2013 "Premium Cigar" Flat Rate Tax Bill SB188 Soars Through Senate, but Stalls in the House.  Self Service Cigar Display Ban Starting July 2014.

Dear Hawaii Cigar Association Supporter,

The 2013 Legislative Session has finally come to a close.  The Hawaii Cigar Association (HCA) made significant progress in moving forward through the Senate the premium cigar tax bill (SB188), and lobbied hard against bills (SB642, and HB672) that would place premium cigars behind checkout counters in retail stores, other than tobacco shops. 

While we were successful in having the behind the counter placement language removed from the bills, a ban on self service cigar displays is scheduled to take effect in July 2014.  The Hawaii Cigar Association and island retail associations, including ABC Stores, testified against these measures that are detrimental to the premium cigar industry.  It should also be noted that during conference committee on April 25, 2013, Senate Health Chair, Joshua Green, and House Consumer Protection Chair, Angus McKelvey, attempted to insert language into HB672 that would exempt premium cigars from this ban.  They argued on behalf of this exemption, but in the end were only able to achieve an effective date for July 2014.  This added year gives the HCA and island retailers the opportunity to petition for an exemption during the next legislative session, while the definition of a premium cigar in SB188 continues to be vetted.

It certainly appears that the passage of HB672 and SB642 were also the result of a trade, or agreement between opposing sides on matters not entirely related to tobacco placement.  As we recall, SB642 and the tobacco placement language was removed during the House Health Committee hearing that bill, and replaced with three pages of pro marijuana legislation that would allow people with medical marijuana cards to now possess 4 ounces of marijuana, and 7 plants.  This would be an increase of 3 ounces and 4 plants currently permitted under the law.  Once the pro marijuana language was inserted into the Senate bill, the same chair of the House Health Committee, who removed the tobacco placement language, argued against the premium cigar exemption during conference committee for HB672.  In the end, caregivers, and patients in Hawai`i are legally able to possess a quarter of a pound of marijuana, but legal aged adult customers are not permitted to handle cigars on their own, before making a purchase.

To reference these bills, various amendments, and votes you may view the following links:

SB642:  http://www.capitol.hawaii.gov/measure_indiv.aspx?billtype=SB&billnumber=642&year=2013

HB672:  http://www.capitol.hawaii.gov/measure_indiv.aspx?billtype=HB&billnumber=672&year=2013

PREMIUM CIGAR TAX BILLS (SB653, HB704 and SB188)

While both of the HCA’s premium cigar tax bills—SB653 and its companion HB704—were on track as we headed into the 2013 legislative session, the Attorney General’s office expressed concern over health issues while the bills themselves pertained only to taxation. To address this, the Hawai‘i Senate leadership introduced a short-form bill, SB188, which contained the language of the original bill. With the subject matter relating only to taxation, the bill was given a single referral to the Senate Ways and Means Committee, where it passed with amendments. On March 5, 2013 the premium cigar bill passed the Senate by a vote of twenty-four to one.  

With the blessing of the Senate, SB188 crossed to the House and was given two referrals, the first being a joint hearing with the committees on Health and on Economic Business & Development; if passed SB188 would have gone to a final hearing in Finance. Amid confusion created by tobacco manufacturers whose products do not fit the strict requirements of a premium cigar, and facing opposition from anti-tobacco groups claiming that premium cigars pose a danger to youth and are consumed in our schools, no consensus among committee members emerged, and SB188 was deferred. Though HCA advocated amending the bill leaving the “large cigar” category intact and instead replacing the phrase “no artificial flavor” with “no characterizing flavor,” House members nevertheless shelved the bill until next year.

As a last ditch effort, HCA tried to amend SB492, the last remaining tobacco product/tax-related measure in this year's session. We feverishly prepared testimony and tax data supporting our cause, and we appeared before the House Committee on Finance on April 1.  SB492 sought an additional tax of $3.20 per ounce on all tobacco products other than large cigars, small cigars and cigarettes. This tax would have been added to the current 70 percent tobacco product tax. At the hearing, Tobacco Free lobbied for an additional increase to 102 percent on all tobacco products. With a stack of testimonials three inches thick and five-hundred-plus signatures to a petition against the tax increases, SB492 was ultimately deferred as well.

Though SB188 has stalled, there is much to be optimistic about. The House will hear the premium cigar tax bill again in 2014, having already cleared the Senate. We will be working with House members to draft amendments that will hopefully placate our opponents. Many supporters have assured us that our concerns will be addressed, and that the best tax policy regarding premium cigars will be adopted in next year’s legislation. They understand that Hawai‘i continues to lose millions in tax revenue to out-of-state mail-order purchases of premium cigars.  

A number of lawmakers worked to get our bill this far, and they believe that we will close the deal in 2014. Part of this year's strategy has been to refute the claim made by Tobacco Free that premium cigars target youth. HCA went to great lengths to create a stringent definition of a premium cigar, one that excludes the machine-made, mass-produced, flavored products that do seem aimed at children. HCA reaffirms its commitment that we in no way support this element of the tobacco industry. We insist that our premium cigars cater only to adult consumers.

As we look forward to drafting amendments that we hope will satisfy House members this coming year, we should thank those Hawai‘i senators who supported our cause:

 

Senator Rosalyn Baker:  Aye with Reservation

Senator Suzanne Chun Oakland:  Aye

Senator Donovan M. Dela Cruz:  Aye

Senator Kalani English:  Aye

Senator Will Espero:  Aye

Senator Mike Gabbard:  Aye

Senator Brickwood Galuteria:  Aye

Senator Josh Green, MD:  Aye

Senator Clayton Hee:  Aye

Senator David Ige:  Aye

Senator Les Ihara:  Aye

Senator Gilbert Kahele:  Aye

Senator Gilbert Keith-Agaran:  Aye

Senator Michelle Kidani:  Aye

Senator Donna Kim:  Aye

Senator Ronald Kouchi:  Aye

Senator Clarence Nishihara:  Aye

Senator Russell Ruderman:  Aye

Senator Maile Shimabukuro:  Aye

Senator Sam Slom:  Noe

Senator Malama Solomon:  Aye with Reservation

Senator Brian Taniguchi:  Aye

Senator Laura Thielen:  Aye

Senator Jill Tokuda:  Aye

Senator Glenn Wakai:  Aye


Please take a moment to reach out and thank them for their support. Please also take the time over the next ten months to contact your district House member and encourage him or her to support the premium cigar tax bill in next year’s legislative session. In amending SB188, the HCA is not seeking to replace the large cigar category but instead to create a new premium cigar category that would be taxed at a flat $.50 per cigar. This tax parity will continue to protect our youth while benefitting everyone in Hawai‘i.

SB188:  http://www.capitol.hawaii.gov/measure_indiv.aspx?billtype=SB&billnumber=188&year=2013

To contact your State Representative you may reference:  http://www.capitol.hawaii.gov/members/legislators.aspx?chamber=H

To contact your State Senator you may reference:  http://www.capitol.hawaii.gov/members/legislators.aspx?chamber=S

It is absolutely imperative that your legislators hear from you if you want change, and protection for premium cigars under the law.  We encourage everyone to call and schedule an appointment with your elected official so that we may achieve our goals in 2014.  Please feel free to contact us prior to your meeting for talking points if needed.

Thank you,

Les Drent,

President, Hawaii Cigar Association

Owner, Kauai Cigar Company