Committee reviews S.198 to shift wholesale tobacco licensure to DLL, raise fees and ban deceptive vape products

The Vermont House Committee on Commerce and Economic Development on April 9 examined S.198, a bill that would recast how the state regulates tobacco products and a broad set of nicotine-containing “tobacco substitutes.” Legislative Counsel Jen Karpy said the measure updates definitions, moves wholesale-dealer licensure from the Department of Taxes to the Department of Liquor and Lottery (DLL), raises license and endorsement fees, and adds a consumer-protection ban on products that imitate items marketed to children.

The panel’s consumer-protection focus centers on a new prohibition on "deceptive" devices and products: the bill would bar marketing, labeling or selling tobacco substitutes that imitate candy, school supplies, common consumer electronics, or characters and symbols known to appeal to minors. "Some of them look like toys ... they are meant to attract kids," said Rose Kennedy, Assistant Attorney General in the Consumer Protection Division, urging strong enforcement language to reach online sellers and distributors.

Why it matters: Sponsors and witnesses said the bill closes gaps in enforcement and tax collection. DLL Commissioner Wendy Knight told the committee transferring wholesale licensure to DLL would align tobacco regulation with the state’s alcohol licensing framework, give DLL subpoena and inspection tools, and allow investigators to verify whether products on retail shelves have appropriate tax evidence. "If we have access like we do for our other licenses, it's public information," Knight said, adding it helps identify unlicensed sellers.

Fiscal and compliance details: Tom Barnett of the Joint Fiscal Office summarized the fiscal note, saying fee increases would generate roughly $125,000 more in license and endorsement revenue and that placing a $1,245 fee on wholesale outlets could yield about $50,000 annually (JFO assumed 35–40 wholesale dealers). Karpy and JFO said the wholesale-license fee would take effect after the bill's delayed transfer of licensure authority; the bill's general effective date is July 1, 2026, with the wholesale-transfer provision slated for July 1, 2027.

Penalties, stamps and enforcement: The bill increases penalties for unlicensed sale and scales up administrative penalties and suspensions for repeat violations; it also expands contraband and seizure authority to include tobacco substitutes and requires that destruction of seized products comply with Agency of Natural Resources hazardous-waste rules. Kennedy asked the committee to reinstate or accelerate a tax-stamp requirement for vapes and nicotine pouches so DLL investigators can visually confirm tax payment in retail stores. "When DLL goes into a brick and mortar store, they can easily verify that the cigarettes they see on the shelves have been ... taxed because they have a very visible tax stamp," Kennedy said, arguing that many vaping products on shelves lack FDA authorization and are effectively not lawfully marketed.

Retail response and implementation questions: Maggie, representing the Commodity Hill Grocers Association, said members generally comply with underage-sales rules and expressed concern about large penalties and new fees but said the association could accept the senate's compromise and supports the deceptive-devices restrictions. Committee members pressed witnesses on how seizures and penalties are allocated (clerk vs. licensee), whether wholesale-license fees should be annual or one-time, and how DLL's online-licensing portal would be adapted; witnesses agreed to provide clarifying language and fiscal details.

Next steps: The bill includes a mandated study, due Jan. 15, 2027, directing the Department of Taxes with DLL and the Attorney General, in consultation with wholesalers, to evaluate taxing tobacco substitutes based on nicotine concentration and to assess the continued use of tax stamps. Committee members asked staff and witnesses to work with legislative counsel on statutory language, administrative penalty structure, and implementation timing before proceeding.

The committee recessed and expected to continue consideration after staff and agencies supply the requested clarifications.