Senate committee moves bill to shift tobacco licensure to DLL, add investigator and increase enforcement fees

The Senate Economic Development, Housing & General Affairs committee on Dec. 27 advanced S.198, a package of amendments that reorganizes how Vermont licenses and enforces laws covering tobacco products and nicotine substitutes and creates a compliance investigator at the Department of Liquor and Lottery (DLL).

Jen Carvey of the Office of Legislative Council walked the committee through draft changes, saying, “This draft is on your committee page,” and explaining the proposal moves wholesale-dealer licensing and many definitions out of Title 32 (tax law) and into Title 7 under DLL so enforcement and licensure are handled in the division that already regulates alcohol and similar retail licensing. Carvey said the draft consolidates several wholesaler provisions into single sections and makes conforming edits across the tobacco chapters.

The bill standardizes civil penalties for sales without a license and aligns penalty language with the retail statute; committee discussion flagged proposed increases that would make first-offense penalties substantially higher than current figures. Carvey described the enforcement change and the investigator position’s funding: the draft directs $160,000 from the Tobacco Litigation Settlement Fund for fiscal year 2027 to start the DLL investigator and expresses legislative intent that funding continue in FY28, with the position intended to be self-funded by enforcement recoveries by FY29 and subject to reporting requirements. Carvey said the investigator would focus on online and direct-to-consumer sales.

A Joint Fiscal Office analyst told the committee the current revenue tied to the tobacco licensing structure is small — roughly $31,000 under existing fee practices — and that decoupling and setting a $1,000 annual fee for both tobacco licenses and substitute endorsements could produce as much as $1.3 million under their modeling, assuming current licensees obtain the new license. The analyst cautioned that revenue depends heavily on licensee behavior and that some retailers could drop out if fees are set too high.

Members pressed for clarity about license counts and fee mechanics; JFO corrected its figures during the hearing to about 784 tobacco licenses and 518 substitute endorsements. The analyst also reported that the Tobacco Litigation Settlement Fund had an approximate cash balance that could absorb the investigator’s cost for two years but warned the fund’s structure would make sustained funding beyond that uncertain.

Public-health advocates urged measures to reduce youth harm rather than punish young users. A coalition representative testified that marketing and flavored products attract youth and argued the bill’s approach should remove penalties for minors to lower barriers to seeking help.

After committee discussion and additional drafting clarifications, a committee member moved to report the bill favorably with the committee amendment using draft 2.2. The clerk called the roll and recorded the vote as 5-0 in favor to report the bill to the next stage. The bill will proceed to the Finance committee for further review of fiscal impacts, fees and penalties; the draft also directs a separate report from the Department of Taxes and DLL on options for taxing nicotine concentration and the future of tax stamps.

Why it matters: The bill shifts licensing and enforcement into DLL and increases civil penalty and licensing fee authority, which committee members said is intended to strengthen prevention and enforcement, especially for online sales and direct-to-consumer distribution channels that have been harder to police.

Next steps: The committee reported the bill favorably with amendment and the measure will be considered in Finance, where revenue and fee levels will be reviewed.