S-1516.7

SENATE BILL 5986

State of Washington
66th Legislature
2019 Regular Session
BySenators Braun, Keiser, Kuderer, and Van De Wege
Read first time 03/15/19.Referred to Committee on Ways & Means.
AN ACT Relating to establishing a tax on vapor and heated tobacco products to fund cancer research and support local public health; amending RCW 66.08.145, 66.44.010, 82.24.510, 82.24.550, 82.26.060, 82.26.080, 82.26.150, 82.26.220, 82.32.300, 70.345.010, 70.345.030, 70.345.090, 82.24.010, and 82.26.020; reenacting and amending RCW 82.26.010; adding a new chapter to Title 82 RCW; creating a new section; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Part I
Tax on Vapor Products
NEW SECTION.  Sec. 101. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
(1) "Actual price" means the total amount of consideration for which vapor products are sold, valued in money, whether received in money or otherwise, including: (a) Any charges by the seller necessary to complete the sale such as charges for delivery, freight, transportation, or handling; and (b) in the case of a taxpayer importing vapor products into the state, any expenses of the taxpayer or any person affiliated with the taxpayer that are necessary to complete the importation, such as delivery, freight, transportation, federal taxes, or handling of the product.
(2) "Affiliated" means related in any way by virtue of any form or amount of common ownership, control, operation, or management.
(3) "Board" means the Washington state liquor and cannabis board.
(4) "Business" means any trade, occupation, activity, or enterprise engaged in selling or distributing vapor products in this state.
(5) "Distributor" mean any person:
(a) Engaged in the business of selling vapor products in this state who brings, or causes to be brought, into this state from outside the state any vapor products for sale;
(b) Who makes, manufactures, fabricates, or stores vapor products in this state for sale in this state;
(c) Engaged in the business of selling vapor products outside this state who ships or transports vapor products to retailers or consumers in this state; or
(d) Engaged in the business of selling vapor products in this state who handles for sale any vapor products that are within this state but upon which tax has not been imposed.
(6) "Indian country" has the same meaning as provided in RCW 82.24.010.
(7) "Manufacturer" has the same meaning as provided in RCW 70.345.010.
(8) "Manufacturer's representative" means a person hired by a manufacturer to sell or distribute the manufacturer's vapor products and includes employees and independent contractors.
(9) "Person" means: Any individual, receiver, administrator, executor, assignee, trustee in bankruptcy, trust, estate, firm, copartnership, joint venture, club, company, joint stock company, business trust, municipal corporation, corporation, limited liability company, association, or society; the state and its departments and institutions; any political subdivision of the state of Washington; and any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit, or otherwise. Except as provided otherwise in this chapter, "person" does not include any person immune from state taxation, including the United States or its instrumentalities, and federally recognized Indian tribes and enrolled tribal members, conducting business within Indian country.
(10) "Place of business" means any place where vapor products are sold or where vapor products are manufactured, stored, or kept for the purpose of sale, including any vessel, vehicle, airplane, or train.
(11) "Retail outlet" has the same meaning as provided in RCW 70.345.010.
(12) "Retailer" has the same meaning as provided in RCW 70.345.010.
(13) "Sale" has the same meaning as provided in RCW 70.345.010.
(14)(a) "Taxable sales price" means:
(i) In the case of a taxpayer that is not affiliated with the manufacturer, distributor, or other person from whom the taxpayer purchased vapor products, the actual price for which the taxpayer purchased the vapor products;
(ii) In the case of a taxpayer that purchases vapor products from an affiliated manufacturer, affiliated distributor, or other affiliated person, and that sells those vapor products to unaffiliated distributors, unaffiliated retailers, or ultimate consumers, the actual price for which that taxpayer sells those vapor products to unaffiliated distributors, unaffiliated retailers, or ultimate consumers;
(iii) In the case of a taxpayer that sells vapor products only to affiliated distributors or affiliated retailers, the price, determined as nearly as possible according to the actual price, that other distributors sell similar vapor products of like quality and character to unaffiliated distributors, unaffiliated retailers, or ultimate consumers;
(iv) In the case of a taxpayer that is a manufacturer selling vapor products directly to ultimate consumers, the actual price for which the taxpayer sells those vapor products to ultimate consumers;
(v) In the case of a taxpayer that has acquired vapor products under a sale as defined in RCW 70.345.010(16)(b), the price, determined as nearly as possible according to the actual price, that the taxpayer or other distributors sell the same vapor products or similar vapor products of like quality and character to unaffiliated distributors, unaffiliated retailers, or ultimate consumers;
(vi) In cases where section 102(2)(b) of this act applies, the value of the article used as defined in RCW 82.12.010; or
(vii) In any case where (a)(i) through (vi) of this subsection do not apply, the price, determined as nearly as possible according to the actual price, that the taxpayer or other distributors sell the same vapor products or similar vapor products of like quality and character to unaffiliated distributors, unaffiliated retailers, or ultimate consumers.
(b) For purposes of (a)(i) and (ii) of this subsection only, "person" includes both persons as defined in this section and any person immune from state taxation, including the United States or its instrumentalities, and federally recognized Indian tribes and enrolled tribal members, conducting business within Indian country.
(c) In any case where the taxable sales price is not indicative of a vapor product's true value at the time and place of the taxable event as provided in section 102(2)(a) of this act, "taxable sales price" means the true value of the vapor product as determined by the department. For purposes of this subsection, "true value" means market value based on sales at comparable locations in this state of the same or similar vapor product of like quality and character sold under comparable conditions of sale by comparable sellers to comparable purchasers.
(15) "Taxpayer" means a person liable for the tax imposed by this chapter.
(16) "Unaffiliated distributor" means a distributor that is not affiliated with the manufacturer, distributor, or other person from whom the distributor has purchased vapor products.
(17) "Unaffiliated retailer" means a retailer that is not affiliated with the manufacturer, distributor, or other person from whom the retailer has purchased vapor products.
