SENATE HEALTH, HUMAN SERVICES AND SENIOR CITIZENS COMMITTEE

STATEMENT TO

SENATE, No. 1867

with committee amendments

STATE OF NEW JERSEY

DATED:  MAY 19, 2014

      The Senate Health, Human Services, and Senior Citizens Committee reports favorably and with amendments Senate Bill No. 1867.

      The bill, as amended, increases the rate of tax imposed on tobacco products under the New Jersey tobacco products wholesale sales and use tax, imposes the tax on electronic cigarettes, changes the base of the tax, requires licenses to conduct business in tobacco products, dedicates certain revenues collected from the tax, and defines tobacco products for purposes of the New Jersey Smoke-Free Air Act.   

      The bill increases, from 30% to 68%, the general tax rate imposed on tobacco products under the tobacco products wholesale sales and use tax, increases, from $0.75 per ounce to $2.25 per ounce, the current weight-based tax on moist snuff, and establishes specific per unit rates of tax for certain other tobacco products.  Under the bill,

      -- cigars will be subject to the tobacco products wholesale sales and use tax at a rate of $2.70 for each cigar,

      -- cigarillos will be subject to tax at a rate of $0.54 for each cigarillo,

      -- little cigars will be subject to tax at a rate of $0.135 for each little cigar,

      -- single-dose smokeless tobacco products will be subject to tax at a rate of $0.135 for each single-dose smokeless tobacco product, and

      -- pipe tobacco and smoking tobacco will be subject to tax at a rate of $4.15 per ounce. 

      The bill imposes the tobacco products wholesale sales and use tax

 on electronic cigarettes.  Electronic cigarettes and similar tobacco-substitute smoking devices are designed to deliver a nicotine-based or other substance-based vapor and are often manufactured to resemble cigarettes, cigars and pipes.  Under this bill, the wholesale sales tax rate for these unregulated products and their components is imposed at a rate of 75% to impose a tax burden in line with a similar tax burden imposed upon cigarettes under the cigarette tax act.

      The bill changes the base of the tobacco products wholesale sales and use tax by reestablishing the wholesaler's price charged by the wholesaler upon their sale of any tobacco product to a retail dealer as the base upon which the tax is determined.  This was the tax base imposed under the tax first enacted in 1990 but was changed in 2002 to the manufacturer's wholesale price, which has complicated the calculation, collection and enforcement of the tax as the sale by a manufacturer to a wholesaler does not trigger the wholesaler's tax liability.

      The bill requires licensing by the Division of Taxation in the Department of the Treasury of businesses of a manufacturer, distributor, wholesaler or retailer of tobacco products under the tobacco products wholesale sales and use tax.  Currently, a tax license is not required to sell tobacco products such as cigars, chewing tobacco, pipe tobacco, and moist snuff.  The license will be in addition to the certificate of authority to collect the tax and will allow the director to conduct the same review of the background and qualifications of such businesses as under the cigarette tax act. The director will have the authority to issue the license and make rules and regulations concerning the same and impose licensing fees.  Eighty percent of the State revenue from the $50 annual licensing fees collected from retailer dealers will be credited to the special projects and development fund in the Department of Health to provide grants to local health agencies for local enforcement efforts concerning the sale and commercial distribution of tobacco products to persons under the age of 19 years.

      The bill dedicates certain revenues collected from the tax to support certain smoking cessation and addiction treatment and prevention programs and initiatives.  Under the bill, the State Treasurer is required to annually credit $22,000,000 of revenues collected from the tobacco products wholesale sales and use tax to a special, nonlapsing fund in the Department of the Treasury.  The bill provides for those funds to be annually appropriated to the department to be used to support the New Jersey State Commission on Cancer Research ($1,000,000), tobacco control, cessation, and treatment initiatives of the Department of Health ($11,000,000), substance abuse prevention and treatment programs of the Division of Mental Health and Addiction Services in the Department of Human Services ($9,000,000), poison information and education programs of the Department of Health ($500,000), and syringe access programs of the  Department of Human Services ($500,000).

      The bill also defines tobacco products for purposes of the New Jersey Smoke-Free Air Act.  Under the bill, the New Jersey Smoke-Free Air Act is amended so that tobacco products are defined to include all tobacco products subject to the tobacco products wholesale sales and use tax, but specifically exclude electronic cigarettes as those products are defined under the tax.

COMMITTEE AMENDMENTS:

      The amendments increase, from 30% to 68%, the general tax rate imposed on tobacco products under the tobacco products wholesale sales and use tax, increase, from $0.75 per ounce to $2.25 per ounce, the current weight-based tax on moist snuff, and establishes specific per unit rates of tax for certain other tobacco products.  

      The amendments dedicate $22,000,000 of revenues collected from the tobacco products wholesale sales and use tax to support certain smoking cessation and addiction treatment and prevention programs and initiatives.

      The amendments also define tobacco products for purposes of the New Jersey Smoke-Free Air Act.