SB 3205: Taxation; Electronic Smoking Devices; E-Liquid; Vaping; University of Hawaii; Hawaii Cancer Research Special Fund

THE SENATE	S.B. NO.	3205
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The legislature finds that electronic smoking devices are battery-operated devices that emit doses of nicotine and non-nicotine vaporized solutions to users, a practice popularly called "vaping."  Since electronic smoking devices were introduced to consumers, their usage has rapidly grown, especially among young people.  Since 2014, electronic cigarette devices have been the most widely used tobacco product among youth in the United States.

     In 2018, the United States Surgeon General classified the danger of youth use of electronic smoking devices as an epidemic.  This epidemic was disproportionately felt in Hawaii, with studies finding that the youth vaping rate in the State was among the highest in the country.  Given the dangerous health impacts of electronic smoking devices, the potential consequences of this statistic were alarming.

     In response to the high rates of electronic smoking device usage among the State's youth, the legislature enacted Act 62, Session Laws of Hawaii 2023 (Act 62), which took several steps to address this epidemic.  In particular, Act 62 established a seventy per cent excise tax on each electronic smoking device or e-liquid sold, used, or possessed by a wholesaler or dealer.

     Despite the passage of Act 62, the use of electronic smoking devices among the State's youth continues to grow at a concerning rate, and addiction to these products remains an epidemic.  Therefore, the legislature finds that the tax rate on these products must be increased to discourage vaping and decrease addiction rates.  The legislature further finds that the additional tax revenue generated by the tax increase should be allocated to cancer research to help address the long-term health impacts caused by electronic smoking devices.

     Accordingly, the purpose of this Act is to:

     (1)  Increase from seventy per cent to ninety per cent the taxation rate on electronic smoking devices and e‑liquid sold, used, or possessed by a wholesaler or dealer after December 31, 2026; and

     (2)  Provide for the deposit of the additional tax revenue into the Hawaii cancer research special fund for use by the cancer center of Hawaii at the university of Hawaii.

     SECTION 2.  Section 245-3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Every wholesaler or dealer, in addition to any other taxes provided by law, shall pay, for the privilege of conducting business and other activities in the State, an excise tax equal to:

     (1)  5.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, 1998, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

     (2)  6.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after September 30, 2002, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

     (3)  6.50 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, 2003, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

     (4)  7.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer after June 30, 2004, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

     (5)  8.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after September 30, 2006, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

     (6)  9.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after September 30, 2007, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

     (7)  10.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after September 30, 2008, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

     (8)  13.00 cents for each cigarette sold, used, or possessed by a wholesaler or dealer on and after July 1, 2009, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

     (9)  11.00 cents for each little cigar sold, used, or possessed by a wholesaler or dealer on and after October 1, 2009, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

    (10)  15.00 cents for each cigarette or little cigar sold, used, or possessed by a wholesaler or dealer on and after July 1, 2010, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

    (11)  16.00 cents for each cigarette or little cigar sold, used, or possessed by a wholesaler or dealer on and after July 1, 2011, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

    (12)  18.00 cents for each cigarette or little cigar sold, used, or possessed by a wholesaler or dealer on and after January 1, 2026, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

    (13)  Seventy per cent of the wholesale price of each article or item of tobacco products, other than large cigars, electronic smoking devices, and e-liquids, sold by the wholesaler or dealer on and after September 30, 2009, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer;

    (14)  Fifty per cent of the wholesale price of each large cigar of any length sold, used, or possessed by a wholesaler or dealer on and after September 30, 2009, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer; [and]

    (15)  Seventy per cent of the wholesale price of each electronic smoking device or e-liquid sold, used, or possessed by a wholesaler or dealer on and after January 1, 2024, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer[.]; and

    (16)  Ninety per cent of the wholesale price of each electronic smoking device or e-liquid sold, used, or possessed by a wholesaler or dealer on and after January 1, 2027, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer.

Where the tax imposed has been paid on cigarettes, little cigars, or tobacco products that thereafter become the subject of a casualty loss deduction allowable under chapter 235, the tax paid shall be refunded or credited to the account of the wholesaler or dealer.  The tax shall be applied to cigarettes through the use of stamps."

