapor products to retailers in 18 this state, to be sold by those retailers. 19 7. Manufacturer means a person who manufactures and sells 20 tobacco products , alternative nicotine products, or vapor 21 products . 22 15. Subjobber means any person, other than a manufacturer 23 or distributor, who buys tobacco products , alternative nicotine 24 products, or vapor products from a distributor and sells them 25 to persons other than the ultimate consumers. 26 18. Wholesale sales price means the established price 27 for which a manufacturer sells a tobacco product , alternative 28 nicotine products, or vapor products to a distributor, 29 exclusive of any discount or other reduction. 30 Sec. 8. NEW SECTION . 453A.43A Additional taxes on 31 alternative nicotine and vapor products. 32 1. a. A tax is imposed upon all alternative nicotine 33 products and all vapor products in this state and upon any 34 person engaged as a distributor of alternative nicotine 35 -4- LSB 1918SZ (2) 91 jm/jh 4/ 13 |
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| 11 | 11 | | S.F. 638 products and vapor products, at the rate of ten percent of the 1 wholesale sales price of the alternative nicotine products or 2 vapor products. 3 b. The tax on alternative nicotine products and vapor 4 products shall be imposed at the time the distributor does any 5 of the following: 6 (1) Brings, or causes to be brought into this state from 7 outside the state, alternative nicotine products or vapor 8 products for sale. 9 (2) Makes, manufactures, or fabricates alternative nicotine 10 products or vapor products in this state for sale in this 11 state. 12 (3) Ships or transports alternative nicotine products or 13 vapor products to retailers in this state, to be sold by the 14 retailers. 15 2. A tax is imposed upon the use or storage of alternative 16 nicotine products or vapor products in this state, and upon 17 any person who uses or stores alternative nicotine products or 18 vapor products, at the rate of ten percent of the cost of the 19 alternative nicotine products or vapor products, if the tax 20 imposed under subsection 1 has not been paid. 21 3. Any alternative nicotine product or vapor product 22 with respect to which a tax has once been imposed under 23 this subchapter shall not again be subject to tax under this 24 subchapter. 25 4. The tax imposed by this section shall not apply with 26 respect to any alternative nicotine product or vapor product 27 which under the constitution and laws of the United States may 28 not be made the subject of taxation by this state. 29 5. The tax imposed by this section shall be in addition to 30 any other taxes imposed by law. 31 6. All excise taxes collected under this section by any 32 person are deemed to be held in trust for the state of Iowa. 33 Sec. 9. Section 453A.44, subsections 1, 3, and 10, Code 34 2025, are amended to read as follows: 35 -5- LSB 1918SZ (2) 91 jm/jh 5/ 13 |
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| 13 | 13 | | S.F. 638 1. No A person shall not engage in the business of a 1 distributor or subjobber of tobacco products at any place of 2 business without first having received a license from the 3 director to engage in that business at that place of business. 4 3. A person without this state who ships or transports 5 tobacco products , alternative nicotine products, or vapor 6 products to retailers in this state, to be sold by those 7 retailers, may make application for a license as a distributor, 8 be granted a license by the director, and thereafter be subject 9 to all the provisions of this subchapter and entitled to act as 10 a licensed distributor. 11 10. The director may revoke, cancel, or suspend the 12 license or licenses of any distributor or subjobber for 13 violation of any of the provisions of this subchapter , or 14 any other act applicable to the sale of tobacco products, 15 alternative nicotine products, or vapor products, or any rule 16 or regulations promulgated by the director in furtherance of 17 this subchapter . No A license shall not be revoked, canceled, 18 or suspended except after notice and a hearing by the director 19 as provided in section 453A.48 . 20 Sec. 10. Section 453A.45, Code 2025, is amended to read as 21 follows: 22 453A.45 Licensees, duties. 23 1. a. Every distributor shall keep at each licensed 24 place of business complete and accurate records for that 25 place of business, including itemized invoices, of tobacco 26 products , alternative nicotine products, or vapor products 27 held, purchased, manufactured, brought in or caused to be 28 brought in from without the state, or shipped or transported to 29 retailers in this state, and of all sales of tobacco products , 30 alternative nicotine products, or vapor products made, except 31 sales to the ultimate consumer. 32 b. When a licensed distributor sells tobacco products , 33 alternative nicotine products, or vapor products exclusively to 34 the ultimate consumer at the address given in the license, an 35 -6- LSB 1918SZ (2) 91 jm/jh 6/ 13 |
