AB536 - Revises provisions relating to tobacco. (BDR 32-1098)

A.B. 536 - *AB536* ASSEMBLY BILL NO. 536–COMMITTEE ON REVENUE MARCH 24, 2025 ____________ Referred to Committee on Revenue SUMMARY—Revises provisions relating to tobacco. (BDR 32-1098) FISCAL NOTE: Effect on Local Government: No. Effect on the State: Yes. ~ EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. AN ACT relating to tobacco; revising provisions governing the taxation of cigarettes that consist of tobacco that is heated but not burned; prohibiting such cigarettes from being sold through the use of a cigarette vending machine; providing a penalty; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law imposes an excise tax on the purchase or possession of cigarettes 1 at the rate of $1.80 cents per pack of 20 cigarettes. (NRS 370.165) Existing law 2 also imposes an excise tax on the receipt, purchase or sale of other tobacco 3 products, other than cigarettes, in this State. (NRS 370.450) For the purposes of 4 such taxes, a cigarette is defined as rolled tobacco, or tobacco substitute, that is 5 wrapped in paper or a substitute for paper that is not tobacco. (NRS 370.010) 6 Section 4 of this bill decreases the excise tax on cigarettes to $0.90 cents per 7 pack of 20 cigarettes if: (1) the cigarettes are intended to be heated but not burned 8 under ordinary conditions of use; (2) the United States Food and Drug 9 Administration has approved the product to be commercially marketed and 10 distributed in interstate commerce as a modified risk tobacco product; and (3) the 11 most recent postmarket surveillance and study conducted for the product in 12 accordance with federal law indicates that less than 5 percent of persons under the 13 age of 18 years have used the product. Section 1 of this bill provides that tobacco 14 that is rolled in paper and intended to be heated but not burned under ordinary 15 conditions of use is considered a cigarette for the purposes of licensing and taxation 16 in this State. Section 3 of this bill provides that such a cigarette, and any device 17 used to heat the tobacco in the cigarette is not a vapor product for the purposes of 18 licensing and taxation because such a product is licensed and taxed as a cigarette. 19 Existing federal regulations, with certain exceptions, require the sale of 20 cigarettes and smokeless tobacco to occur only in a direct, face-to-face exchange 21 without the assistance of any electronic or mechanical device, including, without 22 limitation, a vending machine. One exception to this requirement authorizes the use 23 – 2 – - *AB536* of a vending machine or self-service display to sell cigarettes or smokeless tobacco 24 if the vending machine or self-service display is located in a facility where the 25 retailer ensures that no person younger than 21 years of age is present, or permitted 26 to enter, at any time. (21 C.F.R. § 1140.16) 27 Existing state law also prohibits a retailer from selling cigarettes through the 28 use of any type of display which is located in any area to which customers are 29 allowed access and from which cigarettes are readily accessible to a customer 30 without the assistance of the retailer. (NRS 202.2493) As an exception to this 31 requirement, existing state law authorizes the sale of cigarettes through a cigarette 32 vending machine placed in certain areas in which persons who are under 21 years 33 of age are prohibited from loitering. (NRS 202.2494) Existing law also provides for 34 the licensing of operators of cigarette vending machines and the payment of the 35 excise tax on cigarettes by the operators of cigarette vending machines. (NRS 36 370.270, 370.310, 370.380, 370.567, 370.575, 370.585) Section 9 of this bill 37 prohibits the sale through a cigarette vending machine of cigarettes that are 38 intended to be heated but not burned under ordinary conditions of use, and sections 39 2 and 5-7 of this bill make conforming changes to reflect that such types of 40 cigarettes are prohibited from being sold through cigarette vending machines. 41 Under existing law, a fine of not more than $500 applies to the unlawful sale of 42 cigarettes through a cigarette vending machine. (NRS 202.2493) 43 THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. NRS 370.010 is hereby amended to read as follows: 1 370.010 “Cigarette” means all rolled tobacco or substitutes 2 therefor that is wrapped in paper or any substitute other than 3 tobacco [,] and is intended to be heated or burned under ordinary 4 conditions of use, irrespective of size or shape and whether or not 5 the tobacco is flavored, adulterated or mixed with any other 6 ingredient. 