(18) "Vapor product" means any noncombustible product containing a solution or other consumable substance, regardless of whether it contains nicotine, which employs a mechanical heating element, battery, or electronic circuit regardless of shape or size that can be used to produce vapor from the solution or other substance, including an electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device.
(a) The term does not include:
(i) Any product approved by the United States food and drug administration for sale as a tobacco cessation product, medical device, or for other therapeutic purposes when such product is marketed and sold solely for such an approved purpose;
(ii) Any product that will become an ingredient or component in a vapor product manufactured by a distributor; or
(iii) Any product that meets the definition of marijuana, useable marijuana, marijuana concentrates, marijuana-infused products, cigarette, or tobacco products.
(b) For purposes of this subsection (18):
(i) "Cigarette" has the same meaning as provided in RCW 82.24.010; and
(ii) "Marijuana," "useable marijuana," "marijuana concentrates," and "marijuana-infused products" have the same meaning as provided in RCW 69.50.101.
NEW SECTION.  Sec. 102. (1) There is levied and collected a tax upon the sale, use, consumption, handling, possession, or distribution of all vapor products in this state in an amount equal to 5 cents per milliliter of solution or other consumable substance, regardless of whether it contains nicotine, and a proportionate tax at the like rate on all fractional parts of a milliliter thereof. The tax on vapor products shall be imposed based on the volume of the solution as listed by the manufacturer.
(2)(a) The tax under this section must be collected at the time the distributor: (i) Brings, or causes to be brought, into this state from without the state vapor products for sale; (ii) makes, manufactures, fabricates, or stores vapor products in this state for sale in this state; (iii) ships or transports vapor products to retailers or consumers in this state; or (iv) handles for sale any vapor products that are within this state but upon which tax has not been imposed.
(b) The tax imposed under this section must also be collected by the department from the consumer of vapor products where the tax imposed under this section was not paid by the distributor on such vapor products.
(3)(a) The moneys collected under this section must be deposited as follows:
(a) Fifty percent into the Andy Hill cancer research fund created in RCW 43.348.060; and
(b) Fifty percent into the foundational public health services account created in section 104 of this act.
NEW SECTION.  Sec. 103. (1)(a) Except as provided in (b) of this subsection, a bundled transaction that includes a vapor product is subject to the tax imposed under this chapter on the entire selling price of the bundled transaction.
(b) If the selling price is attributable to products that are taxable and products that are not taxable under this chapter, the portion of the price attributable to the nontaxable products are subject to the tax imposed by this chapter unless the seller can identify by reasonable and verifiable standards the portion that is not subject to tax from its books and records that are kept in the regular course of business for other purposes including, but not limited to, nontax purposes.
(2) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
(a) "Bundled transaction" means:
(i) The sale of two or more products where the products are otherwise distinct and identifiable, are sold for one nonitemized price, and at least one product is a vapor product subject to the tax under this chapter; and
(ii) A vapor product provided free of charge with the required purchase of another product. A vapor product is provided free of charge if the sales price of the product purchased does not vary depending on the inclusion of the vapor product provided free of charge.
(b) "Distinct and identifiable products" does not include packaging such as containers, boxes, sacks, bags, and bottles, or materials such as wrapping, labels, tags, and instruction guides, that accompany the sale of the products and are incidental or immaterial to the sale thereof.
NEW SECTION.  Sec. 104. (1) The foundational public health services account is created in the state treasury. Fifty percent of revenues from the tax collected under section 102 of this act must be deposited into the account.
(2) To determine the funding for foundational health services pursuant to subsection (1)(a) of this section, the department of health and representatives of local health jurisdictions must work together to: (a) Arrive at a mutually acceptable allocation and distribution of funds from the account; and (b) determine the best accountability measures to ensure efficient and effective use of funds, emphasizing use of shared services where appropriate.
NEW SECTION.  Sec. 105. It is the intent and purpose of this chapter to levy a tax on all vapor products sold, used, consumed, handled, possessed, or distributed within this state. It is the further intent and purpose of this chapter to impose the tax only once on all vapor products in this state. Nothing in this chapter may be construed to exempt any person taxable under any other law or under any other tax imposed under this title.
NEW SECTION.  Sec. 106. (1) The tax imposed by section 102 of this act does not apply with respect to any vapor products which under the Constitution and laws of the United States may not be made the subject of taxation by this state.
(2) The provisions of RCW 82.32.805 and 82.32.808 do not apply to this section.
Part II
Conforming Amendments
Sec. 201. RCW 66.08.145 and 2016 sp.s. c 38 s 29 are each amended to read as follows:
(1) The liquor and cannabis board may issue subpoenas in connection with any investigation, hearing, or proceeding for the production of books, records, and documents held under this chapter or chapters 70.155, 70.158, 70.345, 82.24, ((and)) 82.26 ((RCW)), and 82.--- RCW (the new chapter created in section 403 of this act), and books and records of common carriers as defined in RCW 81.80.010, or vehicle rental agencies relating to the transportation or possession of cigarettes, vapor products, or other tobacco products.
(2) The liquor and cannabis board may designate individuals authorized to sign subpoenas.
(3) If any person is served a subpoena from the board for the production of records, documents, and books, and fails or refuses to obey the subpoena for the production of records, documents, and books when required to do so, the person is subject to proceedings for contempt, and the board may institute contempt of court proceedings in the superior court of Thurston county or in the county in which the person resides.
Sec. 202. RCW 66.44.010 and 1998 c 18 s 1 are each amended to read as follows:
(1) All county and municipal peace officers are hereby charged with the duty of investigating and prosecuting all violations of this title, and the penal laws of this state relating to the manufacture, importation, transportation, possession, distribution and sale of liquor, and all fines imposed for violations of this title and the penal laws of this state relating to the manufacture, importation, transportation, possession, distribution and sale of liquor ((shall)) belong to the county, city or town wherein the court imposing the fine is located, and ((shall))must be placed in the general fund for payment of the salaries of those engaged in the enforcement of the provisions of this title and the penal laws of this state relating to the manufacture, importation, transportation, possession, distribution and sale of liquor((: PROVIDED, That)). However, all fees, fines, forfeitures and penalties collected or assessed by a district court because of the violation of a state law ((shall))must be remitted as provided in chapter 3.62 RCW as now exists or is later amended.
