A5385

An Act concerning the sale and taxation of container e-liquid, supplementing and amending P.L.1990, c.39 and amending P.L.2018, c.50.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 1 of P.L.1990, c.39 (C.54:40B-1) is amended to read as follows:

1. Sections 1 through 14 of P.L.1990, c.39 (C.54:40B-1 et seq.) shall be known and may be cited as the "Tobacco and [Nicotine] Vapor Products [Wholesale Sales and Use] Tax Act."

(cf: P.L.2018, c.50, s.2)

2. Section 2 of P.L.1990, c.39 (C.54:40B-2) is amended to read as follows:

2. As used in sections 2 through 14 and section 20 of P.L.1990, c.39 (C.54:40B-1 et seq.):

"Consumer" means a person except a distributor, manufacturer, or wholesaler who acquires a tobacco product for consumption, storage, or use in this State;

“Container e-liquid” means a container of liquid nicotine or other liquid where the liquid is marketed, sold, or intended for use in an electronic smoking device, but does not include a prefilled cartridge or other container where the cartridge or container is marketed, sold, or intended for use as, or as a part of, an electronic smoking device;

"Director" means the Director of the Division of Taxation in the Department of the Treasury;

"Distributor" means:

a person engaged in the business of selling tobacco products in this State who brings, or causes to be brought into this State from without the State a tobacco product for sale within this State,

a person who makes or manufactures tobacco products in this State for sale in the State,

a person engaged in the business of selling tobacco products without this State who ships or transports tobacco products to a person in this State to be sold to a retail dealer, or

a person who receives tobacco products without receiving proof that the tax has been or will be paid by another distributor;

"Dry snuff" means any finely cut, ground, or powdered smokeless tobacco that is intended to be sniffed through the nasal cavity, but does not include moist snuff;

"Electronic smoking device" means a nonlighted, noncombustible device that may be used to simulate smoking and that employs a mechanical heating element, battery, or circuit, regardless of shape or size, to produce aerosolized or vaporized nicotine or other substance for inhalation into the body of a person, including but not limited to a device that is manufactured, distributed, marketed, or sold as an e-cigarette, e-cigar, e-pipe, e-hookah, vape pen, or any other similar product with any other product name or descriptor;

"Liquid nicotine" means any solution containing nicotine that is designed or sold for use with an electronic smoking device;

"Manufacturer" means a person, wherever resident or located, who manufactures or produces, or causes to be manufactured or produced, a tobacco product and sells, uses, stores, or distributes the product regardless of whether it is intended for sale, use, or distribution within or without this State;

"Moist snuff" means any finely cut, ground, or powdered smokeless tobacco that is intended to be placed or dipped in the oral cavity, but does not include dry snuff;

"Person" means an individual, firm, corporation, copartnership, joint venture, association, receiver, trustee, guardian, executor, administrator, or any other person acting in a fiduciary capacity, or an estate, trust, or group or combination acting as a unit, the State Government and any political subdivision thereof, and the plural as well as the singular, unless the intention to give a more limited meaning is disclosed by the context;

"Place of business" means a place where a tobacco product is sold or where a tobacco product is brought or kept for the purpose of sale or consumption, including so far as may be applicable a vessel, vehicle, airplane, train or vending machine;

"Retail dealer" means a person who is engaged in this State in the business of selling any tobacco product at retail. A person placing a tobacco product vending machine at, or on any premises shall be deemed to be a retail dealer for each vending machine;

"Sale" means any sale, transfer, exchange, barter, or gift, in any manner or by any means whatsoever;

"Tobacco product" means any product containing, made, or derived from any tobacco, nicotine, or other chemicals or substances for consumption by a person, including, but not limited to, cigars, little cigars, cigarillos, chewing tobacco, pipe tobacco, smoking tobacco and their substitutes, dry and moist snuff, and liquid nicotine, but does not include cigarette as defined in section 102 of the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.);

"Treasurer" means the State Treasurer;

"Use" means the exercise of any right or power incidental to the ownership of a tobacco product, including a sale at retail;

“Vapor business” means a retail business where more than 50 percent of its retail sales are derived from electronic smoking devices, related accessories, and liquid nicotine, but does not include a retail business that does not sell container e-liquid;

"Wholesale price" means the actual price for which a manufacturer sells tobacco products to a distributor; and

"Wholesaler" means a person, wherever resident or located, other than a distributor as defined herein, who:

a. purchases tobacco products from any other person who purchases from the manufacturer and who acquires tobacco products solely for the purpose of bona fide resale to retail dealers or to other persons for the purposes of resale only; or

b. services retail outlets by the maintenance of an established place of business for the purchase of tobacco products including, but not limited to, the maintenance of warehousing facilities for the storage and distribution of tobacco products.