7 Sec. 2. NRS 370.015 is hereby amended to read as follows: 8 370.015 “Cigarette vending machine operator” means any 9 retail dealer licensed to sell only Nevada stamped cigarettes that are 10 intended to be burned under ordinary conditions of use by means 11 of coin-operated machines anywhere in Nevada. 12 Sec. 3. NRS 370.054 is hereby amended to read as follows: 13 370.054 “Vapor product”: 14 1. Means any noncombustible product containing nicotine or 15 any other substance that employs a heating element, power source, 16 electronic circuit or other electronic, chemical or mechanical means, 17 regardless of the shape or size thereof, that can be used to produce 18 vapor from nicotine or any other substance in a solution or other 19 form, the use or inhalation of which simulates smoking. 20 2. Includes, without limitation: 21 (a) An electronic cigarette, cigar, cigarillo, pipe, hookah, or vape 22 pen, or a similar product or device; and 23 – 3 – - *AB536* (b) The components of such a product or device, whether or not 1 sold separately, including, without limitation, vapor cartridges or 2 other container of nicotine or any other substance in a solution or 3 other form that is intended to be used with or in an electronic 4 cigarette, cigar, cigarillo, pipe, hookah, or vape pen, or a similar 5 product or device, atomizers, cartomizers, digital displays, 6 clearomizers, tank systems, flavors, programmable software or other 7 similar products or devices. As used in this paragraph, “component” 8 means a product intended primarily or exclusively to be used with or 9 in an electronic cigarette, cigar, cigarillo, pipe, hookah, or vape pen, 10 or a similar product or device. 11 3. Does not include any product: 12 (a) Regulated by the United States Food and Drug 13 Administration pursuant to subchapter V of the Federal Food, Drug, 14 and Cosmetic Act, 21 U.S.C. §§ 351 et seq. 15 (b) Subject to the excise tax on cannabis or cannabis products 16 pursuant to NRS 372A.200 to 372A.380, inclusive. 17 (c) Purchased by a person who holds a current, valid medical 18 cannabis establishment license pursuant to chapter 678B of NRS. 19 (d) Subject to an excise tax on cigarettes pursuant to NRS 20 370.0751, 370.165 or 370.350. 21 (e) That includes a device to heat a cigarette that is heated but 22 not burned under ordinary conditions of use. 23 Sec. 4. NRS 370.165 is hereby amended to read as follows: 24 370.165 [There] 1. Except as otherwise provided in this 25 subsection, there is hereby levied a tax upon the purchase or 26 possession of cigarettes by a consumer in the State of Nevada at the 27 rate of 90 mills per cigarette. The tax upon the purchase or 28 possession of cigarettes by a consumer in the State of Nevada must 29 be levied at a rate of 45 mills per cigarette if: 30 (a) The cigarettes are intended to be heated but not burned 31 under ordinary conditions of use; 32 (b) The United States Food and Drug Administration has 33 approved the product to be commercially marketed and distributed 34 in interstate commerce as a modified risk tobacco product 35 pursuant to 21 U.S.C. § 387k; and 36 (c) The most recent postmarket surveillance and study 37 conducted for the product pursuant to 21 U.S.C. § 387k(i) 38 indicates that less than 5 percent of persons under the age of 18 39 years have used the product. 40 2. The tax may be represented and precollected by the affixing 41 of a revenue stamp or other approved evidence of payment to each 42 package, packet or container in which cigarettes are sold. The tax 43 must be precollected by the wholesale or retail dealer, and must be 44 recovered from the consumer by adding the amount of the tax to the 45 – 4 – - *AB536* selling price. Each person who sells cigarettes at retail shall 1 prominently display on the premises a notice that the tax is included 2 in the selling price and is payable under the provisions of this 3 chapter. 4 Sec. 5. NRS 370.270 is hereby amended to read as follows: 5 370.270 1. Each retail dealer shall, not later than 5 calendar 6 days after the retail dealer takes possession of a package of 7 cigarettes, see that the package has the Nevada cigarette stamp 8 properly affixed. 9 2. Every cigarette vending machine operator placing in his or 10 her coin-operated cigarette vending machines cigarettes [in his or 11 her coin-operated cigarette vending machines] that are intended to 12 be burned under ordinary conditions of use for sale to the ultimate 13 consumers shall at the time of placing them in the machine see that 14 each package has the Nevada cigarette stamp properly affixed. 