Legislation to impose a state tax on e-cigarettes and vaping devices appears headed to next year’s legislative work list.
Lawmakers raised multiple questions about the bills at two committee hearings last week, and the Legislature faces a May 17 adjournment deadline. Bills not acted on by then return for consideration next year.
The legislation was heard in the Senate Finance Committee and House Health and Social Services Committee, both on May 4, with bill sponsors fielding multiple questions about penalties for underage use, the tax burden on consumers and the tax filing requirements on retailers.
Senate President Gary Stevens, sponsoring the legislation for the third time, told Finance Committee members, “This bill is about protecting our children from becoming addicted to nicotine.” He said manufacturers promote e-cigarettes and vape sticks as “fashionable” alternatives to tobacco.
Juneau Rep. Sara Hannan, who, like Stevens, has introduced the bill multiple times in her career, told the House committee that the tax and a lower age limit are “about restricting the sale to young people.”
The tax would be 25% on the retail price of the products, adding about $2 or $3 to the cost of a $10 or $15 e-cigarette, Joe Darnell, chief investigator with the tobacco section at the Department of Health, told the House committee.
A single vape stick has about the same amount of nicotine as a pack of cigarettes, which is taxed by the state at $2, Tim Lamkin, staff to Stevens, testified at the Senate Finance Committee.
The tax would raise about $3.3 million a year. Currently, Alaska taxes cigarettes, cigars and loose tobacco, but not vape products.
The legislation also would raise the minimum age to purchase or possess vape products to 21 years old, the same as tobacco products under Alaska law and the same as federal law for vape sticks and e-cigarettes.
While none of the committee members disagreed with the goal of deterring younger Alaskans from taking up a nicotine habit, several questioned whether the legislation would work.
Health and Social Services Chair Rep. Mike Prax, R-North Pole, questioned whether imposing a tax would create an underground market for untaxed vaping devices.
Committee member Rep. Jesse Sumner, R-Wasilla, said the tax would be “a burden on the poorest members of our society.”
Others questioned the provision for a maximum fine of $150 for underage possession.
Representatives of several retail businesses phoned in to testify against the legislation in both committees, specifically adding a new retail tax.
“I think you’re going after the wrong area,” Minneapolis-based Joe O’Connor, director of tobacco and alcohol sales at Holiday Stationstores, which operates gas stations and convenience stores in Alaska, testified at Senate Finance. “Don’t penalize (local) retailers,” he said. Rather, target sales by online merchants.
Stevens’ bill would ban online sales to individuals.
Several retailers in Alaska told legislators of the burden of collecting the tax and filling out new a form covering only vape products. The state collects its tobacco tax from wholesalers, not retailers.
Others called in to oppose the new tax, saying it would penalize Alaskans who are using vape products in an attempt to quit tobacco.
Several school administrators called in to testify in support of the legislation, including Shawn Arnold, principal at Juneau’s Thunder Mountain High School, who told Senate Finance Committee members that 75% of the school’s major discipline cases this year were vaping related.
Wrangell is having less of a problem than other Southeast Alaska school districts, Bob Burkhart, the high school principal, said in an interview last week.
“We aren’t seeing it at the same level as other schools,” he said, praising students who know it’s not a good habit to start.
Vaping, same as smoking, is not allowed on school grounds in Wrangell.