Bill Summary – FastDemocracy

State of Alaska
                                                           Fiscal Note
                                                                                             Bill Version:                    HCS CSSB 45(FIN)
 2022 Legislative Session
                                                                                             Fiscal Note Number:              7
                                                                                             (H) Publish Date:                5/15/2022
 Identifier:        SB045CS(FIN)-DOR-TAX-5-10-22                              Department:        Department of Revenue
 Title:             AGE FOR NICOTINE/E-CIG; TAX E-CIG.                        Appropriation: Taxation and Treasury
 Sponsor:           STEVENS                                                   Allocation:        Tax Division
 Requester: (H) Finance                                                       OMB Component Number:               2476
 Expenditures/Revenues
 Note: Amounts do not include inflation unless otherwise noted below.                                                               (Thousands of Dollars)
                                                 Included in
                                    FY2023       Governor's
                                Appropriation      FY2023                                           Out-Year Cost Estimates
                                  Requested       Request
 OPERATING EXPENDITURES               FY 2023        FY 2023       FY 2024                     FY 2025           FY 2026            FY 2027       FY 2028
 Personal Services
 Travel
 Services
 Commodities
 Capital Outlay
 Grants & Benefits
 Miscellaneous
 Total Operating                            0.0           0.0          0.0                           0.0                0.0              0.0            0.0
 Fund Source (Operating Only)
 None
 Total                                           0.0             0.0                 0.0             0.0                0.0              0.0            0.0
 Positions
 Full-time
 Part-time
 Temporary
 Change in Revenues
 1252 DGF Temp (DGF)                          600.0                           1,200.0           1,200.0           1,200.0            1,200.0       1,200.0
 Total                                        600.0              0.0          1,200.0           1,200.0           1,200.0            1,200.0       1,200.0
 Estimated SUPPLEMENTAL (FY2022) cost:                                  0.0                (separate supplemental appropriation required)
 Estimated CAPITAL (FY2023) cost:                                       0.0                (separate capital appropriation required)
 Does the bill create or modify a new fund or account?       Yes
 (Supplemental/Capital/New Fund - discuss reasons and fund source(s) in analysis section)
 ASSOCIATED REGULATIONS
 Does the bill direct, or will the bill result in, regulation changes adopted by your agency?                Yes
 If yes, by what date are the regulations to be adopted, amended or repealed?                                12/31/22
 Why this fiscal note differs from previous version/comments:
 The committee substitute (1) extends the existing tax on other tobacco products other than cigarettes (OTP) to electronic smoking
 products (ESP) but would tax ESPs at 25% of wholesale value; (2) provides that batteries and marijuana smoking products are not
 subject to the ESP 25% tax; (3) requires that the tax collected on ESPs be accounted for separately in the general fund and designates
 the purpose of the revenue; and (4) changes the effective date to 1/1/2023. Changes in Revenues based on data from the Spring 2022
 Revenue Forecast, incorporate minor changes to assumptions from the prior fiscal note, and are shown as 1252 Designated General
 Fund Temp. Removed inflation assumption for revenue estimates in FY2027 and FY2028.
 Prepared By:             Nicole Reynolds, Deputy Director and Dan Stickel, Chief Economist                        Phone:         (907)269-6736
 Division:                Tax Division                                                                             Date:          05/10/2022 05:15 PM
 Approved By:             Eric DeMoulin, Administrative Services Director                                          Date:
                                                                                                                           OUT OF 05/10/2022
 Agency:                  Department of Revenue                                                                  REPORTED
Printed 5/15/2022                                                      Page 1 of 2                                HFC 05/12/2 022
                                                                                                                           Control Code: MGxCt
                                                                                                       HCS CSSB 45(FIN) - Fiscal Note 7
                                                  FISCAL NOTE ANALYSIS
STATE OF ALASKA                                                                    BILL NO. CSSB 045
2022 LEGISLATIVE SESSION
Analysis
   Background
   Alaska's excise tax on other tobacco products (OTP) is levied at a rate of 75% of the wholesale value. Currently, all revenue
   from the tax on OTP is deposited into the General Fund. This bill would extend the existing tax on OTP to electronic
   smoking products (ESPs) but would tax ESPs at 25% of wholesale value. Currently, ESPs do not fall under the definition of
   tobacco products and are not subject to tax at the state level. Batteries and marijuana smoking products would not be
   taxable under this bill. The tax rate for OTP would remain unchanged at 75% of the wholesale value. This bill would levy
   the tax when an ESP is brought into the state for sale or when an ESP is manufactured in the state for sale in the state. The
   person bringing an ESP into the state for sale or manufacturing the product in the state would be required to be licensed
   by the Tax Division. There is an application fee of $50 for a tobacco products license. This bill also raises Alaska's legal age
   for nicotine consumption from 19 to 21, to conform with federal law. This bill would be effective January 1, 2023.
   Revenue Impact
   No revenue impact is expected from the age change, as sellers have already adjusted selling practices to reflect federal
   law.
   The Department of Revenue (Department) estimates that taxing ESPs at 25% of the wholesale price would generate an
   additional $0.6 million in revenue in FY2023 (representing a half year of tax), then $1.2 million in FY2024 and
   beyond. These revenue impacts do not account for potential increases in wholesale value due to inflation. The bill
   designates the purpose of revenue collected for education, programs, and advertising relating to the hazards of ESPs. The
   Department has reflected this revenue under a temporary designated general fund code.
   These estimates use updated data from the MatanuskaSusitna Borough's tax on ESP sales and updated population data to
   develop an estimated tax base for Alaska. Since there is no statewide data available for ESP sales, there is a wide range of
   uncertainty around the revenue estimates. Given the wide range of uncertainty, no additional adjustment was made to
   FY2024 revenue estimates to account for potential stockpiling of ESPs in advance of the effective date of the tax.