15 3. No unstamped packages of cigarettes may lawfully be 16 accepted or held in the possession of any person, except as 17 authorized by law or regulation. For the purposes of this subsection, 18 “held in possession” means: 19 (a) In the actual possession of the person; or 20 (b) In the constructive possession of the person when cigarettes 21 are being transported or held for the person or for his or her 22 designee by another person. Constructive possession is deemed to 23 occur at the location of the cigarettes being transported or held. 24 4. Any cigarettes found in the possession of any person except 25 a person authorized by law or regulation to possess them, which do 26 not bear such identifying marks as are necessary to ascertain the 27 origin of the cigarettes and numbering in a legible manner on the 28 Nevada excise tax stamp, must be seized by the Department or any 29 of its agents, and caused to be stamped by a licensed wholesale 30 dealer, or confiscated and sold by the Department or its agents to the 31 highest bidder among the licensed wholesale dealers in this State 32 after due notice to all licensed Nevada wholesale dealers has been 33 given by mail to the addresses contained in the Department’s 34 records. If there is no bidder, or in the opinion of the Department the 35 quantity of the cigarettes is insufficient, or for any other reason such 36 disposition would be impractical, the cigarettes must be destroyed or 37 disposed of as the Department may see fit. The proceeds of all sales 38 must be classed as revenues derived under the provisions of NRS 39 370.007 to 370.430, inclusive. 40 5. Any cigarette vending machine in which unstamped 41 cigarettes are found may be so seized and sold to the highest bidder. 42 Sec. 6. NRS 370.380 is hereby amended to read as follows: 43 370.380 1. It is unlawful for a person, with the intent to 44 defraud the State: 45 – 5 – - *AB536* (a) To alter, forge or counterfeit any license or stamp provided 1 for in this chapter; 2 (b) To have in his or her possession any forged, counterfeited, 3 spurious or altered license or stamp with the intent to use the same, 4 knowing or having reasonable grounds to believe the same to be 5 such; 6 (c) To have in his or her possession one or more cigarette 7 stamps which he or she knows have been removed from the pieces 8 of packages or packages of cigarettes to which they were affixed; 9 (d) To affix to any piece of a package or package of cigarettes a 10 stamp which he or she knows has been removed from any other 11 piece of a package or package of cigarettes; or 12 (e) To have in his or her possession for the purpose of sale 13 cigarettes which do not bear indicia of the State of Nevada excise 14 tax stamping. Presence in a cigarette vending machine of the 15 cigarettes [in a cigarette vending machine] that are intended to be 16 burned under ordinary conditions of use is prima facie evidence of 17 the purpose to sell. 18 2. A person who violates any of the provisions of subsection 1 19 is guilty of a category C felony and shall be punished as provided in 20 NRS 193.130. 21 Sec. 7. NRS 370.585 is hereby amended to read as follows: 22 370.585 A current license as a: 23 1. Manufacturer authorizes the holder thereof to: 24 (a) Sell cigarettes from the premises for which the license was 25 issued to a licensed wholesale dealer of cigarettes in this State; 26 (b) Ship cigarettes to a licensed logistics company; and 27 (c) Temporarily store, fulfill orders for or coordinate the 28 transport or delivery of cigarettes by using a licensed warehouse or 29 distribution center. 30 2. Wholesale dealer of cigarettes authorizes the holder thereof 31 to: 32 (a) Purchase unstamped cigarettes from any manufacturer who 33 holds a current license; 34 (b) Purchase stamped cigarettes from a licensed wholesale 35 dealer of cigarettes; 36 (c) Sell stamped cigarettes from the premises for which the 37 license was issued to any Indian tribe or colony listed by the 38 Department pursuant to NRS 370.571, to any licensed wholesale 39 dealer of cigarettes or to any licensed tobacco retail dealer; and 40 (d) Temporarily store and fulfill orders for stamped cigarettes at 41 a licensed warehouse or distribution center or through a licensed 42 logistics company. 43 3. Wholesale dealer of other tobacco products authorizes the 44 holder thereof to: 45 – 6 – - *AB536* (a) Purchase other tobacco products from any manufacturer of 1 other tobacco products or wholesale dealer of other tobacco 2 products; 3 (b) Sell other tobacco products from the premises for which the 4 license was issued to any Indian tribe or colony listed by the 5 Department pursuant to NRS 370.571, to any wholesale dealer of 6 other tobacco products who holds a current license or to any tobacco 7 retail dealer who holds a current license; and 8 (c) Temporarily store and fulfill orders for other tobacco 9 products at a licensed warehou [Text truncated for display. Full text available on LegiScan.]