The Virginia ABC will assess a regulatory scheme for liquid nicotine, with the consultation of stakeholders, and issue a report and recommendations.
On April 12, the Virginia General Assembly enacted House Bill 2296 and Senate Bill 1350, incorporating recommendations of Governor Glenn Youngkin to have the Virginia Alcoholic Beverage Control Authority (ABC) “assess” a potential licensing scheme for liquid nicotine manufacturers, distributors, and retail dealers, as well as administrative and enforcement matters relating to liquid nicotine licensing, age verification, product verification, and advertising restrictions. These bills effectively instruct the ABC to tell the Virginia General Assembly whether and how the Commonwealth should regulate liquid nicotine. The ABC’s report and recommendations are due by November 1, and will be informed by stakeholder input. The enactments specify that the ABC will conduct its assessment “in consultation with stakeholders, including public and community health organizations, retailers, tobacco and vaporized nicotine companies, and wholesalers.”
Current Liquid Nicotine Regulation in Virginia
The Virginia tobacco products tax law, enforced by the Department of Taxation, defines “liquid nicotine” as “a liquid or other substance containing nicotine in any concentration that is sold, marketed, or intended for use in a nicotine vapor product.” The 2020 Appropriation Act created a liquid nicotine tax and required the Department of Taxation to establish guidelines and rules for implementing a tobacco products tax on liquid nicotine. In the guidelines, the Department of Taxation included the definition of “liquid nicotine” in the definition of “tobacco products” and considered liquid nicotine to be subject to the same licensing requirements as tobacco products under the Department of Taxation’s authority. The Department of Taxation also indicated that there is no licensing requirement for retailers purchasing tax-paid product from a licensed distributor — only tobacco product distributors are required to obtain a license.
In 2021, Delegate Patrick A. Hope (D-Arlington County) patroned a bill that would have required tobacco and liquid nicotine retailers to obtain licenses from ABC and would have provided for related sales restrictions. The House Appropriations Subcommittee on Transportation and Public Safety tabled the bill but supported the Department of Taxation’s study into those matters. The Department of Taxation issued a report with “findings to assist the General Assembly in considering future action” but no specific recommendations.
Now it appears that the Commonwealth is considering the creation of a regulatory framework that directly addresses liquid nicotine, including retailer-specific requirements and potentially others.
How to Regulate? Who Should Regulate?
As originally offered in the 2023 legislative session, House Bill 2296 and Senate Bill 1350 would have addressed matters that have since been designated for the ABC’s assessment in the enacted Acts of Assembly. Those original bills would have included provisions for an excise tax on liquid nicotine at respective rates for open and closed systems; licensure of manufacturers, distributors, and retailers; age verification and penalties for sales to individuals under legal age; requirements for delivery sales; general requirements for sale and resale; and safety requirements focused on labeling, packaging, advertisement, and marketing. As explained by Delegate Hope, the patron of the House bill, these earlier versions of the bills were based on proposals of the Virginia Smoke Free Association intended “to regulate the sale of nicotine vapor products in Virginia and reduce underage sales of nicotine.”
As the legislative session progressed, Delegate Hope observed that “it’s not really a question of if we should do it, it’s more of a question of how we should do it, and there’s a lot of questions to who should set this up. If it should be Department of Taxation, or should it be ABC, or should it be someone else?” Substitute bills were introduced and made their way through the respective houses at that time, requiring the secretary of finance (who is responsible for the Department of Taxation and three other departments) to assess liquid nicotine regulation with stakeholder input. After the bills reached Governor Youngkin, another “who” question arose over which agency should conduct the assessment. Governor Youngkin returned the bills to the House and Senate with the recommendation that the ABC conduct the assessment instead of the secretary of finance. The General Assembly enacted the bills consistent with the Governor’s recommendation.
What To Look For
The General Assembly has suspended its judgment on how best to regulate liquid nicotine in the Commonwealth, and it will be interesting to see what stakeholders propose, what the ABC recommends, and whether or to what extent the substance of earlier legislative proposals is incorporated. It will also be interesting to see if the ABC recommends itself as the administrator of a proposed licensing scheme or if it would prefer that the Department of Taxation or some other agency administer it. It may make sense for the ABC to take on the role of regulating liquid nicotine retailers in the Commonwealth, while the Department of Taxation enforces tax laws, licensing, and other related requirements for upper tier suppliers, namely distributors and manufacturers. The ABC has the resources and experience to enforce a retail program given its role in enforcing retail licensing requirements for alcoholic beverages. Furthermore, several states bifurcate their tobacco product regulatory programs between state tax and alcoholic beverage authorities (e.g., Louisiana Office of Alcohol and Tobacco Control and Department of Revenue; Alabama ABC Board and Department of Revenue), so there are models from which to draw analogies. In any event, stakeholders from public health, consumer, and industry groups will want to make their voices heard as the ABC considers the liquid nicotine licensing, administration, and enforcement matters before it.
We will monitor for further developments.