BILL NUMBER: S5300

SPONSOR: RIVERA
 
TITLE OF BILL:  An act to amend the tax law, in relation to research
tobacco products

 
PURPOSE:

Exempts medical research tobacco products from tax and regulatory
requirements intended for commercial tobacco products.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section one exempts medical research tobacco products from the defi-
nitions of "cigarette" and "tobacco product" in the Tax Law and defines
"research tobacco products."

Section two states the effective date.

 
JUSTIFICATION:
              

Research tobacco is tobacco used only for medical research purposes and
shipped to medical researchers from out of state. A recent proposal by
the Department of Tax and Finance would subject research tobacco to
similar taxation requirements as commercial tobacco. This would effec-
tively cut off supply to New York's research institutions.

The Kentucky Tobacco Research and Development Center (KTRDC) supplies
tobacco to NY institutions to study chronic obstructive pulmonary disor-
der. KTRDC's product is sent directly to New York research institutions
without risk of diversion or sale on the commercial market, nor does
this research involve human consumption of tobacco. For these reasons,
the Department has historically exempted KTRDC from cigarette tax stamp-
ing requirements under statutory and regulatory authority (Tax Law
section 471-A "Use tax on cigarettes;" and 20 NYCRR section 76.1 "Ciga-
rette tax" / "Exemption from tax.")

In 2018, however, the Department informed research institutions that
under a new interpretation of the law and regulations, KTRDC's products
would no longer be exempt from stamping requirements and that KTRDC
would have to become a certified manufacturer under the Master Settle-
ment Agreement. This change in longstanding interpretation did not
follow any statutory or regulatory change.

KTRDC is unable to become a certified manufacturer in New York without
jeopardizing its position nationally. The company sells to dozens of
states who have never treated it as a commercial tobacco company, nor is
it subject to such requirements in its home state. Rather than risk
accepting a precedent for regulators nationally, KTRDC may simply quit
the New York market - and medical researchers have been unable to iden-
tify a comparable supplier. Even if an alternative was found, changing
suppliers mid-study would throw the validity of current research into
doubt.

The Department's longtime exemption of research tobacco from certain
regulatory requirements has facilitated medical research without any
diversion or other problems. This reinterpretation would effectively
block future research at New York institutions, and potentially invali-
date current studies. In response, this legislation defines "research
tobacco" so to limit it clearly to tobacco held by certain institutions,
for purposes of tobacco-related health research, and that shall not be
offered to consumers; and carves out such "research tobacco" from the
definition of "cigarettes" upon which taxes are imposed.

 
PRIOR LEGISLATIVE HISTORY:

2019: New bill

 
FISCAL IMPLICATIONS:

None to the State, as research tobacco has not been previously taxed.

 
EFFECTIVE DATE:
Immediate