(2) In addition to any and all other powers granted, the board ((shall have))has the power to enforce the penal provisions of this title and the penal laws of this state relating to the manufacture, importation, transportation, possession, distribution and sale of liquor.
(3) In addition to the other duties under this section, the board ((shall))must enforce chapters 82.24 ((and)), 82.26 ((RCW)), and 82.--- RCW (the new chapter created in section 403 of this act).
(4) The board may appoint and employ, assign to duty and fix the compensation of, officers to be designated as liquor enforcement officers. Such liquor enforcement officers ((shall)) have the power, under the supervision of the board, to enforce the penal provisions of this title and the penal laws of this state relating to the manufacture, importation, transportation, possession, distribution and sale of liquor. They ((shall)) have the power and authority to serve and execute all warrants and process of law issued by the courts in enforcing the penal provisions of this title or of any penal law of this state relating to the manufacture, importation, transportation, possession, distribution and sale of liquor, and the provisions of chapters 82.24 ((and)), 82.26 ((RCW)), and 82.--- RCW (the new chapter created in section 403 of this act). They ((shall)) have the power to arrest without a warrant any person or persons found in the act of violating any of the penal provisions of this title or of any penal law of this state relating to the manufacture, importation, transportation, possession, distribution and sale of liquor, and the provisions of chapters 82.24 ((and)), 82.26 ((RCW)), and 82.--- RCW (the new chapter created in section 403 of this act).
Sec. 203. RCW 82.24.510 and 2013 c 144 s 50 are each amended to read as follows:
(1) The licenses issuable under this chapter are as follows:
(a) A wholesaler's license.
(b) A retailer's license.
(2) Application for the licenses must be made through the business licensing system under chapter 19.02 RCW. The board must adopt rules regarding the regulation of the licenses. The board may refrain from the issuance of any license under this chapter if the board has reasonable cause to believe that the applicant has willfully withheld information requested for the purpose of determining the eligibility of the applicant to receive a license, or if the board has reasonable cause to believe that information submitted in the application is false or misleading or is not made in good faith. In addition, for the purpose of reviewing an application for a wholesaler's license or retailer's license and for considering the denial, suspension, or revocation of any such license, the board may consider any prior criminal conduct of the applicant, including an administrative violation history record with the board and a criminal history record information check within the previous five years, in any state, tribal, or federal jurisdiction in the United States, its territories, or possessions, and the provisions of RCW 9.95.240 and chapter 9.96A RCW do not apply to such cases. The board may, in its discretion, grant or refuse the wholesaler's license or retailer's license, subject to the provisions of RCW 82.24.550.
(3) No person may qualify for a wholesaler's license or a retailer's license under this section without first undergoing a criminal background check. The background check must be performed by the board and must disclose any criminal conduct within the previous five years in any state, tribal, or federal jurisdiction in the United States, its territories, or possessions. A person who possesses a valid license on July 22, 2001, is subject to this subsection and subsection (2) of this section beginning on the date of the person's business license expiration under chapter 19.02 RCW, and thereafter. If the applicant or licensee also has a license issued under chapter 66.24 ((or)), 82.26, or 70.345 RCW, the background check done under the authority of chapter 66.24 ((or)), 82.26, or 70.345 RCW satisfies the requirements of this section.
(4) Each such license expires on the business license expiration date, and each such license must be continued annually if the licensee has paid the required fee and complied with all the provisions of this chapter and the rules of the board made pursuant thereto.
(5) Each license and any other evidence of the license that the board requires must be exhibited in each place of business for which it is issued and in the manner required for the display of a business license.
Sec. 204. RCW 82.24.550 and 2015 c 86 s 307 are each amended to read as follows:
(1) The board must enforce the provisions of this chapter. The board may adopt, amend, and repeal rules necessary to enforce the provisions of this chapter.
(2) The department may adopt, amend, and repeal rules necessary to administer the provisions of this chapter. The board may revoke or suspend the license or permit of any wholesale or retail cigarette dealer in the state upon sufficient cause appearing of the violation of this chapter or upon the failure of such licensee to comply with any of the provisions of this chapter.
(3) A license may not be suspended or revoked except upon notice to the licensee and after a hearing as prescribed by the board. The board, upon finding that the licensee has failed to comply with any provision of this chapter or any rule adopted under this chapter, must, in the case of the first offense, suspend the license or licenses of the licensee for a period of not less than thirty consecutive business days, and, in the case of a second or further offense, must suspend the license or licenses for a period of not less than ninety consecutive business days nor more than twelve months, and, in the event the board finds the licensee has been guilty of willful and persistent violations, it may revoke the license or licenses.
(4) Any licenses issued under chapter 82.26 or 70.345 RCW to a person whose license or licenses have been suspended or revoked under this section must also be suspended or revoked during the period of suspension or revocation under this section.
(5) Any person whose license or licenses have been revoked under this section may reapply to the board at the expiration of one year from the date of revocation of the license or licenses. The license or licenses may be approved by the board if it appears to the satisfaction of the board that the licensee will comply with the provisions of this chapter and the rules adopted under this chapter.
(6) A person whose license has been suspended or revoked may not sell cigarettes, vapor products, or tobacco products or permit cigarettes, vapor products, or tobacco products to be sold during the period of such suspension or revocation on the premises occupied by the person or upon other premises controlled by the person or others or in any other manner or form whatever.
(7) Any determination and order by the board, and any order of suspension or revocation by the board of the license or licenses issued under this chapter, or refusal to reinstate a license or licenses after revocation is reviewable by an appeal to the superior court of Thurston county. The superior court must review the order or ruling of the board and may hear the matter de novo, having due regard to the provisions of this chapter and the duties imposed upon the board.
(8) If the board makes an initial decision to deny a license or renewal, or suspend or revoke a license, the applicant may request a hearing subject to the applicable provisions under Title 34 RCW.
