LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: HB 179 HLS 23RS 301
Bill Text Version: REENGROSSED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: May 22, 2023 1:50 PM Author: WHEAT
Dept./Agy.: Revenue
Subject: Prohibition of sales of certain vaping products Analyst: Deborah Vivien
TOBACCO/TOBACCO PRODUCTS RE DECREASE GF RV See Note Page 1 of 1
Provides relative to the sale of certain vapor products for electronic cigarettes and similar devices
Current law imposes a tax of $0.05 per milliliter of consumable nicotine liquid solution or other material containing nicotine
that is depleted as a vapor product is used. Vaping products are also subject to state sales tax. The proceeds primarily
accrue to the state general fund.
Proposed law prohibits the sale or service of consumable nicotine liquid solution containing a characterizing flavor on or
about any premises which sells tobacco products, alternative nicotine products or vapor products. Proposed law mandates
that all vaping products sold in the state must be purchased from a Louisiana wholesaler. Proposed law limits nicotine
products sold in the state to those with a pending, appealed or granted application for a FDA marketing order (product on
market by 8/1/16 and applied by 9/9/20) with information submitted by the manufacturer to ATC beginning 10/1/23. The
ATC must maintain and publish a directory of products eligible for sale in the state and will limit remittances of sales and
excise taxes to the reported products.
EXPENDITURES 2023-24 2024-25 2025-26 2026-27 2027-28 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. $95,000 $77,000 $77,000 $77,000 $77,000 $403,000
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total $95,000 $77,000 $77,000 $77,000 $77,000 $403,000
REVENUES 2023-24 2024-25 2025-26 2026-27 2027-28 5 -YEAR TOTAL
State Gen. Fd. DECREASE DECREASE DECREASE DECREASE DECREASE
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total
EXPENDITURE EXPLANATION
Initially, the Office of Alcohol and Tobacco Control (ATC) indicated that enforcement efforts are currently accommodated in the budget,
and no additional permits will be required. However, after publication of the engrossed bill fiscal note, ATC submitted a revised fiscal note
response stating that this bill will require 4 additional agents at a total cost of $381,000 in FY 24 and $225,000-$250,000 annually
thereafter. The justification concerned enforcement efforts spread among the 30 agents at ATC that will take longer given the specific
nature of the prohibited products as conducted by more than 7,000 businesses selling tobacco products. The reengrossed version of the
bill retains the prohibitions but also limits sales for resale to those made through a wholesaler in the state. ATC is required to create and
maintain a directory of approved products that may be sold in the state. Compared to current enforcement, the bill appears to streamline
efforts once fully operational but could require additional resources for the initial implementation. At publication, LFO has not received an
updated expenditure estimate from ATC so assumes these efforts can be accomplished with the engrossed bill expenditure estimate.
The Legislative Fiscal Office does not concur that four agents are needed to implement this bill but concedes that one additional agent may
alleviate the extra time requirements possible with enforcement of more nuanced product prohibitions as compared to existing efforts. To
the extent one agent proves insufficient, additional resources may be required. The expense of one agent is valued from the submitted
ATC figures divided by 4, which is rounded to $95,000 in FY 24 and $55,000 annually thereafter (plus 40% for related benefits). ATC
indicates that self-generated revenue (SGR) is available to cover the additional expenses, which is substantiated by actual collections
compared to appropriations over the last 5 years. As an agency allowed to retain SGR each year, ATC currently has about $11.2 M in
reserve and has collected an average of $372,000 more than appropriated each year for the last 5 years. When comparing actual
collections to actual spending through FY 22, ATC has added an average of $1.1 M to reserves annually since FY 18.
REVENUE EXPLANATION
The sale prohibition portion of the bill will serve to reduce state general fund revenue by an amount equal to current excise and sales
taxes collected on products that would no longer be allowed for sale, namely nicotine containing vaping products with characterizing
flavors. However, the bill also requires sales for resale to be made through wholesalers, which would prohibit sales of product purchased
directly from the manufacturer. ATC must create a directory of products eligible to be sold in the state tied to federal provisions. To the
extent the new sales regime is enforceable, limiting access to wholesalers could increase excise tax collections as testimony indicated that
sales directly from manufacturers may not be remitting taxes appropriately. However, the timing and effectiveness of these enforcement
provisions lack the certainty to place an explicit value on potential impacts, particularly since vaping is a relatively new market and the
enforcement provisions may require a substantial ramp up. Current collections of excise tax on liquid nicotine are roughly $5M per year
and sales tax of an indeterminate amount is collected on the retail purchase of vaping products.
To the extent that these nicotine products contain characterizing flavors, defined in the bill as certain listed flavors other than tobacco,
mint or menthol imparted prior to or during consumption, the sale prohibition would reduce state general fund. It is not clear the extent
to which consumers will instead buy nicotine vaping products that do not contain characterizing flavors, which would continue to be
available.
The bill does not appear to address the availability of these products online as the sale and service prohibition in the bill is based on the
premises of the sale. However, it is also not clear whether online vendors are in compliance with sales and excise tax remittance
requirements.
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Alan M. Boxberger
13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} or a Net Fee Decrease {S} Interim Legislative Fiscal Officer


Statutes affected:
HB179 Reengrossed: 26:911(B)(1)