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| 15 | 15 | | S.F. 638 invoice of those sales is not required, but itemized invoices 1 shall be made of all tobacco products , alternative nicotine 2 products, or vapor products transferred to other retail 3 outlets owned or controlled by that licensed distributor. All 4 books, records, and other papers and documents required by 5 this subsection to be kept shall be preserved for a period 6 of at least three years after the date of the documents or 7 the date of the entries appearing in the records, unless the 8 director, in writing, authorized their destruction or disposal 9 at an earlier date. At any time during usual business hours, 10 the director, or the directors duly authorized agents or 11 employees, may enter any place of business of a distributor, 12 without a search warrant, and inspect the premises, the records 13 required to be kept under this subsection , and the tobacco 14 products , alternative nicotine products, or vapor products 15 contained therein, to determine if all the provisions of this 16 subchapter are being fully complied with. If the director, 17 or any such agent or employee, is denied free access or is 18 hindered or interfered with in making the examination, the 19 license of the distributor at that premises is subject to 20 revocation by the director. 21 2. Every person who sells tobacco products , alternative 22 nicotine products, or vapor products to persons other than the 23 ultimate consumer shall render with each sale itemized invoices 24 showing the sellers name and address, the purchasers name and 25 address, the date of sale, and all prices and discounts. The 26 person shall preserve legible copies of all these invoices for 27 three years from the date of sale. 28 3. Every retailer and subjobber shall procure itemized 29 invoices of all tobacco products , alternative nicotine 30 products, or vapor products purchased. The invoices shall show 31 the name and address of the seller and the date of purchase. 32 The retailer and subjobber shall preserve a legible copy 33 of each invoice for three years from the date of purchase. 34 Invoices shall be available for inspection by the director or 35 -7- LSB 1918SZ (2) 91 jm/jh 7/ 13 |
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| 17 | 17 | | S.F. 638 the directors authorized agents or employees at the retailers 1 or subjobbers place of business. 2 4. Records of all deliveries or shipments of tobacco 3 products , alternative nicotine products, or vapor products from 4 any public warehouse of first destination in this state which 5 is subject to the provisions of and licensed under chapter 6 554 shall be kept by the warehouse and be available to the 7 director for inspection. They The records shall show the name 8 and address of the consignee, the date, the quantity of tobacco 9 products , alternative nicotine products or vapor products 10 delivered, and such other information as the commissioner may 11 require. These The records shall be preserved for three years 12 from the date of delivery of the tobacco products , alternative 13 nicotine products, or vapor products . 14 5. a. The transportation of tobacco products , alternative 15 nicotine products, or vapor products into this state by means 16 other than common carrier must be reported to the director 17 within thirty days with the following exceptions: 18 (1) The transportation of not more than fifty cigars, not 19 more than ten ounces of snuff or snuff powder, or not more 20 than one pound of smoking or chewing tobacco or other tobacco 21 products not specifically mentioned herein; 22 (2) Transportation by a person with a place of business 23 outside the state, who is licensed as a distributor under 24 section 453A.44 , or tobacco products , alternative nicotine 25 products, or vapor products sold by such person to a retailer 26 in this state. 27 b. The report shall be made on forms provided by the 28 director. The director may require by rule that the report be 29 filed by electronic transmission. 30 c. Common carriers transporting tobacco products , 31 alternative nicotine products, or vapor products into this 32 state shall file with the director reports of all such 33 shipments other than those which are delivered to public 34 warehouses of first destination in this state which are 35 -8- LSB 1918SZ (2) 91 jm/jh 8/ 13 |