(9) For purposes of this section((,)):
(a) "Tobacco products" has the same meaning as provided in RCW 82.26.010; and
(b) "Vapor products" has the same meaning as provided in section 101 of this act.
Sec. 205. RCW 82.26.060 and 2009 c 154 s 3 are each amended to read as follows:
(1) Every distributor ((shall))must keep at each place of business complete and accurate records for that place of business, including itemized invoices, of tobacco products held, purchased, manufactured, brought in or caused to be brought in from without the state, or shipped or transported to retailers in this state, and of all sales of tobacco products made.
(2) These records ((shall))must show the names and addresses of purchasers, the inventory of all tobacco products, and other pertinent papers and documents relating to the purchase, sale, or disposition of tobacco products. All invoices and other records required by this section to be kept ((shall))must be preserved for a period of five years from the date of the invoices or other documents or the date of the entries appearing in the records.
(3) At any time during usual business hours the department, board, or its duly authorized agents or employees, may enter any place of business of a distributor, without a search warrant, and inspect the premises, the records required to be kept under this chapter, and the tobacco products contained therein, to determine whether or not all the provisions of this chapter are being fully complied with. If the department, board, or any of its agents or employees, are denied free access or are hindered or interfered with in making such examination, the registration certificate issued under RCW 82.32.030 of the distributor at such premises ((shall be))is subject to revocation, and any licenses issued under this chapter or chapter 82.24 or 70.345 RCW are subject to suspension or revocation, by the department or board.
Sec. 206. RCW 82.26.080 and 2005 c 180 s 5 are each amended to read as follows:
(1) Every retailer ((shall))must procure itemized invoices of all tobacco products purchased. The invoices ((shall))must show the seller's name and address, the date of purchase, and all prices and discounts.
(2) The retailer ((shall))must keep at each retail outlet copies of complete, accurate, and legible invoices for that retail outlet or place of business. All invoices required to be kept under this section ((shall))must be preserved for five years from the date of purchase.
(3) At any time during usual business hours the department, board, or its duly authorized agents or employees may enter any retail outlet without a search warrant, and inspect the premises for invoices required to be kept under this section and the tobacco products contained in the retail outlet, to determine whether or not all the provisions of this chapter are being fully complied with. If the department, board, or any of its agents or employees, are denied free access or are hindered or interfered with in making the inspection, the registration certificate issued under RCW 82.32.030 of the retailer at the premises is subject to revocation, and any licenses issued under this chapter or chapter 82.24 or 70.345 RCW are subject to suspension or revocation by the department.
Sec. 207. RCW 82.26.150 and 2013 c 144 s 52 are each amended to read as follows:
(1) The licenses issuable by the board under this chapter are as follows:
(a) A distributor's license; and
(b) A retailer's license.
(2) Application for the licenses must be made through the business licensing system under chapter 19.02 RCW. The board may adopt rules regarding the regulation of the licenses. The board may refuse to issue any license under this chapter if the board has reasonable cause to believe that the applicant has willfully withheld information requested for the purpose of determining the eligibility of the applicant to receive a license, or if the board has reasonable cause to believe that information submitted in the application is false or misleading or is not made in good faith. In addition, for the purpose of reviewing an application for a distributor's license or retailer's license and for considering the denial, suspension, or revocation of any such license, the board may consider criminal conduct of the applicant, including an administrative violation history record with the board and a criminal history record information check within the previous five years, in any state, tribal, or federal jurisdiction in the United States, its territories, or possessions, and the provisions of RCW 9.95.240 and chapter 9.96A RCW do not apply to such cases. The board may, in its discretion, issue or refuse to issue the distributor's license or retailer's license, subject to the provisions of RCW 82.26.220.
(3) No person may qualify for a distributor's license or a retailer's license under this section without first undergoing a criminal background check. The background check must be performed by the board and must disclose any criminal conduct within the previous five years in any state, tribal, or federal jurisdiction in the United States, its territories, or possessions. If the applicant or licensee also has a license issued under chapter 66.24 ((or)), 82.24, or 70.345 RCW, the background check done under the authority of chapter 66.24, 70.345, or 82.24 RCW satisfies the requirements of this section.
(4) Each license issued under this chapter expires on the business license expiration date. The license must be continued annually if the licensee has paid the required fee and complied with all the provisions of this chapter and the rules of the board adopted pursuant to this chapter.
(5) Each license and any other evidence of the license required under this chapter must be exhibited in each place of business for which it is issued and in the manner required for the display of a business license.
Sec. 208. RCW 82.26.220 and 2015 c 86 s 308 are each amended to read as follows:
(1) The board must enforce this chapter. The board may adopt, amend, and repeal rules necessary to enforce this chapter.
(2) The department may adopt, amend, and repeal rules necessary to administer this chapter. The board may revoke or suspend the distributor's or retailer's license of any distributor or retailer of tobacco products in the state upon sufficient cause showing a violation of this chapter or upon the failure of the licensee to comply with any of the rules adopted under it.
(3) A license may not be suspended or revoked except upon notice to the licensee and after a hearing as prescribed by the board. The board, upon finding that the licensee has failed to comply with any provision of this chapter or of any rule adopted under it, must, in the case of the first offense, suspend the license or licenses of the licensee for a period of not less than thirty consecutive business days, and in the case of a second or further offense, suspend the license or licenses for a period of not less than ninety consecutive business days but not more than twelve months, and in the event the board finds the licensee has been guilty of willful and persistent violations, it may revoke the license or licenses.
(4) Any licenses issued under chapter 82.24 or 70.345 RCW to a person whose license or licenses have been suspended or revoked under this section must also be suspended or revoked during the period of suspension or revocation under this section.
(5) Any person whose license or licenses have been revoked under this section may reapply to the board at the expiration of one year of the license or licenses. The license or licenses may be approved by the board if it appears to the satisfaction of the board that the licensee will comply with the provisions of this chapter and the rules adopted under it.
