A BILL for an Act to create and enact five new sections to chapter 57-36 of the North Dakota Century Code, relating to a tax on cigars, other tobacco products, alternative tobacco products, electronic smoking devices, and electronic smoking device substances and a tobacco tax distribution fund; to amend and reenact section 57-36-01, subsection 1 of section 57-36-31, and section 57-36-32 of the North Dakota Century Code, relating to the definition of alternative tobacco products, transfer and allocation of tobacco products tax revenue and tax on cigarettes; to provide a penalty; to provide a continuing appropriation; and to provide an effective date.
SB 2281 would expand North Dakota’s tobacco tax structure to cover a broader range of nicotine and tobacco products, including cigars, snuff, chewing tobacco, alternative tobacco products such as nicotine pouches and dissolvables, and electronic smoking devices and their substances. The bill also updates statutory definitions to reflect these products, including a broader definition of electronic smoking devices that captures devices and nicotine-containing substances used with them, while excluding FDA-approved nicotine replacement therapies and certain separately sold components like batteries.
The measure would impose new or revised excise taxes on these products: a 32 percent tax on cigars, 28 percent on other tobacco products, 28 percent on alternative tobacco products, and 28 percent on electronic smoking devices and vaping substances, all based on wholesale purchase price. It also amends the cigarette tax provisions and revenue allocation rules, directing certain tobacco tax receipts into a newly created tobacco tax distribution fund rather than the general fund. The fund would be continuously appropriated to the Department of Health and Human Services, with monthly distributions split between local public health units and organizations providing 988 crisis hotline services. The tax provisions would apply to taxable events after June 30, 2025.
The bill’s impact on state law would be significant because it would broaden the tax base for tobacco-related products, create a dedicated fund, and redirect a portion of tobacco tax revenue to public health and behavioral health-related uses. It would also require administrative and compliance changes for manufacturers, distributors, dealers, and retailers handling these products, while preserving existing cigarette tax collection mechanisms and adding new tax categories for products that are increasingly used as alternatives to traditional tobacco.
Overall, the bill appears to have been framed as a revenue and public health measure, with the new revenue earmarked for local public health and 988 crisis services. However, the bill failed in the Senate, indicating that it did not secure enough support to advance. The available record does not include committee testimony or recorded votes, so the broader discussion is not documented here, but the failure suggests either policy disagreement over the tax expansion, concern about the size of the tax increases, or objections to dedicating the revenue outside the general fund.
The main points of contention likely centered on taxing newer nicotine products, especially vaping products and nicotine pouches, and on the creation of a special fund that diverts revenue to specific purposes. Potential opponents may have viewed the measure as a tax increase on consumers and businesses, while supporters likely emphasized public health funding and the need to update the tax code to reflect modern tobacco and nicotine products.
SB 2281 would amend North Dakota Century Code chapter 57-36 to expand and modernize the state’s tobacco tax regime. It would add new taxable categories for cigars, other tobacco products, alternative tobacco products, and electronic smoking devices/substances, revise definitions to include nicotine pouches and similar products, and create a tobacco tax distribution fund with a continuing appropriation. The bill would also change the allocation of certain tobacco tax revenues away from the general fund and into the new fund for public health and 988 crisis hotline purposes, affecting distributors, retailers, consumers, and state tax administration.
The bill’s apparent policy goal was to raise revenue from a broader set of tobacco and nicotine products while directing the proceeds to health-related programs, which suggests a public-health-oriented rationale. At the same time, its failure indicates the proposal did not achieve sufficient legislative support. With no committee transcript or vote record available, the public sentiment can only be inferred as mixed or unfavorable enough to stop the bill, likely reflecting concern about higher taxes, the treatment of vaping and nicotine alternatives, and the earmarking of revenue.
The likely areas of contention were the expansion of taxes to newer nicotine products such as vape devices, e-liquids, nicotine pouches, and other alternative tobacco products; the size of the proposed tax rates; and the decision to create a dedicated tobacco tax distribution fund rather than sending all revenue to the general fund. Supporters would have favored the public health and 988 funding uses, while opponents may have objected to the burden on consumers and tobacco/vape businesses, as well as the administrative complexity of the new tax structure.