S.B. 101 Specialized Product Amendments: transcript

Thank you, Mr. Chair. Um, a couple years ago we had a, we've run this situation with hemp products where we are trying to regulate a, a hemp market that has, uh, an additional THC that keeps showing up in products. And we're trying to be creative and find a way to get revenue into the Department of Agriculture in order to have, be able to have enough inspectors and others that can go out and, and deal with the issues. So we created a tax that was, uh, we called it the cannabinoid, tax Restricted can created a restricted account. What we're doing here is, uh, and I think it's prudent because not only do we are dealing with, uh, CRE and, but we're going to be dealing with other products in the future. They're just, you know, you can just see these things kind of continue to come down the pipeline. Unfortunately, I think we started out with spice back in the day and now it just keeps adding to it. So what this bill is doing is as adding, uh, attacks on raum to the, to the bill or to the, to the fund, and renaming it as a specialized product account, proceeds a restricted account. That way as things go forward, we can add items with it without having, you know, without having to change things. And I, I wish that I could foresee that we wouldn't have to deal with any more substances, but it's just gonna happen. And that's all there's to it. Um, recognizing that there's going to be a lot of discussion about Creto in the session. This is simply, this is, this thought was came before any of those discussions came forward. If there is one bill that, uh, Senator McKell has we referenced, you know, that's in our committee, but it won't be heard today. Um, if that, that is a complete ban on creto, if that, if that ban moved forward, if that bill moved forward as a ban and passed, then there would be a coordinating clause in that bill, you know, to, you know, not there would no, would not be a need for tax on Creto, obviously. So there would be a com, a coordinating clause in it, you know, that would do that. We are dealing with the same similar issues with Crem and we'll talk about it in a minute, about seven hydroxy and, you know, things that are causing very, you know, a lot of harm to people and that, you know, that a lot of it is, is in crem type products. And, uh, so as we move forward, that's, that's not the discussion of this bill. This, this, the discussion of this bill is simply that we would add Crate to this specialized tax to try to get some additional revenue into ag to do the, you know, the inspections and other thing regulations and those markets that are out there. So I do have Dr. Brandon Forsyth with the Department of Ag. With your permission, uh, Mr. Chair, I'd like to turn some time over to him for any further discussion on it That'd be appropriate for you to identify yourself.

Absolutely. My name's Dr. Brandon Forsyth. I'm director of the Specialized Products Division at the Utah Department of Agriculture and Food. As Senator Vickers has mentioned, our inspectors spend a lot of time out in these facilities where cannabinoid products are sold. Um, and it's a good opportunity to look at the other types of products that are coming into our state and being sold at these same facilities. Often with the express intent of getting Utah's public high. Um, unfortunately we're seeing an increased number of creative products and some that are kind of reborn from drugs that were popular a long time ago in the United States. Um, so it's good to have the eyes of our inspectors on these types of products and we need to be able to capture some kind of revenue because it is more efficient to have our inspectors out there in these facilities doing these types of inspections and keeping an eye on this stuff while they're already out there looking at the cannabinoid products. So we feel like renaming the tax to specialized product and making it apply to products more generally create, in this case, is a step in the right direction towards funding the program. Uh, back in the 2024 session, this tax was created, uh, because registration fees for cannabinoid products were down and we were having difficulty funding the program, which is not funded through, um, uh, general fund. And the tax at the time was estimated to bring in 1.4 million per year. At that time, we didn't recognize that it takes a while to build up to that, uh, to that point, um, apparently we're told by a tax commission that they do expect it to earn more than it currently is, but this year, so far, this fiscal year so far, it's only brought in $214,000, which is quite a bit under what we need to actually administer the program. Our costs last year were about 1.6 million, and the year before that it was 1.7. We're actually decreasing our abilities to get out there into these facilities because we don't have the funds. We, we are estimated to make over 400,000 this year with the tax. So it is moving in the right direction and it will still be doing better than what we were doing with product registration in the past. But we do need some ability to cover that shortfall, and that's where registration of, um, or adding back the ability to charge for registration of hemp products and also, uh, registration of Creon products if those aren't banned, would be a benefit to the division. Thank you.