(6) A person whose license has been suspended or revoked may not sell tobacco products, vapor products, or cigarettes or permit tobacco products, vapor products, or cigarettes to be sold during the period of suspension or revocation on the premises occupied by the person or upon other premises controlled by the person or others or in any other manner or form.
(7) Any determination and order by the board, and any order of suspension or revocation by the board of the license or licenses issued under this chapter, or refusal to reinstate a license or licenses after revocation is reviewable by an appeal to the superior court of Thurston county. The superior court must review the order or ruling of the board and may hear the matter de novo, having due regard to the provisions of this chapter and the duties imposed upon the board.
(8) If the board makes an initial decision to deny a license or renewal, or suspend or revoke a license, the applicant may request a hearing subject to the applicable provisions under Title 34 RCW.
Sec. 209. RCW 82.32.300 and 1997 c 420 s 9 are each amended to read as follows:
(1) The administration of this and chapters 82.04 through 82.27 RCW of this title is vested in the department ((of revenue which shall)), which must prescribe forms and rules of procedure for the determination of the taxable status of any person, for the making of returns and for the ascertainment, assessment and collection of taxes and penalties imposed thereunder.
(2) The department ((of revenue shall))must make and publish rules and regulations, not inconsistent therewith, necessary to enforce provisions of this chapter and chapters 82.02 through 82.23B and 82.27 RCW, and the liquor ((control))and cannabis board ((shall))must make and publish rules necessary to enforce chapters 82.24 ((and)), 82.26 ((RCW)), and 82.--- RCW (the new chapter created in section 403 of this act), which ((shall have))has the same force and effect as if specifically included therein, unless declared invalid by the judgment of a court of record not appealed from.
(3) The department may employ such clerks, specialists, and other assistants as are necessary. Salaries and compensation of such employees ((shall))must be fixed by the department and ((shall be)) charged to the proper appropriation for the department.
(4) The department ((shall))must exercise general supervision of the collection of taxes and, in the discharge of such duty, may institute and prosecute such suits or proceedings in the courts as may be necessary and proper.
Sec. 210. RCW 70.345.010 and 2016 sp.s. c 38 s 4 are each amended to read as follows:
The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
(1) "Board" means the Washington state liquor and cannabis board.
(2) "Business" means any trade, occupation, activity, or enterprise engaged in for the purpose of selling or distributing vapor products in this state.
(3) "Child care facility" has the same meaning as provided in RCW 70.140.020.
(4) "Closed system nicotine container" means a sealed, prefilled, and disposable container of nicotine in a solution or other form in which such container is inserted directly into an electronic cigarette, electronic nicotine delivery system, or other similar product, if the nicotine in the container is inaccessible through customary or reasonably foreseeable handling or use, including reasonably foreseeable ingestion or other contact by children.
(5) "Delivery sale" means any sale of a vapor product to a purchaser in this state where either:
(a) The purchaser submits the order for such sale by means of a telephonic or other method of voice transmission, the mails or any other delivery service, or the internet or other online service; or
(b) The vapor product is delivered by use of the mails or of a delivery service. The foregoing sales of vapor products constitute a delivery sale regardless of whether the seller is located within or without this state. "Delivery sale" does not include a sale of any vapor product not for personal consumption to a retailer.
(6) "Delivery seller" means a person who makes delivery sales.
(7) "Distributor" ((means any person who:
(a) Sells vapor products to persons other than ultimate consumers; or
(b) Is engaged in the business of selling vapor products in this state and who brings, or causes to be brought, into this state from outside of the state any vapor products for sale))has the same meaning as in section 101 of this act.
(8) "Liquid nicotine container" means a package from which nicotine in a solution or other form is accessible through normal and foreseeable use by a consumer and that is used to hold soluble nicotine in any concentration. "Liquid nicotine container" does not include closed system nicotine containers.
(9) "Manufacturer" means a person who manufactures and sells vapor products.
(10) "Minor" refers to an individual who is less than eighteen years old.
(11) "Person" means any individual, receiver, administrator, executor, assignee, trustee in bankruptcy, trust, estate, firm, copartnership, joint venture, club, company, joint stock company, business trust, municipal corporation, the state and its departments and institutions, political subdivision of the state of Washington, corporation, limited liability company, association, society, any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit, or otherwise.
(12) "Place of business" means any place where vapor products are sold or where vapor products are manufactured, stored, or kept for the purpose of sale.
(13) "Playground" means any public improved area designed, equipped, and set aside for play of six or more children which is not intended for use as an athletic playing field or athletic court, including but not limited to any play equipment, surfacing, fencing, signs, internal pathways, internal land forms, vegetation, and related structures.
(14) "Retail outlet" means each place of business from which vapor products are sold to consumers.
(15) "Retailer" means any person engaged in the business of selling vapor products to ultimate consumers.
(16)(a) "Sale" means any transfer, exchange, or barter, in any manner or by any means whatsoever, for a consideration, and includes and means all sales made by any person.
(b) The term "sale" includes a gift by a person engaged in the business of selling vapor products, for advertising, promoting, or as a means of evading the provisions of this chapter.
(17) "School" has the same meaning as provided in RCW 70.140.020.
(18) "Self-service display" means a display that contains vapor products and is located in an area that is openly accessible to customers and from which customers can readily access such products without the assistance of a salesperson. A display case that holds vapor products behind locked doors does not constitute a self-service display.
(19) "Vapor product" means any noncombustible product that may contain nicotine and that employs a heating element, power source, electronic circuit, or other electronic, chemical, or mechanical means, regardless of shape or size, that can be used to produce vapor or aerosol from a solution or other substance.
(a) "Vapor product" includes any electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device and any vapor cartridge or other container that may contain nicotine in a solution or other form that is intended to be used with or in an electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device.
(b) "Vapor product" does not include any product that meets the definition of marijuana, useable marijuana, marijuana concentrates, marijuana-infused products, cigarette, or tobacco products.
(c) For purposes of this subsection (19), "marijuana," "useable marijuana," "marijuana concentrates," and "marijuana-infused products" have the same meaning as provided in RCW 69.50.101.
