Phillip Morris International (PMI) requested a declaratory statement regarding the taxability of their IQOS “heat stick” tobacco products. During the pendency of the ABT response, the First District Court of Appeal released an opinion expanding the judicial interpretation of the term “loose tobacco suitable for smoking” as used in chapter 210, Florida Statutes, to include hookah products. This change pivoted from the traditional interpretation that “suitable for smoking” required some sort of ignition/combustion of the actual tobacco product, and also clarified that tobacco leaves/trimmings in conjunction with a binding agent can still be considered “loose tobacco."

The opinion created tension with a prior ABT declaratory statement response in which the Division determined that Logic’s tobacco product, which included capsules of loose tobacco and a liquid mixture, were not taxable tobacco products.

To arrive at an outcome where PMI’s product is not taxable, ABT distinguished the product on factual differences – namely that the product did not produce hookah-like smoke infused with nicotine, the makeup of the tobacco product (ground tobacco reformulated into sheets/layers), and the absence of combustion.

Ultimately, while this declaratory statement may be based on distinctions that may not make a difference under the First DCA’s Global Hookah opinion, because ABT administers the tax on tobacco products itself and does not intend to tax the IQOS, any challenge to the taxability of the product or the declaratory statement itself is unlikely.

Note that there is currently pending legislation seeking to amend the definition of other tobacco products in the taxing contests. If the definition is amended, the language could potentially impact the precedential value of both this declaratory statement’s determination and the Global Hookah case.

A copy of the Declaratory Statement is available here.