AZ HB2778

Imposes a 50% wholesale price luxury tax on nicotine products and vapor products, effective for taxable periods beginning after December 31, 2025.

Requires nicotine and vapor product distributors to obtain licenses from the department of revenue under the same licensing and compliance framework as tobacco product distributors, including record-keeping, invoicing, and storage requirements.

Allocates tax revenue from nicotine and vapor products as follows: 40% to the state general fund and 60% to the early childhood development and health fund (with 70% distributed under existing law and 30% for early childhood education grants).

Extends existing tobacco tax enforcement provisions, penalties, and refund procedures to apply to nicotine and vapor products, including electronic payment requirements and civil penalties for non-compliance.

Requires the department of revenue to be exempt from standard rulemaking procedures for one year to implement the new tax and licensing requirements.