Sec. 211. RCW 70.345.030 and 2016 sp.s. c 38 s 6 are each amended to read as follows:
(1)(a) No person may engage in or conduct business as a retailer, distributor, or delivery seller in this state without a valid license issued under this chapter, except as otherwise provided by law. Any person who sells vapor products to ultimate consumers by a means other than delivery sales must obtain a retailer's license under this chapter. Any person who ((sells vapor products to persons other than ultimate consumers or who)) meets the definition of distributor under this chapter must obtain a distributor's license under this chapter. Any person who conducts delivery sales of vapor products must obtain a delivery sale license.
(b) A violation of this subsection is punishable as a class C felony according to chapter 9A.20 RCW.
(2) No person engaged in or conducting business as a retailer, distributor, or delivery seller in this state may refuse to allow the enforcement officers of the board, on demand, to make full inspection of any place of business or vehicle where any of the vapor products regulated under this chapter are sold, stored, transported, or handled, or otherwise hinder or prevent such inspection. A person who violates this subsection is guilty of a gross misdemeanor.
(3) Any person licensed under this chapter as a distributor, any person licensed under this chapter as a retailer, and any person licensed under this chapter as a delivery seller may not operate in any other capacity unless the additional appropriate license is first secured, except as otherwise provided by law. A violation of this subsection is a misdemeanor.
(4) No person engaged in or conducting business as a retailer, distributor, or delivery seller in this state may sell or give, or permit to sell or give, a product that contains any amount of any cannabinoid, synthetic cannabinoid, cathinone, or methcathinone, unless otherwise provided by law. A violation of this subsection (4) is punishable according to RCW 69.50.401.
(5) The penalties provided in this section are in addition to any other penalties provided by law for violating the provisions of this chapter or the rules adopted under this chapter.
Sec. 212. RCW 70.345.090 and 2016 sp.s. c 38 s 17 are each amended to read as follows:
(1) No person may conduct a delivery sale or otherwise ship or transport, or cause to be shipped or transported, any vapor product ordered or purchased by mail or through the internet to any person unless such seller has a valid delivery sale license as required under this chapter.
(2) No person may conduct a delivery sale or otherwise ship or transport, or cause to be shipped or transported, any vapor product ordered or purchased by mail or through the internet to any person under the minimum age required for the legal sale of vapor products as provided under RCW 70.345.140.
(3) A delivery sale licensee must provide notice on its mail order or internet sales forms of the minimum age required for the legal sale of vapor products in Washington state as provided by RCW 70.345.140.
(4) A delivery sale licensee must not accept a purchase or order from any person without first obtaining the full name, birth date, and residential address of that person and verifying this information through an independently operated third-party database or aggregate of databases, which includes data from government sources, that are regularly used by government and businesses for the purpose of age and identity verification and authentication.
(5) A delivery sale licensee must accept payment only through a credit or debit card issued in the purchaser's own name. The licensee must verify that the card is issued to the same person identified through identity and age verification procedures in subsection (4) of this section.
(6) Before a delivery sale licensee delivers an initial purchase to any person, the licensee must verify the identity and delivery address of the purchaser by mailing or shipping to the purchaser a notice of sale and certification form confirming that the addressee is in fact the person placing the order. The purchaser must return the signed certification form to the licensee before the initial shipment of product. Certification forms are not required for repeat customers. In the alternative, before a seller delivers an initial purchase to any person, the seller must first obtain from the prospective customer an electronic certification, such as by email, that includes a declaration that, at a minimum, the prospective customer is over the minimum age required for the legal sale of a vapor product, and the credit or debit card used for payment has been issued in the purchaser's name.
(7) A delivery sale licensee must include on shipping documents a clear and conspicuous statement which includes, at a minimum, that the package contains vapor products, Washington law prohibits sales to those under the minimum age established by this chapter, and violations may result in sanctions to both the licensee and the purchaser.
(8)(a) A delivery sale licensee must collect the tax imposed under RCW 82.08.020 and chapter 82.--- RCW (the new chapter created in section 403 of this act) on sales of vapor products to consumers in Washington.
(b) For purposes of this subsection (8), "vapor products" has the same meaning as provided in section 101 of this act.
(9) A person who knowingly violates this section is guilty of a class C felony, except that the maximum fine that may be imposed is five thousand dollars.
(((9)))(10) In addition to or in lieu of any other civil or criminal remedy provided by law, a person who has violated this section is subject to a civil penalty of up to five thousand dollars for each violation. The attorney general, acting in the name of the state, may seek recovery of the penalty in a civil action in superior court.
(((10)))(11) The attorney general may seek an injunction in superior court to restrain a threatened or actual violation of this section and to compel compliance with this section.
(((11)))(12) Any violation of this section is not reasonable in relation to the development and preservation of business and is an unfair and deceptive act or practice and an unfair method of competition in the conduct of trade or commerce in violation of RCW 19.86.020. Standing to bring an action to enforce RCW 19.86.020 for violation of this section lies solely with the attorney general. Remedies provided by chapter 19.86 RCW are cumulative and not exclusive.
(((12)))(13)(a) In any action brought under this section, the state is entitled to recover, in addition to other relief, the costs of investigation, expert witness fees, costs of the action, and reasonable attorneys' fees.
(b) If a court determines that a person has violated this section, the court shall order any profits, gain, gross receipts, or other benefit from the violation to be disgorged and paid to the state treasurer for deposit in the general fund.
(((13)))(14) Unless otherwise expressly provided, the penalties or remedies, or both, under this section are in addition to any other penalties and remedies available under any other law of this state.
(((14)))(15) A licensee who violates this section is subject to license suspension or revocation by the board.
(((15)))(16) The board may adopt by rule additional requirements for mail or internet sales.
(((16)))(17) The board must not adopt rules prohibiting internet sales.
Part III
Heated Tobacco Products
Sec. 301. RCW 82.24.010 and 2012 2nd sp.s. c 4 s 1 are each amended to read as follows:
Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter:
(1) "Board" means the state liquor ((control))and cannabis board.
