Arizona’s HB 2765 Could Restrict Adult Access to Tobacco Harm Reduction

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Key Points:

• Legislative Overview: Arizona’s HB 2765 would establish a comprehensive regulatory framework governing vapor product manufacturers and sales in the state.

• Core Expansion: The bill expands Arizona’s tobacco regulatory statutes to explicitly include vapor products, nicotine products, and nicotine analog substances.

• Manufacturer Licensing: Beginning December 31, 2026, vapor product manufacturers would be required to obtain a state license in order to sell products in Arizona.

• Application Requirements: Manufacturers must submit detailed business information, including ownership structures, compliance certifications with federal and state laws, and complete product listings.

• State Product Listings: Manufacturers would be required to submit comprehensive lists of all vapor products intended for sale in Arizona, including product names, nicotine concentrations, categories, and product volume.

• Public Product Database: The Arizona Department of Revenue would maintain a publicly accessible online list of licensed manufacturers and the vapor products they are authorized to sell.

• Restricted Supply Chain: Retailers and distributors would only be permitted to purchase vapor products from manufacturers holding an Arizona license.

• Recordkeeping Requirements: Manufacturers, distributors, and importers would be required to maintain extensive transaction records – including invoices, product quantities, brand styles, and counterparties – for several years.

• Foreign Manufacturer Requirements: Manufacturers located outside the United States would be required to appoint an in-state agent for service of process and post a $25,000 surety bond.

• Escalating Penalties:

  • First violation: $2,500 civil penalty

  • Second violation: Class 2 misdemeanor and $5,000 penalty

  • Third violation: Class 1 misdemeanor, $10,000 penalty, and license ineligibility for three years

• Directory-Style System: Although not explicitly described as such, the bill effectively creates a state vapor product directory by limiting sales to products listed by licensed manufacturers.

• Federal Compliance Dependency: Because manufacturers must certify compliance with federal law, the system effectively ties Arizona’s legal vapor market to the FDA’s PMTA process.

• Limited Federal Authorizations: The FDA has authorized only a small number of vapor products – mostly tobacco or menthol flavored – produced largely by large tobacco companies.

• Market Restriction Risk: Directory-style systems tied to federal authorization may significantly narrow the range of products available to adult consumers.

• Adult Use Trends: In 2024, an estimated 509,508 Arizona adults (8.5 percent) were current e-cigarette users – an increase of 19.7 percent from 2023.

• Long-Term Growth in Alternatives: Between 2016 and 2024, adult vaping prevalence increased 60.4 percent, representing 228,163 more adult users.

• Smoking Declines: Over the same period, adult smoking declined 30.6 percent, representing 168,925 fewer adult smokers.

• Retail Compliance Data: In 2024, FDA inspections of Arizona vape and tobacco specialty retailers recorded 65 violations across 302 inspections, a 21.5 percent failure rate.

• Youth Vaping Trends: According to the Arizona Youth Survey, youth vaping has declined sharply, with current use falling 64.3 percent between 2018 and 2024.

• Youth Smoking Rates: Youth cigarette use remains extremely low, with 1.5 percent reporting past-month smoking in 2024.

• Young Adult Trends: Among adults aged 18–24, only 3.6 percent currently smoke, while 16.9 percent currently vape – indicating a shift toward noncombustible products.

• Regulatory Comparison: Other age-restricted markets such as alcohol, tobacco, and marijuana primarily regulate businesses through licensing rather than product-by-product authorization systems.

• Bottom Line: HB 2765 would shift Arizona’s vapor market toward a permission-based regulatory model tied to federal approvals. While framed as oversight, the system could significantly restrict product availability and limit adult access to lower-risk alternatives that have coincided with long-term declines in smoking.

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Legislation in the Grand Canyon State seeks to create a comprehensive regulatory framework for the sale of e-cigarettes in Arizona. While state oversight of adult consumer goods is a worthwhile endeavor, the proposed bill would impose significant barriers on vape retailers and manufacturers while effectively tying state-authorized products to a broken federal regulatory system – at the cost of small businesses in the state. Rather than impose draconian regulations on tobacco harm reduction tools, Arizona policymakers should establish regulations that are on par with existing tobacco, alcohol, and marijuana policies to ensure adult access to less harmful alternatives to cigarettes.

House Bill 2765 – which has been significantly amended – would expand the Grand Canyon State’s tobacco regulatory framework by creating a state licensing and compliance system for vapor product manufacturers.

HB 2765 would modify existing tobacco regulatory and tax statutes to explicitly include vapor products and nicotine products, including substances classified as nicotine analogs. The legislation would also create a state license for vapor product manufacturers, requiring that beginning December 31, 2026, manufacturers may not offer for sale or sell vapor products in Arizona without first obtaining a state-issued license.

In order to receive a license, manufacturers must submit applications with pertinent business information, including ownership and business structure, and certify compliance with all applicable federal and state laws, including federal import and customs requirements. In addition, manufacturers must submit a comprehensive list of all vapor products intended for sale in Arizona, including product names, categories, nicotine concentrations, and total volume. The Arizona Department of Revenue would be responsible for maintaining publicly accessible online lists of licensed manufacturers and the vapor products those manufacturers are authorized to sell in the state. Retailers and distributors would only be permitted to purchase vapor products from licensed manufacturers.

HB 2765 also expands recordkeeping requirements for manufacturers, distributors, and importers, requiring them to maintain invoices and documentation for vapor product transactions, including details of the transaction, brand style, product quantities, and business counterparties. These records must be retained for several years and made available for inspection by state regulators.