(cf: P.L.2018, c.50, s.3)

3. Section 5 of P.L.2018, c.50 (C.54:40B-3.2) is amended to read as follows:

5. a. There is imposed a tax upon the sale, use, or distribution of liquid nicotine within this State by a distributor or wholesaler to a retail dealer or consumer at the rate of $0.10 per fluid milliliter on the volume of the liquid nicotine as listed by the manufacturer, and a proportionate rate on all fractional parts of a fluid milliliter of volume of liquid nicotine as listed by the manufacturer.

b. Unless liquid nicotine has already been or will be subject to the tax imposed in subsection a. of this section, if a distributor or wholesaler uses the liquid nicotine within the State, there is imposed upon the distributor or wholesaler a compensating use tax of $0.10 per fluid milliliter of the volume of liquid nicotine as listed by the manufacturer, and a proportionate rate on all fractional parts of a fluid milliliter of the volume of liquid nicotine as listed by the manufacturer.

c. Unless a tax is due pursuant to subsection b. of this section, if a distributor or wholesaler has not paid the tax imposed in subsection a. of this section upon a sale that is subject to the tax imposed in that subsection a., there is imposed upon the retail dealer or consumer chargeable for the sale a compensating use tax of $0.10 per fluid milliliter on the volume of the liquid nicotine as listed by the manufacturer, and a proportionate rate on all fractional parts of a fluid milliliter of the volume of liquid nicotine as listed by the manufacturer, which shall be collected in the manner provided in subsection b. of section 5 of P.L.1990, c.39 (C.54:40B-5).

d. The tax imposed pursuant to this section shall not apply to the retail sale of container e-liquid.

(cf: P.L.2018, c.50, s.5)

4. (New Section) a. After the effective date of P.L. , c. (C. )(pending before the Legislature as this bill), container e-liquid shall not be sold at retail in the State except by a licensed vapor business.

b. A vapor business operating in the State shall be required to be licensed as such. The director shall make rules and regulations respecting applications to be licensed as a vapor business in the State. For each license issued to a vapor business the vapor business shall pay to the director a fee of $50 annually.

5. (New Section) a. There is imposed a tax at the rate of 10 percent of the listed retail sale price of container e-liquid sold within the State.

b. The tax imposed pursuant to this section shall be collected by the seller.

c. The seller shall be personally liable for the tax required to be collected pursuant to this section.

d. The director shall prescribe the manner and method that the tax shall be payable. The director may require such information and records necessary for administration of the tax, including for the purpose of consistent administration with other provisions of the “Tobacco and Vapor Products Tax Act,” P.L.1990, c.39 (C.54:40B‑1 et seq.).

6. This act shall take effect 60 days following enactment, but the director may take anticipatory administrative action necessary to implement this act.

STATEMENT

This bill imposes licensing requirements on vapor businesses, limits the sale of container e-liquid to vapor businesses, and imposes a 10 percent tax on the sale of container e-liquid. The bill also exempts container e-liquid from the wholesale liquid nicotine tax, which pursuant to the bill, will only apply to non-container e‑liquid.

Container e-liquid is a container of liquid nicotine or other liquid where the liquid is intended for use in an electronic smoking device, but not including prefilled containers where the container is intended for use in an electronic smoking device (e.g. cartridges).

A vapor business is a retail business where more than 50 percent of its retail sales are derived from electronic smoking devices, related accessories, and liquid nicotine. A retail business that does not sell container e-liquid is not included in the definition of vapor business.

Once this bill goes into effect, vapor businesses will be required to be licensed. The Director of Taxation will set the rules for application of licensure. In addition, container e-liquid may only be sold by vapor businesses. This requirement ensures that container e‑liquid is sold by businesses with expertise in proper use and consumption of e-liquid.

The bill also imposes a tax on container e-liquid at 10 percent of the retail price. However, the wholesale tax on tobacco and nicotine products ($0.10 per fluid milliliter for liquid nicotine) will not apply to container e-liquid.