Senate Bill S1089

                                 BILL NUMBER:  S1089

 TITLE OF BILL :

An act to amend the tax law and the public health law, in relation to
providing for the taxation of electronic cigarette cartridges

 PURPOSE :

This legislation would include electronic cigarette cartridges as a
tobacco product in the tax law, and would subsequently subject them to
the appropriate taxes for such items.

 SUMMARY OF SPECIFIC PROVISIONS :

Section 1 amends subdivision 2 of section 470 of the tax law, as
amended by section 15 of part D of chapter 134 of the laws of 2010 by
adding two new subdivisions 20 and 21 that add the definition of an
electronic cigarette or c-cigarette, as well as electronic cigarette
cartridge or e-cigarette cartridge.

Section 2 amends section 1399-aa of the public health law by adding a
new subdivision 14, which adds the definition of an electronic
cigarette cartridge or e-cigarette cartridge.

Section 3 sets the effective date.
              

 JUSTIFICATION :

In recent years we have begun to address the litany of issues that
have arrived with the rise in popularity of the electronic cigarette
(e-cigarette). Beginning with the ban on sales to minors, they are now
banned from being used indoors in the City of New York, and
legislation to do the same on a statewide level is being pursued.
However, the issue of taxation has yet to be addressed and this
legislation will do just that. Currently the Federal Food and Drug
Administration (FDA) has yet to rule on how to regulate these products
but many states and localities are moving ahead. New York will join
Minnesota in classifying the cartridges that contain the nicotine
and/or other chemicals that deliver the addictive drug that are found
in cigarettes and other forms of tobacco products in a vaporized form.

In December of 2010, the U.S. Court of Appeals for the D.C. Circuit
issued a decision stating that e-cigarettes and other products "made
or derived from tobacco" should be regulated as tobacco products and
that the FDA can regulate them under the Tobacco Control Act. On April
25, 2011 the FDA announced it would not appeal that ruling, and has
since been working toward forming a strategy to regulate e-cigarettes
under the Tobacco Control Act.

Those in the business of selling e-cigarettes market them as a safe
alternative to traditional forms of smoking, i.e. cigarettes,
cigarillos and many other smoking related ways of inhaling nicotine.
The truth is that to date, the FDA is unaware of what is in the
majority of these devices; those they have tested have been found to
contain not only nicotine but also detectable levels of known
carcinogens and toxic chemicals. The FDA also found that "quality
control processes used to manufacture these products are inconsistent
or non-existent." Additionally, while they are often marketed as a
smoking cessation tool or a safer alternative, there is growing
concern amongst tobacco control organizations that there is little
noticeable difference in appearance when using these devices. This
could lead to young teens being potentially lured by the e-cigarettes
and ultimately find themselves addicted to nicotine, which could very
well lead to smoking cigarettes.

Adding these products to Section 470 of the tax law will bring these
products in line with other tobacco products; they will be regulated
and taxed in the same fashion as other tobacco products. As the State
continues to fight to lessen the smoking population as a public health
measure, allowing an addictive drug like nicotine to be sold without
tax is simply counter intuitive.

 PRIOR LEGISLATIVE HISTORY :

2014: S6610
2015-2016: S722

 FISCAL IMPLICATIONS :

The State will receive significant new revenue by classifying these
products as tobacco products; they will subsequently be taxed under
existing law and new regulations promulgated by the Department of
Taxation and Finance as directed under this bill.

 EFFECTIVE DATE :
This act shall take effect on the 180th day after it shall have become
a law; provided, however, that the Department of Taxation and Finance
is authorized and directed to promulgate rules and regulations
necessary for the implementation of this act on or before such date.