Thank Mr. Chair. I think that concludes our presentation.

Well, I, I'll give Dr. Foray some time. The bottom line is those are difficult. We're still trying to solve that problem, that nut. Um, it's not like, uh, traditional sales. I mean traditional sales, if you're captured, you know, if you're buying it through Amazon or something, we captured a lot of sales tax. This would be a specialized tax. Um, we haven't completely solved that problem and this would be dealing with, you know, on shelf products at this point, but we're still exploring how to, how to solve that one.

I don't know if Dr. Forche had a different opinion on that or, but yeah, This bill doesn't address that, but we are trying to look for ways to do that and are open to addressing that in other bills if possible. It is a major problem, not just for Kratom, but for a lot of these, uh, kind of underground drugs. And another big problem is it's a lot of these are legal in other states right now, um, and can, you can go straight over the border to one of our neighboring states and purchase them completely legally and then bring them back into Utah. So there's a lot of enforcement challenges that we're dealing with and really we just need to get some funding in place so that we can even do the limited enforcement that we're able to, and then look to expand to ways to do this as well.

And, and you probably said this and I missed it and I'm sorry. So the extra money that's raised from, from Crem and other, um, future products, what specifically will that money be targeted for? It would go back into the Department of Agriculture for enforcement, hiring inspectors and other things. They go for enforcement just of CRE and these other new products or for any enforcement, Uh, specifically this, these products, these specialized products. Okay. And, um, are we differentiating between like straight CRE and cre 'em laced with other products or No. Is it all Just not in this bill? Okay. And have, um, have you worked with the creative industry and stakeholders? Do you have buy-in on this?

Okay. I appreciate that. And I just, Mr. Chair, if I could, I, um, I, I wanna regulate anything that is, poses a legitimate health and safety risk. Um, having watched Kratom for seven or eight years, and I know if Senator ml were here, he'd probably disagree with me, but it, it, it appears to me in a, in the, their very first article I read in the media, this was at least seven years ago, the headline was, you know, driver killed High on Kratom, something like that. It was in Denver. And if you read to like paragraph 17 in the article, you, you read that the driver had like 17 different substances in his body, but Kratom got the headline. And so I'm not for Kratom, I'm not against Kratom, but I feel like it's kind of the ugly redheaded stepchild sometimes, and it gets picked on, you know, I think unfairly sometimes. And so I just wanna make sure that, you know, um, I just wanted to say that because I, I think that, um, it, it, it probably deserves some scrutiny and regulation, but I think it sometimes gets a bad rap Undeservedly.

Yeah. And the, and the next bill we discussed the seven hydroxy specifically, is one an item that is, is an opioid like substance that, uh, often is often found and usually added to, you know, create em. That makes it, you know, specifically very dangerous. But yeah, you're right.

I'm good. Uh, my name's Walt Plum. I'm the head of Drug Safe, Utah. My question is, we're for a total ban of Creto, and if there's a total ban, the tax thing would sort of be irrelevant. So do you wanna address I think he, did They both need to be addressed together, or, Uh, Mr. Chair, if I can

Send, um, no, I think we, in the presentation we talked about the fact that if, so this is, this is simply, this is not talking about the legal sale of Krem or any sub cre like substance. It simply says if, if Krem is being sold, there would be a specialized tax on it, uh, in whatever form. If the, there is a bill, as we recognize that there is another bill, uh, Senator ML has that bill, and it will be heard in this committee's. And if some, sometime in the future, if that bill was to pass the legislature, then there would be a coordinating clause in there that would, would pull out the need for this tax.

Uh, yes, Mr. Chair. I would like to, uh, make a motion that, um, oh, you know what? There's an amendment on this. There is amendment. Um, I assume that's amendment number one. Yeah. I'd like to make a motion to amend the bill. Uh, it's proposed amendment number one in my name. That was a suggestion that came, came to the state tax Commission.

Thank you. Mr. Bills amended. Mr. Chair. I would, uh, make a motion that we favor or recommend Senate Bill 1 0 1 as amended.