(2) "Cigarette" means any roll for smoking made wholly or in part of tobacco, irrespective of size or shape and irrespective of the tobacco being flavored, adulterated, or mixed with any other ingredient, where such roll has a wrapper or cover made of paper or any material, except where such wrapper is wholly or in the greater part made of natural leaf tobacco in its natural state. "Cigarette" includes a roll-your-own cigarette, but does not include a heated tobacco product as defined in RCW 82.26.010.
(3) "Cigarette paper" means any paper or any other material except tobacco, prepared for use as a cigarette wrapper.
(4) "Cigarette tube" means cigarette paper made into a hollow cylinder for use in making cigarettes.
(5) "Commercial cigarette-making machine" means a machine that is operated in a retail establishment and that is capable of being loaded with loose tobacco, cigarette paper or tubes, and any other components related to the production of roll-your-own cigarettes, including filters.
(6) "Indian tribal organization" means a federally recognized Indian tribe, or tribal entity, and includes an Indian wholesaler or retailer that is owned by an Indian who is an enrolled tribal member conducting business under tribal license or similar tribal approval within Indian country. For purposes of this chapter "Indian country" is defined in the manner set forth in 18 U.S.C. Sec. 1151.
(7) "Precollection obligation" means the obligation of a seller otherwise exempt from the tax imposed by this chapter to collect the tax from that seller's buyer.
(8) "Retailer" means every person, other than a wholesaler, who purchases, sells, offers for sale or distributes any one or more of the articles taxed herein, irrespective of quantity or amount, or the number of sales, and all persons operating under a retailer's registration certificate.
(9) "Retail selling price" means the ordinary, customary or usual price paid by the consumer for each package of cigarettes, less the tax levied by this chapter and less any similar tax levied by this state.
(10) "Roll-your-own cigarettes" means cigarettes produced by a commercial cigarette-making machine.
(11) "Stamp" means the stamp or stamps by use of which the tax levy under this chapter is paid or identification is made of those cigarettes with respect to which no tax is imposed.
(12) "Wholesaler" means every person who purchases, sells, or distributes any one or more of the articles taxed herein to retailers for the purpose of resale only.
(13) The meaning attributed, in chapter 82.04 RCW, to the words "person," "sale," "business" and "successor" applies equally in this chapter.
Sec. 302. RCW 82.26.010 and 2010 1st sp.s. c 22 s 4 are each reenacted and amended to read as follows:
The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
(1) "Actual price" means the total amount of consideration for which tobacco products are sold, valued in money, whether received in money or otherwise, including any charges by the seller necessary to complete the sale such as charges for delivery, freight, transportation, or handling.
(2) "Affiliated" means related in any way by virtue of any form or amount of common ownership, control, operation, or management.
(3) "Board" means the state liquor ((control))and cannabis board.
(4) "Business" means any trade, occupation, activity, or enterprise engaged in for the purpose of selling or distributing tobacco products in this state.
(5) "Cigar" means a roll for smoking that is of any size or shape and that is made wholly or in part of tobacco, irrespective of whether the tobacco is pure or flavored, adulterated or mixed with any other ingredient, if the roll has a wrapper made wholly or in greater part of tobacco. "Cigar" does not include a cigarette.
(6) "Cigarette" has the same meaning as in RCW 82.24.010.
(7) "Department" means the department of revenue.
(8) "Distributor" means (a) any 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 any tobacco products for sale, (b) any person who makes, manufactures, fabricates, or stores tobacco products in this state for sale in this state, (c) any person engaged in the business of selling tobacco products without this state who ships or transports tobacco products to retailers in this state, to be sold by those retailers, (d) any person engaged in the business of selling tobacco products in this state who handles for sale any tobacco products that are within this state but upon which tax has not been imposed.
(9) "Heated tobacco product" means a product containing tobacco that produces an inhalable aerosol by:
(a) Heating the tobacco by means of an electronic device without combustion of the tobacco; or
(b) Heat generated from a combustion source that only or primarily heats rather than burns the tobacco.
(10) "Indian country" means the same as defined in chapter 82.24 RCW.
(((10)))(11) "Little cigar" means a cigar that has a cellulose acetate integrated filter.
(((11)))(12) "Manufacturer" means a person who manufactures and sells tobacco products.
(((12)))(13) "Manufacturer's representative" means a person hired by a manufacturer to sell or distribute the manufacturer's tobacco products, and includes employees and independent contractors.
(((13)))(14) "Moist snuff" means tobacco that is finely cut, ground, or powdered; is not for smoking; and is intended to be placed in the oral, but not the nasal, cavity.
(((14)))(15) "Person" means any individual, receiver, administrator, executor, assignee, trustee in bankruptcy, trust, estate, firm, copartnership, joint venture, club, company, joint stock company, business trust, municipal corporation, the state and its departments and institutions, political subdivision of the state of Washington, corporation, limited liability company, association, society, any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit, or otherwise. The term excludes any person immune from state taxation, including the United States or its instrumentalities, and federally recognized Indian tribes and enrolled tribal members, conducting business within Indian country.
(((15)))(16) "Place of business" means any place where tobacco products are sold or where tobacco products are manufactured, stored, or kept for the purpose of sale, including any vessel, vehicle, airplane, train, or vending machine.
(((16)))(17) "Retail outlet" means each place of business from which tobacco products are sold to consumers.
(((17)))(18) "Retailer" means any person engaged in the business of selling tobacco products to ultimate consumers.
(((18)))(19)(a) "Sale" means any transfer, exchange, or barter, in any manner or by any means whatsoever, for a consideration, and includes and means all sales made by any person.
(b) The term "sale" includes a gift by a person engaged in the business of selling tobacco products, for advertising, promoting, or as a means of evading the provisions of this chapter.