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| 19 | 19 | | S.F. 638 licensed under the provisions of chapter 554 . Such reports 1 shall be filed on or before the tenth day of each month and 2 shall show with respect to deliveries made in the preceding 3 month all of the following: 4 (1) The date. 5 (2) The point of origin. 6 (3) The point of delivery. 7 (4) The name of the consignee. 8 (5) A description and the quantity of tobacco products , 9 alternative nicotine products, or vapor products delivered. 10 (6) Such other information as the director may require. 11 d. Any person who fails or refuses to transmit to the 12 director the required reports or whoever refuses to permit the 13 examination of the records by the director shall be guilty of 14 a serious misdemeanor. 15 Sec. 11. Section 453A.46, subsection 1, paragraph a, 16 subparagraph (1), Code 2025, is amended to read as follows: 17 (1) On or before the twentieth day of each calendar month 18 every distributor with a place of business in this state shall 19 file a return with the director showing for the preceding 20 calendar month the quantity and wholesale sales price of each 21 tobacco product , alternative nicotine products, or vapor 22 products brought, or caused to be brought, into this state 23 for sale; made, manufactured, or fabricated in this state for 24 sale in this state; and any other information the director may 25 require. Every licensed distributor outside this state shall 26 in like manner file a return with the director showing for 27 the preceding calendar month the quantity and wholesale sales 28 price of each tobacco product , alternative nicotine products, 29 or vapor products shipped or transported to retailers in this 30 state to be sold by those retailers and any other information 31 the director may require. Returns shall be made upon forms 32 furnished or made available in electronic form and prescribed 33 by the director and shall contain other information as the 34 director may require. Each return shall be accompanied by a 35 -9- LSB 1918SZ (2) 91 jm/jh 9/ 13 |
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| 21 | 21 | | S.F. 638 remittance for the full tax liability shown on the return, less 1 a discount as fixed by the director not to exceed five percent 2 of the tax. Within three years after the return is filed or 3 within three years after the return became due, whichever is 4 later, the department shall examine it, determine the correct 5 amount of tax, and assess the tax against the taxpayer for any 6 deficiency. The period for examination and determination of 7 the correct amount of tax is unlimited in the case of a false or 8 fraudulent return made with the intent to evade tax, or in the 9 case of a failure to file a return. 10 Sec. 12. Section 453A.46, subsection 6, Code 2025, is 11 amended to read as follows: 12 6. On or before the twentieth day of each calendar month, 13 every consumer who, during the preceding calendar month, 14 has acquired title to or possession of tobacco products , 15 alternative nicotine products, or vapor products for use or 16 storage in this state, upon and upon which tobacco products the 17 tax taxes imposed by section 453A.43 has or 453A.43A have not 18 been paid, shall file a return with the director showing the 19 quantity of tobacco products , alternative nicotine products, 20 or vapor products so acquired. The return shall be made upon 21 a form furnished and prescribed by the director, and shall 22 contain other information as the director may require. The 23 return shall be accompanied by a remittance for the full unpaid 24 tax liability shown by it. Within three years after the return 25 is filed or within three years after the return became due, 26 whichever is later, the department shall examine it, determine 27 the correct amount of tax, and assess the tax against the 28 taxpayer for any deficiency. The period for examination and 29 determination of the correct amount of tax is unlimited in the 30 case of a false or fraudulent return made with the intent to 31 evade tax, or in the case of a failure to file a return. 32 Sec. 13. Section 453A.47, Code 2025, is amended to read as 33 follows: 34 453A.47 Refunds, credits. 35 -10- LSB 1918SZ (2) 91 jm/jh 10/ 13 |