Thank you, Mr. Thank you, Mr. Chair and committee. I thought I had a couple more agenda items in front of me before I was gonna be presenting, so I apologize. Take Your time. Um, so, um, just as a, as a point of reference, uh, a historical reference, um, a couple of years ago, uh, in collaboration with Department of Agriculture and Food, we helped, we worked with, um, the, the legislature worked with them to make sure that the department had the appropriate support that it needed to regulate our industrial hemp industry, which is basically CBD products and whatnot. Um, because we as a legislature tasked them with the pretty big job of regulating the industry, but did not give them the resources to do so. And so we came together as a legislature and we created a new tax, which I, I still find remarkable, but, um, basically CBD products are taxed and that creates a revenue stream to regulate the industry. Um, this bill basically restructures that specialized, um, that that CBD account and renames it, the specialized products account so that it can pull in other products besides just CBD. And so right now, the one that's most salient is creto. Um, which is a, a product that is widely sold in the state that we task the Department of Agriculture and Food with regulating. Um, but unfortunately don't provide them with the resources to do that job. And so this just pulls cred into that specialized account, um, extends the same policy to those products. Um, so that UAF Scott has got those resources. Um, I know that there has been a lot of discussion around raum and other bills, and it's been a big issue. There is, um, a bill being proposed that would ban it. There is a coordinating clause in this bill that should, that pass this, um, this bill would not be, um, would not be relevant obviously. And so there is coordinating language in there, um, and then also adds back in the registration of products, um, uh, for Krem as well, because that's one of the most effective ways that U DAF has to make sure that, um, they know where these, what these products are and what is being sold so that they can appropriately, appropriately regulate the products themselves. Let's see. Um, additionally strengthens the enforcement authority, um, to make sure that appropriate products are appropriately seized and dis and destroyed if, um, they're unregistered or illegal and enhances information sharing between state agencies. And then also clarifies product safety standards, including testing, labeling, serving sizes and restrictions on products marketed to children, which is critical, while also limiting, um, some flavored products including sugar coating. So, um, with that I think is here. Brad, If I may, Mr. Chair, I'd like to invite Dr. Forsyth from UD DAF to share any thoughts and be available for questions. Okay. Sorry, I didn't even see you come in.

I'm Dr. Brandon Forsyth, director of the Specialized Products Division at the Utah Department of Agriculture and Food. Um, we appreciate Senator Vickers and Representative Daley Provo for running this bill and for the consideration of the legislature. As we've enforced on the rules or the statute and rules that have been put in place, the products that are being sold in the state have become safer and less appealing to children critically, but the total number of them being sold has gone down and the total number that were registered has gone down and this made the tax become very necessary a few years ago, but the tax still isn't really bringing in the money necessary to cover the program. And so these steps are needed, bringing back the product registration to try to bolster those funds so that we can afford to pay inspectors to go into these, uh, shops and look at the products that are on the market and be able to get ones off the market that shouldn't be in those places. I'm sure all of you have been into a gas station and seen products that look a little bit questionable that have CBD Orem or some other product in there that we really need to have eyes on, um, to keep our citizens safe. So we genuinely appreciate the consideration here. We don't want to be coming back asking for general fund at some point. And so these steps to, uh, fund the program and put that on the back of the people using these products are, uh, needed at this time. Thank you.

Thank you. And I would just conclude by saying, um, you know, it's a, it is a fine line to, to walk to make sure that we've got resources to regulate dangerous products. Um, and it's encouraging to see when these kind of revenues go down because that means that dangerous products are increasing, are increasingly coming off of shelves. Um, but we also know that there's a, a pretty strong incentive, um, for organizations to skirt rules. And, you know, we continue to ask, you'd have to, to try to find where those players are and we wanna make sure that they've, um, got the resources to do that, but to do it in a careful way so that, um, we're not overburdening people using safe products legally. Um, but recognizing that this is, you know, it's a complicated field to regulate and we've tasked our, our state agency with regulating it. And if we're going to require that they do those things, we wanna make sure that they have the resources to do it well and to do it safely.