(((19)))(20)(a) "Taxable sales price" means:
(i) In the case of a taxpayer that is not affiliated with the manufacturer, distributor, or other person from whom the taxpayer purchased tobacco products, the actual price for which the taxpayer purchased the tobacco products;
(ii) In the case of a taxpayer that purchases tobacco products from an affiliated manufacturer, affiliated distributor, or other affiliated person, and that sells those tobacco products to unaffiliated distributors, unaffiliated retailers, or ultimate consumers, the actual price for which that taxpayer sells those tobacco products to unaffiliated distributors, unaffiliated retailers, or ultimate consumers;
(iii) In the case of a taxpayer that sells tobacco products only to affiliated distributors or affiliated retailers, the price, determined as nearly as possible according to the actual price, that other distributors sell similar tobacco products of like quality and character to unaffiliated distributors, unaffiliated retailers, or ultimate consumers;
(iv) In the case of a taxpayer that is a manufacturer selling tobacco products directly to ultimate consumers, the actual price for which the taxpayer sells those tobacco products to ultimate consumers;
(v) In the case of a taxpayer that has acquired tobacco products under a sale as defined in subsection (((18)))(19)(b) of this section, the price, determined as nearly as possible according to the actual price, that the taxpayer or other distributors sell the same tobacco products or similar tobacco products of like quality and character to unaffiliated distributors, unaffiliated retailers, or ultimate consumers; or
(vi) In any case where (a)(i) through (v) of this subsection do not apply, the price, determined as nearly as possible according to the actual price, that the taxpayer or other distributors sell the same tobacco products or similar tobacco products of like quality and character to unaffiliated distributors, unaffiliated retailers, or ultimate consumers.
(b) For purposes of (a)(i) and (ii) of this subsection only, "person" includes both persons as defined in subsection (((14)))(15) of this section and any person immune from state taxation, including the United States or its instrumentalities, and federally recognized Indian tribes and enrolled tribal members, conducting business within Indian country.
(c) The department may adopt rules regarding the determination of taxable sales price under this subsection.
(((20)))(21) "Taxpayer" means a person liable for the tax imposed by this chapter.
(((21)))(22) "Tobacco products" means cigars, cheroots, stogies, periques, granulated, plug cut, crimp cut, ready rubbed, and other smoking tobacco, snuff, snuff flour, cavendish, plug and twist tobacco, fine-cut and other chewing tobaccos, shorts, refuse scraps, clippings, cuttings and sweepings of tobacco, and other kinds and forms of tobacco, prepared in such manner as to be suitable for chewing or smoking in a pipe or otherwise, or both for chewing and smoking, and any other product, regardless of form, that contains tobacco and is intended for human consumption or placement in the oral or nasal cavity or absorption into the human body by any other means, but does not include cigarettes as defined in RCW 82.24.010.
(((22)))(23) "Unaffiliated distributor" means a distributor that is not affiliated with the manufacturer, distributor, or other person from whom the distributor has purchased tobacco products.
(((23)))(24) "Unaffiliated retailer" means a retailer that is not affiliated with the manufacturer, distributor, or other person from whom the retailer has purchased tobacco products.
Sec. 303. RCW 82.26.020 and 2010 1st sp.s. c 22 s 5 are each amended to read as follows:
(1) There is levied and collected a tax upon the sale, handling, or distribution of all tobacco products in this state at the following rate:
(a) For cigars except little cigars, ninety-five percent of the taxable sales price of cigars, not to exceed sixty-five cents per cigar;
(b) For all tobacco products except those covered under separate provisions of this subsection, ninety-five percent of the taxable sales price;
(c) For moist snuff, as established in this subsection (1)(c) and computed on the net weight listed by the manufacturer:
(i) On each single unit consumer-sized can or package whose net weight is one and two-tenths ounces or less, a rate per single unit that is equal to the greater of 2.526 dollars or eighty-three and one-half percent of the cigarette tax under chapter 82.24 RCW multiplied by twenty; or
(ii) On each single unit consumer-sized can or package whose net weight is more than one and two-tenths ounces, a proportionate tax at the rate established in (c)(i) of this subsection (1) on each ounce or fractional part of an ounce; ((and))
(d) For little cigars, an amount per cigar equal to the cigarette tax under chapter 82.24 RCW((.
(2))); and
(e) For heated tobacco products, forty cents per ounce of tobacco, plus a proportionate tax at the like rate on any fractional parts of a gram. The tax on heated tobacco products is imposed based on the net weight of tobacco as listed by the manufacturer.
(2) Any tax imposed under this chapter must be reduced by fifty percent for any product as to which a modified risk tobacco product order has been issued by the secretary of the United States department of health and human services pursuant to Title 21 U.S.C. Sec. 387k(g)(1).
(3) Taxes under this section must be imposed at the time the distributor (a) brings, or causes to be brought, into this state from without the state tobacco products for sale, (b) makes, manufactures, fabricates, or stores tobacco products in this state for sale in this state, (c) ships or transports tobacco products to retailers in this state, to be sold by those retailers, or (d) handles for sale any tobacco products that are within this state but upon which tax has not been imposed.
(((3) The moneys collected under this section must be deposited into the state general fund.))(4)(a) Except as provided in (b) of this subsection, the moneys collected under this section must be deposited into the state general fund.
(b) The moneys collected on heated tobacco products under subsections (1)(e) and (2) of this section must be deposited as follows:
(i) Fifty percent into the Andy Hill cancer research fund created in RCW 43.348.060; and
(ii) Fifty percent into the foundational public health services account created in section 104 of this act.
Part IV
Miscellaneous Provisions
NEW SECTION.  Sec. 401. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.
NEW SECTION.  Sec. 402. If any part of this act is found to be in conflict with federal requirements that are a prescribed condition to the allocation of federal funds to the state, the conflicting part of this act is inoperative solely to the extent of the conflict and with respect to the agencies directly affected, and this finding does not affect the operation of the remainder of this act in its application to the agencies concerned. Rules adopted under this act must meet federal requirements that are a necessary condition to the receipt of federal funds by the state.
NEW SECTION.  Sec. 403. Part I of this act constitutes a new chapter in Title 82 RCW.
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