Vote on Chicago Tobacco Ordinance Delayed Until March 16, 2016

Earlier today, the Chicago City Council’s Finance Committee voted 22-9 to approve an amended tobacco ordinance which increases the legal age to purchase tobacco to 21, sets minimum prices for certain tobacco products, mandates minimum package sizes for various tobacco products, prohibits the redemption of tobacco product coupons, outlaws multi-pack discount pricing, and assesses new taxes on other tobacco products.  However, when the full Chicago City Council met this afternoon, a group of city council aldermen used a parliamentary procedure to delay a final vote on the proposed tobacco ordinance to the city council’s next meeting on March 16, 2016.

The amended ordinance also provides that if a lawsuit is brought against the City of Chicago which results in a court overturning the new tax on other tobacco products, then the minimum price and minimum package size requirements would take effect.  The amended ordinance goes on to state that if a lawsuit is not brought to overturn the new OTP tax, then the minimum price and minimum package size requirements would not take effect.

Mayor Rahm Emanuel, the original sponsor of the ordinance, also agreed to amend ordinance to double the fine for the sale of loose cigarettes to $5,000 for the first violation and $10,000 for repeat offenses, while also using some of the revenue from the new tax on tobacco products to fund smoking cessation programs in addition to funding incoming high school orientation programs.  In addition, the mayor promised to increase city and police enforcement against the sale of single cigarettes and report back to the city council annually on the progress of the stepped up enforcement.

The parliamentary maneuver to delay the final city council vote occurred because a number of the Chicago City Council members raised questions about the ordinance during a Chicago Finance Committee hearing on the proposed ordinance earlier this week.  The questions and concerns raised by council members included the lack of legal authority for the city council to adopt a new OTP tax, the impact of such a tax on lower income residents, the expansion of the current black market in Chicago, the loss of retail jobs, the likelihood of retail store closings, and the fact that 18, 19 and 20 year olds are adults and should be allowed to decide whether to buy and use tobacco products.

Turnout by retailers at this Finance Committee hearing was very high, with approximately fifty 7-11 franchisee owners attending and the president of the Illinois 7-11 franchisee association testifying against the ordinance.  NATO Board Member Mike Gold, the owner of Arango Cigar Company, testified about the lack of regulation of premium cigar sales over the Internet, the fact that the proposed minimum prices on premium cigars will drive more consumers to buy their cigars over the Internet resulting in lost retail sales and lost excise tax and sales tax revenue for the city, and that four tobacco stores have already closed in the past several years.

NATO Executive Director Thomas Briant testified about the Illinois state law that prohibits Chicago from enacting an OTP tax while also responding to misinformation from ordinance advocates, opposing the age 21 provision, and explaining how the minimum pricing would expand the current black market in the City of Chicago.

The amended ordinance as approved by the Finance Committee creates a dilemma for retailers who will be forced to decide whether to pursue their legal rights to overturn the new OTP tax and face minimum price and package size mandates, or give up their legal rights and involuntarily agree to an unlawful tax on tobacco products in order to avoid minimum price and package size regulations.

NATO will continue to oppose the Chicago tobacco ordinance and update members on the final city council vote to take place on March 16th.

Newly Introduced State Tobacco Bills

The following bills were recently introduced in state legislatures:

Alabama:  House Bill 57 prohibits the use and sale of novelty lighter designed to resemble a cartoon character, toy, gun, watch, musical instrument, vehicle, animal, food or beverage, or similar articles, or that plays musical notes.

Kansas:  House Bill 2583 imposes an excise tax on electronic cigarettes at a rate of 3.5% of gross receipts.

Kentucky:  House Bill 322 prohibits the self-service display of tobacco products, alternative nicotine products, and vapor products in retail stores.
New Jersey:  Assembly Bill 1832 imposes a wholesale sales tax of 75% on electronic cigarettes and similar nicotine delivery products.

New Mexico:  House Bill 300 increases the tax on cigarettes by $1.00 per pack and also increases the tax on OTP (includes electronic cigarettes) from 25% to 66% of the product value.  Senate Bill 289 adds electronic cigarettes to the New Mexico Clean Indoor Air Act.