Uh, thank you Mr. Chair. Uh, I'm looking at line 84 and 85. Do we feel like, uh, it's talking about a fine not to exceed 5,000? Do you feel like that's an appropriate, or do you think we can increase that? I pass that to Dr. Forsyth then, but before I do, I would say that I would actually like to see it larger, but I felt like that was a good compromise. I would Yeah, But I I'm just wondering what yeah. What's appropriate. If we could go larger.

Yeah, it certainly could be increased. Uh, we don't want to unnecessarily harm producers and people who are selling products in the state for innocent mistakes, but these are dangerous products potentially. And so people who are trying to get around the system, we'd wanna make sure that they're being, uh, sufficiently punished for doing such things. And so there's kind of a balance to walk there of, you know, not overly burdening people who are innocently making a mistake, but adequately punishing people who are purposefully doing it.

Sure, yeah. I mean, relatively this is a product that's ruining people's lives. It's killing people. I don't, I think 5,000 is too low. Um, personally, I, I don't know how this has been negotiated or where it's been, but I think if they're putting something out on something that's gonna addict somebody and ruin their entire life, 5,000 is, is way too low.

Yeah, and I, I'll speak to that kind of in context of the broader piece. This is, um, fines that could be set for, um, registration, you know, um, breaking laws out as far as the registration piece. There are other bills that may or may not be under my name that have higher fi higher potential for fines for other egregious transgressions that have to do with the products themselves and illegal sales that aren't necessarily to do with just with the product registration.

I just wanna clarify, so this bill is really just looking at tax consequences, registration consequences, not the products necessarily themselves nor detailing any of that.

Correct. Yeah. And there's, there's a lot of pieces that we need to address in with this issue for sure. Um, as, as a group of stakeholders and legislators and, and a state agencies, we've tried to have really thoughtful discussions on the best way to approach this legislatively that wasn't all one bill because there's a lot of this needs to be done. Um, we just wanna be really careful about how we're doing it and we're not mixing up policy areas unnecessarily.

I really appreciate that. Thank you. Thanks.

Uh, my name is Dalton Locke with Diversified Botanics and I just wanna say that I'm for this and I don't think you hear a lot of organizations, companies, I'm sure that if anybody owns a company, they don't come to you and say, Hey, you know what we need? We need you to tax us, especially now with the Republican Party from what I can tell. So with that being said, I think you could also tax, at least from the Raum side, I think you would also tax them more. Because I think right now what you're dealing with is you're dealing with a lot of bad players and you have to be able to make sure you're doing proper testing to be able to make sure that you remove these bad players in the market in general. Now, I can't talk to CBD or cannabis or anything like that, but I can talk to this space because I've been doing it for years and I've seen the problems, but I've also seen a lot of the good players. So I do think we need that. And I think if people are going to be putting things or uh, any type of things into the product that could potentially cause any issues, I think you should have a, a much higher fine for that. So thank you and very much for this bill, and I appreciate your time.

So I, I do wanna ask a, a question Representative Dailey-Provost. Um, so when I know you said you, you negotiated the fee, right?

So I wouldn't say we necessarily negotiated it with the industry. I think that that was more a group of, um, agencies, legislators trying to strike at what seemed appropriate. And I think across many industries that's more, less in line with what we do in other areas in code. Thanks.

Because, you know, kind of piggybacking with Representative Kyle, I mean, and what we just heard from testimony, I don't know if they did that just simply because, you know, on, uh, cannabis products it's five grand and so hey, why not keep it the same? Yeah. Consistency. I don't if that was Yeah. But I, I do agree with that argument, right? That if it's doing more harm mm-hmm. There probably ought to be a, a bigger penalty. So what's the, what's the downside if we said, Hey, should we amend this thing and, and increase the penalty? I mean, you you, you tell me because I wasn't in on your conversations.