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| 23 | 23 | | S.F. 638 Where tobacco products , alternative nicotine products, or 1 vapor products upon which the tax imposed by this subchapter 2 has been reported and paid are shipped or transported by the 3 distributor to consumers to be consumed without the state or 4 to retailers or subjobbers without the state to be sold by 5 those retailers or subjobbers without the state or are returned 6 to the manufacturer by the distributor or destroyed by the 7 distributor, refund of such tax or credit may be made to the 8 distributor in accordance with regulations prescribed by the 9 director. Any overpayment of the tax imposed under section 10 453A.43 or 453A.43A may be made to the taxpayer in accordance 11 with regulations prescribed by the director. The director 12 shall cause any such refund of tax to be paid out of the general 13 fund of the state, and so much of said fund as may be necessary 14 is hereby appropriated for that purpose. 15 Sec. 14. Section 453A.47C, subsections 3 and 4, Code 2025, 16 are amended to read as follows: 17 3. A retailer required to possess or possessing a permit 18 under section 453A.13 or 453A.47A to make delivery sales 19 of alternative nicotine products or vapor products within 20 this state shall be deemed to have waived all claims that 21 such retailer lacks physical presence within this state for 22 purposes of collecting and remitting sales and use tax and the 23 additional tax provided in section 453A.43A . 24 4. A retailer making taxable delivery sales of alternative 25 nicotine products or vapor products within this state shall 26 remit to the department all sales and use tax due on such sales 27 at the times and in the manner provided by chapter 423 , and 28 remit the additional tax as provided in section 453A.43A . 29 Sec. 15. Section 453A.48, subsection 3, Code 2025, is 30 amended to read as follows: 31 3. The director may exchange information with the officers 32 and agencies of other states administering laws relating to the 33 taxation of tobacco products , alternative nicotine products, 34 and vapor products . 35 -11- LSB 1918SZ (2) 91 jm/jh 11/ 13 |
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| 25 | 25 | | S.F. 638 Sec. 16. EFFECTIVE DATE. This Act takes effect January 1, 1 2026. 2 EXPLANATION 3 The inclusion of this explanation does not constitute agreement with 4 the explanations substance by the members of the general assembly. 5 This bill regulates alternative nicotine products and vapor 6 products and imposes taxes upon the wholesale sales price of 7 such products, and makes numerous conforming changes to Code 8 chapter 453A (cigarettes and tobacco-related products). 9 The bill defines nicotine analog to mean a substance that 10 has a chemical structure that is substantially similar to 11 nicotine, or that has an effect on the central nervous system 12 that is substantially similar to, or greater than, the effects 13 of nicotine on the central nervous system. 14 The bill adds nicotine analog to the definitions of 15 alternative nicotine product and vapor product. 16 The bill imposes a tax on alternative nicotine and 17 vapor products upon any person engaged as a distributor of 18 alternative nicotine products and vapor products, at the rate 19 of 10 percent of the wholesale sales price of such products. 20 In the alternative, a tax is imposed on the use or storage of 21 alternative nicotine and vapor products, at the rate of 10 22 percent of the cost of such products, if the 10 percent tax on 23 the wholesale sales price has not been paid. 24 The revenue generated by the bill is credited to the new 25 Iowa cancer research fund (fund), under the authority of the 26 department of health and human services (HHS). The bill 27 specifies moneys in the fund shall not be disbursed prior to 28 July 1, 2026, and shall only be appropriated for purposes 29 related to supporting and funding cancer research in the state. 30 The bill requires HHS to develop an application process and 31 guidelines for cancer researchers to receive moneys from the 32 fund. 33 The fund is not subject to reversion and moneys or earnings 34 attributable to the fund are credited to the fund. 35 -12- LSB 1918SZ (2) 91 jm/jh 12/ 13 |
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| 27 | 27 | | S.F. 638 The bill takes effect January 1, 2026. 1 -13- LSB 1918SZ (2) 91 jm/jh 13/ 13 |
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