Oklahoma:  House Bill 2317 increases the legal age to purchase tobacco and vapor products from 18 to 21 years of age.  House Bill 3147 increases the minimum sales age to purchase tobacco and vapor products from 18 to 21 over the course of the next three years.

Oregon:  Senate Bill 1559 requires retailers of tobacco products and inhalant delivery systems to obtain a license.  House Bill 4062 imposes an excise tax on the retail sale of inhalant delivery systems and inhalant form nicotine at 50% of the retail sales price. House Bill 4103 requires tobacconist/smoke shop retailers to obtain a certification from the State at a fee of $1,000.

Rhode Island:  House Bill 7427 requires child-resistant packaging for electronic delivery system liquid.  Governor Raimondo released her 2017 budget, which includes an increase in the cigarette tax from $3.75 to $4.00 per pack.

Washington:  House Bill 2969 imposes a tax on vapor products at 45% of the taxable sales price and also requires distributors and retailers of vapor products to obtain a license.

Legislative Action on State Tobacco Bills

The following is a summary of recent action that has taken place on tobacco-related bills pending in state legislatures:

California:  Senate Bill 591 and Assembly Bill 1391, which would have increased the tax on cigarettes by $2.00 per pack, both died pursuant to Constitutional provisions on January 31, 2016.

Hawaii:  Senate Bill 2408, which exempts “premium cigars” from the current self-service display ban, passed the Senate Committee on Commerce, Consumer Protection and Health on February 1, 2016.

Indiana:  House Bill 1001, which includes a $1.00 per pack cigarette tax increase, passed the House on February 2, 2016.  Senate Bill 381, which changes the stamp discount for cigarette distributors from $0.012 to $0.013 and for tobacco distributors from $0.006 to $0.007 for tobacco products other than cigarettes, passed the Senate on February 1, 2016.

Maryland:  House Bill 71, which increases the cigarette tax by $1.00 per pack, the OTP tax on moist snuff to the greater of 74% of wholesale or $3.00 per 1.2 ounce container or $3.00 per .65 ounces of loose smoking tobacco, is scheduled for a hearing in the House Ways & Means Committee on February 17, 2016.  House Bill 139, which alters the tax on premium cigars from 15% to 7.5% of the wholesale price, is scheduled for a hearing in the House Ways & Means Committee on February 10, 2016.  Senate Bill 320, which alters the tax on premium cigars from 15% to 7.5% of the wholesale price, is scheduled for a hearing in the Senate Budget and Taxation Committee on February 17, 2016.  Senate Bill 114, which prohibits the distribution of a tobacco product, electronic smoking device, cigarette papers or tobacco coupons to a minor, was reported unfavorably from the Finance Committee and withdrawn from consideration on February 4, 2016.

Nebraska:  Legislative Bill 1013, which increases the cigarette excise tax by $1.50 per pack and also increases the excise tax on other tobacco products other than moist snuff from 20% to 31% of the purchase price, will be considered by the Revenue Committee on February 11th.  Legislative Bill 727, which imposes a tax of 1% on all tobacco sales by someone who holds a cigar license, was postponed indefinitely on February 1st in the Revenue Committee.

New Jersey:  Senate Bill 359, which raises the minimum age for the purchase and sale of tobacco products and electronic smoking devices from 19 to 21, was reported from the Senate Health, Human Services and Senior Citizens Committee on February 4, 2016.

Vermont:  House Bill 171, which prohibits the use of electronic cigarettes where a lighted tobacco product use is prohibited and bans electronic cigarette displays on store counters, was heard in the House Human Services Committee on February 3, 2016.

Virginia:  House Bill 627 taxes vapor products at 15% of the manufacturer’s sales price, was stricken from the legislative agenda 2/2/16.

Washington: House Bill 2313, which increases the legal age to purchase tobacco and vapor products from 18 to 21, received a “Pass Recommendation” from the House Health Care and Wellness Committee on January 29th and was referred to the House Appropriations Committee on February 2nd.

President Obama Signs Vapor Child Resistant Packaging Bill

On January 28th, President Obama signed into law the Child Nicotine Poisoning Prevention Act of 2015 which requires liquid nicotine containers for use with e-cigarettes to meet the Consumer Product Safety Commission’s standards for child resistant packaging. The new law does not require child resistant packaging of sealed, pre-filled disposable containers of nicotine. The law goes into effect July 26, 2016.