Well, so good cop, bad cop. I, I I think that, I mean the, the way the statute's written is it gives, um, the regulatory agency, the Department of Ag, agriculture and food discretion, so it says not to exceed $5,000. And so, like Dr. Forsyth said, if it's, if it's an honest mistake, and usually, and I know I've worked with UDA for a lot a long time on these things, when, when companies make honest mistakes, they're, they're really good at just saying, Hey, you've made this mistake. And companies are pretty good at, at correcting those. If they make the mistake over and over again, ADA's gonna say, okay, here's a fine that seems commensurate more or less commensurate to, to what you're doing. And, you know, and then it becomes less of a slap on the wrist. Um, I think that when we're talking about an administrative fine for a registration on a product, $5,000 has some teeth in it, but also for companies that arguably make hundreds of millions or billions of dollars, that might just be a cost of doing business that that's easy to write off. And so I would say that, I mean, I personally wouldn't be opposed to, to changing that, to amending it, but I also wanna be sensitive to the fact that we as a, as a legislature don't want to be entirely punitive either. Um, but there is every valid reason to fully recognize right now that this is an industry that, um, that really needs more than a couple slaps on the wrist. So I would say I would leave it to the dis, you know, to the discretion of the committee. Um, ideally I would like Senator Vickers input since he is the primary sponsor of the bill. Um, but you're not gonna get any arguments from me if and if you were to make that amendment as well as the one on the system.

Yes. I'd like to move amendment number two to SB 1 0 1.

Uh, um, thank you. This was, uh, just something that, uh, department of Agriculture and Food brought up to the, um, to the drafting attorney that was just an honest miss in the primary drafting. So,

Yes. I'd like to, uh, make a motion that we pass out SB 1 0 1 as amended with a favorable recommendation That is in order.

Um, briefly, I just wanna thank the committee for the thoughtful discussion and just really, really grateful after having worked on this for a number of years, that we've got, um, real commitment and consensus on, um, some opportunities to improve this, this space writ large. So thank you for the motion and I'd appreciate everyone's support And to the committee.

that tax structure. And so in, you know, previous to that, we had it as a cannabinoid tax, uh, restricted fund. Now it'll be a specialized product, uh, tax restricted fund because we know that crem isn't the last item we're gonna see. There's gonna, there's just a continuation of these things that keep popping up. I don't know what the next one will be, but there will be, I guarantee you there will be one. So this bill simply does that. It creates, uh, where if, if crem and still the questions up in the air, if after this session when we still be selling creto, I dunno if we do, uh, then this tax will take place on those products. If we, if we don't, if we ban it, then there will be a coordinating clause and there's no need for this to be that element of it, the creto to be put in the tax. But with that, and I know this has been a little confusing, we actually started talking about this a year and a half ago and, and realizing that we needed some additional resources for the enforcement. So this one, but here again, it has been a little bit confusing 'cause people didn't, when they, whenever they see Raum, you have kind of a two groups, one that wants to completely ban it and one that would like to see it continue to be sold. So anyway, hopefully that's a good ex explanation of what's going on. The simple nature of the bill is it does add credo to that tax structure to be used for enforcement and making sure that those products that were being sold are safe for the public.

Thank you Mr. President. I would waive further summation to move the Senate Bill 1 0 1, uh, as amended pass or mean we read a third time.

Senator Vickers Baldry Lewin Brammer bus Colmore Esia Fillmore a Grover a Harper Kins Ipson johnson Aye. K Juab a McKay Aye. Mikel Aye. Milner Aye. Musselman Aye. Owens pitcher Plum rebe Aye. Sandal Aye. Stevenson Stratton Aye. Vickers Aye. Weiler Aye. Wilson Aye. Winterton Aye. President Adams Aye. Senate Bill 1 0 1 having received 26 yay votes, zero nay votes.

Senator Plumb. Thank you Mr. President. Um, we had some really insightful discussions, uh, yesterday evening in committee and I would like to circle this bill so I can continue to work on making it better.

I almost feel like I should ditto that last statement. Uh, I would love to circle this bill and work on it a bit, Mr. President.

Winterton, I'd like to make motion to circle this bill. I'm waiting for a New draft. Okay.

Senator Wilson. Motion circle sponsors off the floor.

Brammer. Motion to circle I Your mic on? I think so. Okay. Motion to circle.