The bill further requires manufacturers located outside of the United States to appoint an in-state agent for service of process and post a $25,000 surety bond to ensure payment of fees, penalties, or costs associated with enforcement actions.

The legislation would also establish escalating penalties for noncompliance. A first violation for operating without a manufacturer license would result in a $2,500 civil penalty. A second violation within a 36-month period would constitute a Class 2 misdemeanor and carry a $5,000 civil penalty. A third violation would constitute a Class 1 misdemeanor, carry a $10,000 civil penalty, and result in the manufacturer becoming ineligible to obtain a license for three years. Licensed manufacturers found in violation of the statute would face similar escalating penalties, including potential suspension or revocation of their license.

While HB 2765 does not explicitly state so in the statutory language, the legislation effectively functions as a state vapor product directory system. Manufacturers must certify compliance with federal law and submit detailed product lists as a condition of receiving a state license. The Arizona Department of Revenue must then publish a public list of licensed manufacturers and their approved vapor products, and products not included on those lists cannot legally be sold in the state.

Unfortunately, the U.S. Food and Drug Administration has been slow to properly regulate vapor products through its Premarket Tobacco Product Application (PMTA) process, and only a very limited number of products currently have marketing authorization from the agency. As a result, regulatory frameworks that rely on federal compliance as a prerequisite for state authorization can severely restrict the range of products legally available to adult consumers.

To date, the FDA has authorized only a small number of e-cigarette products, almost all limited to tobacco and menthol flavors. Only a handful of companies have received marketing authorization orders, most of which are affiliated with large tobacco manufacturers. As a result, a directory-style system tied to federal compliance could dramatically narrow the market and restrict adult access to flavored products that many adults report using as alternatives to combustible cigarettes.

Ultimately, the legislation could significantly hinder adult access to tobacco harm reduction products. According to the Centers for Disease Control and Prevention’s annual Behavioral Risk Factor Surveillance System survey, in 2024, more than half a million adults (509,508) were currently using e-cigarettes – or 8.5 percent of Arizona’s adult population. This represented a 19.7 percent increase from 2023, when 7.1 percent of adults reported vaping, and reflects approximately 91,956 additional adult e-cigarette users.

Over the past decade, vaping has grown significantly among Arizona adults. Between 2016 and 2024, the percentage of adults who were current e-cigarette users increased by 60.4 percent, from 5.3 percent to 8.5 percent. In fact, there were 228,163 more adults vaping in 2024 compared to 2016.

This increase in vaping has coincided with long-term declines in combustible cigarette use – the most harmful form of tobacco. In 2024, an estimated 611,409 adults were currently smoking, representing 10.5 percent of adults. Although this represented a slight increase compared to the previous year, smoking prevalence has declined substantially over time. Between 2016 and 2024, the percentage of adults who were currently smoking decreased by 30.6 percent, from 14.7 percent of adults to 10.2 percent – or approximately 168,925 fewer adult smokers.

Further, the legislation would unfairly burden responsible retailers in the Grand Canyon State who are not overwhelmingly furnishing age-restricted products to minors. The FDA routinely conducts compliance inspections at retail locations using underage decoys attempting to purchase tobacco and vapor products. In 2024, the FDA conducted 302 inspections of Arizona tobacco and vape specialty retailers, with 65 resulting in violations for sales to minors – representing a 21.5 percent failure rate among specialty shop inspections.

The legislation is also unnecessary from a youth use perspective, as youth vaping has significantly declined in recent years and combustible cigarette use among youth is nearly nonexistent. According to the Arizona Youth Survey (AYS), in 2024 only 15.3 percent of Arizona students reported ever trying an e-cigarette, while 7.1 percent reported past-month use. These represent some of the lowest rates recorded by the survey. Between 2018 and 2024, the percentage of Arizona youth who reported current vaping declined by 64.3 percent, from 19.9 percent to 7.1 percent.

Moreover, the introduction of e-cigarettes has not led to increased youth cigarette use. In 2024, only 5.4 percent of Arizona youth reported ever trying a cigarette, while just 1.5 percent reported past-month use – the lowest levels recorded by the AYS.

Even more striking are trends among young adults aged 18 to 24. In 2024, only 3.6 percent of Arizona young adults were currently smoking, while 16.9 percent were currently vaping. Between 2016 and 2024, the percentage of young adults who were current smokers declined by 60 percent, while vaping increased by nearly 98.8 percent.

Rather than impose restrictive policies that may severely limit options for adults who smoke and/or vape, Arizona policymakers should look toward sensible regulation similar to other age-restricted markets. Traditional tobacco regulation largely focuses on tax administration and retailer oversight rather than establishing a state product directory. Alcohol regulations similarly rely on licensing and compliance systems but do not require SKU-by-SKU product authorization by the state. Even highly regulated markets such as marijuana focus primarily on licensing businesses rather than restricting individual product types through indirect federal regulatory standards.

Ultimately, HB 2765 risks moving Arizona’s vapor market away from a traditional tobacco regulatory framework toward a more restrictive permission-based system that could dramatically limit product availability. Policymakers should instead pursue balanced regulations that protect youth while preserving adult access to reduced-risk alternatives that are helping thousands of Arizonans move away from combustible cigarettes.

Nothing in this analysis is intended to influence the passage of legislation, and it does not necessarily represent the views of Tobacco Harm Reduction 101.