   Department research suggests that some ESPs currently brought into the state are purchased by the final consumer over
   the internet. Shipments to the final consumer would not be taxable under this bill because the excise tax is only levied on
   products brought into the state for sale or manufactured in the state for sale in the state. This fiscal analysis does not
   include ESPs purchased online by the final consumer.
   Implementation Cost
   This bill would require the Department to update its Tax Revenue Management System (TRMS) and Revenue Online (ROL)
   which allows a taxpayer to file a return online. The update would consist of reprogramming both systems, updating the
   return rules in TRMS and testing both systems thoroughly to verify that they function as expected. We would also need to
   update the current tax return forms. However, this bill would not require the Department of Revenue to make material
   changes to its Tax Revenue Management System (TRMS). Therefore, there would be no cost to the Department of
   Revenue for implementation.
   The Department does not anticipate any continuing costs or additional staff needs. The Department does estimate that
   there will be new taxpayers  the specialty shops that bring ESPs into the state for sale  which will be an additional
   administrative burden on the Division, but one that the Department can absorb.
(Revised 11/23/2021 OMB/LFD)                                                                                           Page 2 of 2
SB045CS(FIN)-DOR-TAX-5-10-22                                     Page 2 of 2                                               Control Code: MGxCt
Statutes affected: 
SB0045A, AM SB 45, introduced 01/25/2021: 11.76.100, 43.70.075, 04.11.090, 04.11.110, 04.11.150, 11.76.105, 11.76.106, 11.76.109, 43.50.010, 43.50.105, U.S.C, 43.50.150, 43.50.390, 43.50.300, 43.50.310, 43.61.010, 43.61.030, 43.50.320, 43.50.090, 43.50.190, 43.50.330, 43.50.335, 43.50.340, 44.64.010, 44.64.060, 11.76.107, 47.12.030, 29.35.085, 29.25.070, 12.55.055
SB0045B, AM CSSB 45(L&C), introduced 03/24/2021: 11.76.100, 43.70.075, 04.11.090, 04.11.110, 04.11.150, 11.76.105, 11.76.106, 11.76.109, 43.50.010, 43.50.390, 43.50.105, U.S.C, 43.50.150, 43.50.300, 43.50.310, 43.61.010, 43.61.030, 43.50.320, 43.50.090, 43.50.190, 43.50.330, 43.50.335, 43.50.340, 43.50.350, 37.05.142, 44.64.010, 44.64.060, 11.76.107, 45.50.471, 47.12.030, 29.35.085, 29.25.070, 12.55.055
SB0045C, AM CSSB 45(FIN), introduced 04/15/2022: 11.76.100, 43.70.075, 04.11.090, 04.11.110, 04.11.150, 11.76.105, 11.76.106, 11.76.109, 43.50.010, 11.81.900, 43.50.105, U.S.C, 43.50.150, 43.50.390, 43.50.300, 43.50.310, 43.61.010, 43.61.030, 17.38.900, 43.50.320, 43.50.090, 43.50.190, 43.50.330, 43.50.335, 43.50.340, 43.50.350, 37.05.142, 44.64.010, 44.64.060, 11.76.107, 45.50.471, 47.12.030, 29.35.085, 29.25.070, 12.55.055, 04.16.050
SB0045D, AM HCS CSSB 45(FIN), introduced 05/15/2022: 11.76.100, 43.70.075, 11.76.105, 11.76.106, 11.76.109, 43.50.010, 04.11.090, 04.11.110, 04.11.150, 11.81.900, 43.50.105, U.S.C, 43.50.150, 43.50.390, 43.50.300, 43.50.310, 03.05.076, 17.38.900, 43.50.320, 43.50.090, 43.50.190, 43.50.330, 43.50.335, 43.50.340, 43.50.350, 37.05.142, 44.64.010, 44.64.060, 11.76.107, 45.50.471
SB0045E, AM HCS CSSB 45(FIN) am H, introduced 05/17/2022, passed House 05/18/2022: 11.76.100, 43.70.075, 11.76.105, 11.76.106, 11.76.109, 43.50.010, 04.11.090, 04.11.110, 04.11.150, 11.81.900, 43.50.105, U.S.C, 43.50.150, 43.50.390, 43.50.300, 43.50.310, 03.05.076, 17.38.900, 43.50.320, 43.50.090, 43.50.190, 43.50.330, 43.50.335, 43.50.340, 43.50.350, 37.05.142, 44.64.010, 44.64.060, 11.76.107, 45.50.471
SB0045Z, AM Enrolled SB 45, introduced 05/18/2022: 11.76.100, 43.70.075, 11.76.105, 11.76.106, 11.76.109, 43.50.010, 04.11.090, 04.11.110, 04.11.150, 11.81.900, 43.50.105, U.S.C, 43.50.150, 43.50.390, 43.50.300, 43.50.310, 03.05.076, 17.38.900, 43.50.320, 43.50.090, 43.50.190, 43.50.330, 43.50.335, 43.50.340, 43.50.350, 37.05.142, 44.64.010, 44.64.060, 11.76.107, 45.50.471
SB0045D, AM HCS CSSB 45(FIN), introduced 05/12/2022: 11.76.100, 43.70.075, 11.76.105, 11.76.106, 11.76.109, 43.50.010, 04.11.090, 04.11.110, 04.11.150, 11.81.900, 43.50.105, U.S.C, 43.50.150, 43.50.390, 43.50.300, 43.50.310, 03.05.076, 17.38.900, 43.50.320, 43.50.090, 43.50.190, 43.50.330, 43.50.335, 43.50.340, 43.50.350, 37.05.142, 44.64.010, 44.64.060, 11.76.107, 45.50.471