Can I make a motion to circle a lot of bills?

Uh, I will, uh, make a motion to circle.

Thank you, uh, Mr. President. I mentioned in committee yesterday that I would love to hear, uh, from people, uh, about the definition of a learner validated program. I'd like to give, uh, the stakeholders a, uh, you know, a day or two to come up with that.

Thank you Mr. President. It's 1156 and this bill will take a fair amount of time to debate. I move to circle.

The constituent that I ran this bill for, just emailed me suggesting some changes. I'd like to make a motion to circle.

I'm not even gonna try Mr. President, I'll just make a motion to circle. Motion

Thank you. If you, if you thought the Fillmore Show was over, you've got another thing coming.

Um, this one actually is short, Mr. President, I'll present this quickly. Uh, this year is 2026, so it's the 25th anniversary of the attacks on our country. Uh, that occurred on September 11th in 2001. Uh, I was a school teacher then, uh, you know, and, and coming to school that morning and welcoming the kids that morning who of course had all seen this horrible thing on the news. You know, you just can imagine that that took up, you know, that day and that, uh, that week. Um, this resolution just calls on schools and local governments to recognize the 25th anniversary of nine 11 and to just hold remembrances and, and lessons and, and activities that are age appropriate just to mark that occasion to make sure that, uh, that this event stays, stays fresh. You know, it's part of Emery, the American character, and we need to make sure that that's passed on to the next generation.

Thank you Mr. President. I would just like to take an opportunity to thank Senator Fillmore for running this bill. Uh, nine 11 was my very first day as a teacher in the state of Utah. And, uh, as I was watching TV getting ready to go to work, I was thinking about my brother, who's a port authority cop, my neighbors who are police officers and firemen. And so it really is really close to my heart that you are taking the time to honor the people that, um, are near and dear to me. And, uh, I just really appreciate that. So thank you for running this resolution.

over the years we've dealt with, uh, trying to enforce and keep, uh, dangerous products off the, off the shelves of our retailers, that that might be available to our citizens, especially children. Um, we've gone through the gamut of spice and dealing with too much THC and, and even finding other things, um, opioids and other things and products. Uh, we created, um, uh, special tax for hemp products a couple years ago so that we could start building up funds to do the enforcement on this. This simply just adds, um, raum products to that tax and change the name of it from the cannabinoid product, um, product tax to this, uh, specialized product. So give us more flexibility in the future. 'cause we know there's other things come forward, uh, like we discussed. Also, um, right now there is no assumption that CRE will be continued to be sold. But if, if it is, then we'll have this in place. If, uh, if a, a bill passes that would completely ban the sale of Raum, then obviously there would be a coordinating clause and this would would come out. So with that, I'm open for any questions.

Senator Wilson, Motion to circle sponsors off the floor.

Thank you Mr. Speaker Pro tem. SB 1 0 1 is a bill that, uh, seeks to update necessary changes in the regulation and oversight of, uh, a lot of the work that occurs at the Utah Department of Agriculture and Food with regard to our industrial hemp industry. Also, um, referred to in the legislation as cannabinoids, um, the department had recently changed the name of their indus um, cannabinoid division to the Specialized Products Division. Um, and is especially salient given the passage of earlier legislation today to allow them to streamline and, uh, create consistency in the way that all specialized products are, um, registered, the fees that they collect and the, uh, oversight and regulation that they perform on things like Crate and our cannabinoid products without Mr. Speaker, I'm open to questions.

Thank was present motion to Concur. We had to put a coordinating clause between the creative retailers, specialized product retailers, uh, the Department of Agriculture and, uh, the Tax Commission. Motion

Vote. Senator Vickers Baldy Lewin Bramer Press Lu And aye. Comore Escamilla Fillmore Grover Harper Hankins Ipson Johnson. Quan McKay Mikel Milner Musselman Owens Pitcher Plum Rebe Sandal Stevenson Stratton Stratton Vickers Weiler Wilson Winterton, president Adams Aye.

This is a new bill that I inherited yesterday at about 3:00 PM uh, it's