     SECTION 3.  Section 245-15, Hawaii Revised Statutes, is amended to read as follows:

     "§245-15  Disposition of revenues.  All moneys collected pursuant to this chapter shall be paid into the state treasury as state realizations to be kept and accounted for as provided by law; provided that, of the moneys collected under the tax imposed pursuant to:

     (1)  Section 245-3(a)(5), after September 30, 2006, and prior to October 1, 2007, 1.0 cent per cigarette shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures;

     (2)  Section 245-3(a)(6), after September 30, 2007, and before October 1, 2008:

          (A)  1.5 cents per cigarette shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures;

          (B)  0.25 cents per cigarette shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5; and

          (C)  0.25 cents per cigarette shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234;

     (3)  Section 245-3(a)(7), after September 30, 2008, and before July 1, 2009:

          (A)  2.0 cents per cigarette shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures;

          (B)  0.5 cents per cigarette shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5;

          (C)  0.25 cents per cigarette shall be deposited to the credit of the community health centers special fund established pursuant to section 321‑1.65; and

          (D)  0.25 cents per cigarette shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234;

     (4)  Section 245-3(a)(8), after June 30, 2009, and before July 1, 2013:

          (A)  2.0 cents per cigarette shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures;

          (B)  0.75 cents per cigarette shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5;

          (C)  0.75 cents per cigarette shall be deposited to the credit of the community health centers special fund established pursuant to section 321‑1.65; and

          (D)  0.5 cents per cigarette shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321-234;

     (5)  Section 245-3(a)(11), after June 30, 2013, and before July 1, 2015:

          (A)  2.0 cents per cigarette shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures;

          (B)  1.5 cents per cigarette shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5;

          (C)  1.25 cents per cigarette shall be deposited to the credit of the community health centers special fund established pursuant to section 321‑1.65; and

          (D)  1.25 cents per cigarette shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234;

     (6)  Section 245-3(a)(11), after June 30, 2015, and before January 1, 2026:

          (A)  2.0 cents per cigarette shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures;

          (B)  1.125 cents per cigarette, but not more than $7,400,000 in a fiscal year, shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5;

          (C)  1.25 cents per cigarette, but not more than $8,800,000 in a fiscal year, shall be deposited to the credit of the community health centers special fund established pursuant to section 321‑1.65; and

          (D)  1.25 cents per cigarette, but not more than $8,800,000 in a fiscal year, shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234; [and]

     (7)  Section 245-3(a)(12), after December 31, 2025, and thereafter:

          (A)  4.0 cents per cigarette shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures; provided that, until June 30, 2030, of each amount deposited under this paragraph to the credit of the Hawaii cancer research special fund, 4.0 cents per cigarette shall be used exclusively for debt service of capital expenditures and building maintenance; provided further that beginning July 1, 2030, of each amount deposited under this paragraph to the credit of the Hawaii cancer research special fund, 2.0 cents per cigarette shall be used exclusively for debt service of capital expenditures and building maintenance;

          (B)  1.125 cents per cigarette, but no more than $7,400,000 in a fiscal year, shall be deposited to the credit of the trauma system special fund established pursuant to section 321-22.5;

          (C)  1.25 cents per cigarette, but no more than $8,800,000 in a fiscal year, shall be deposited to the credit of the community health centers special fund established pursuant to section 321‑1.65; and

          (D)  1.25 cents per cigarette, but no more than $8,800,000 in a fiscal year, shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234[.]; and

     (8)  Section 245-3(a)(16), after December 31, 2026, and thereafter, twenty-two per cent of the taxes collected shall be deposited to the credit of the Hawaii cancer research special fund, established pursuant to section 304A-2168, for research and operating expenses and for capital expenditures.

The department shall provide an annual accounting of these dispositions to the legislature."

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect upon its approval.

 

INTRODUCED BY:	_____________________________

 

 

 

Report Title:

Taxation; Electronic Smoking Devices; E-Liquid; Vaping; University of Hawaii; Hawaii Cancer Research Special Fund

 

Description:

Increases from 70% to 90% the taxation rate on electronic smoking devices and e-liquid sold, used, or possessed by a wholesaler or dealer after 12/31/2026.  Provides for the deposit of the additional tax revenue into the Hawaii cancer research special fund.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.