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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
smoking devices; tax; medical research
Purpose
Subjects electronic smoking devices to the Arizona luxury privilege tax (LPT). Authorizes monies in the Tobacco Tax and Health Care Fund Health Research Account to be used for Alzheimer's disease research. Contains requirements for enactment and becomes effective on signature of the Governor (Proposition 108).
Background
Statute prescribes six individual taxes that may be imposed on tobacco products that are sold, used or consumed in Arizona: 1) the LPT; 2) the three tobacco taxes for health; 3) the tobacco tax for early childhood development and health; and 4) the Indian reservation tobacco tax. These taxes are often collectively or individually referred to as tobacco tax, and monies from the taxes are deposited into various accounts and Funds including: 1) the Tobacco Tax and Health Care Fund Health Education Account; 2) the Tobacco Tax and Health Care Fund Health Research Account (Health Research Account); and 3) the Smoke Free Arizona Fund. The applicability of taxes on tobacco products depends on the location of the sale, the parties involved and the existence of a tribal exemption (A.R.S. §§ 36-771; 36-772; and 36-773).
Every
distributor who acquires or possesses a tobacco product for the purpose of
making the initial sale or distribution of the tobacco product is required to
obtain a license to sell the tobacco product from the Arizona Department of Revenue
(ADOR). Statute additionally requires licensed tobacco distributors to pay
taxes on cigarettes through the purchase of tax stamps from ADOR, which are
affixed to packs of cigarettes intended for sale in Arizona. An affixed stamp
is evidence that the taxes have been paid on that product. ADOR is authorized
to seize cigarettes and other tobacco products when a tax has not been paid or
accounted for (A.R.S. §§ 42-1124;
42-3051;
42-3052;
42-3251;
42-3302;
and 42-3371).
S.B. 1527 establishes a new LPT on electronic smoking devices at a rate of 43 percent of the wholesale cost of the product. Monies collected pursuant to this LPT are required to be deposited into the Health Research Account.
Provisions
1. Subjects electronic smoking devices to the LPT and establishes a taxation rate on electronic smoking devices in an amount of 43 percent of the wholesale cost of the product.
2. Defines electronic smoking device as any device that can be used to deliver aerosolized or vaporized nicotine to an individual inhaling form the device, including an e-cigarette, e-cigar, e-pipe, vape pen or e-hookah, including:
a) any component, part or accessory of the device, whether or not sold separately; and
b) any substance intended to be aerosolized or vaporized during the use of the device.
3. Excludes from the definition of electronic smoking device:
a) any battery or battery chargers that are sold separately; and
b) any drugs, devices or combination of products that are authorized for sale by the U.S. Food and Drug Administration.
4. Allocates and annually appropriates luxury tax monies collected on electronic smoking devices to the Health Research Account.
5. Authorizes Health Research Account monies to be used for research on preventing and treating Alzheimer's disease.
6. Directs the Department of Health Services to deposit the first $5,000,000 deposited into the Health Research Account each year to a statewide Alzheimer' disease research consortium that includes public and private participating institutions for Alzheimer's disease research.
7. Exempts Health Research Account monies from statutory lapsing appropriation provisions.
8. Makes technical and conforming changes.
9. Requires for enactment the affirmative vote of at least two-thirds of the members of each house of the Legislature (Proposition 108).
10. Becomes effective on signature of the Governor.
Prepared by Senate Research
February 18, 2019
CRS/kja