The vaping industry is facing yet another compliance requirement in the wake of increased regulatory scrutiny. December 27, 2020, was the key date when Congress signed into law the Preventing Online Sales of E-Cigarettes to Children Act which amended the 2009 PACT Act to add all vaporization and e-cigarette products.
The bill broadened the definition of the term "cigarette" in the previous PACT Act to include all electronic nicotine delivery systems. This inlcudes e-cigarettes, e-pipes, vapes, hookah pens, and vaporizers. This means it's no longer business as usual in how vape and e-cigarette shops sell and ship their products. Simply put, the new and expanded registration and reporting requirements touch on two aspects:
- The inclusion of vaping products into the 2009 Prevent All Cigarette Trafficking Act (PACT)
- The prohibition of the shipment and transport of ENDS through the United States Postal Service (USPS)
What Is the Role of the PACT Act?
The PACT Act stamped a decade-long mark on the tobacco industry when it came into effect on June 29, 2010. Its intended purpose amends the Jenkins Act of 1949. This enactment required interstate shippers to report cigarette sales to state tobacco tax administrators. Thus, promoting legal sales and tax compliance. In the previous year, the Tobacco Control Act became law giving power to the FDA over tobacco use.
With time, as the consumption of vape products among the youth increased, Congress took action, which led to the current outcome of the amended PACT Act. Under the new changes, those dealing with cigarettes and smokeless tobacco products will have to comply with the registration, reporting, mailing, and taxation requirements.
What Are the PACT Act Guidelines by State?
In general, states require anyone who advertises, sells, or ships cigarettes and vape products to email, mail, and electronically file the PACT reports. Retailers should be mindful of the different report forms and rules per state for reporting to avoid violations.
The state of Connecticut, for example, has a bulletin detailing the registration, reporting, and filing requirements in line with the amended PACT requirements. They are also issuing a new form which needs to be electronically filed through their newly installed system, MyConnect.
Another state is Minnesota, where the Department of Revenue avails two templates for completion-PACT Act Cigarette(PA-1) Excel Template and the PACT Act Tobacco ENDS(PA-2) Excel Template, which are then uploaded to a virtual room.
Who Needs to Register?
The Pact Act applies to anyone who advertises, sells, transfers or ships ENDS and cigarettes in interstate commerce for profits. The first step is to register with both the U.S Attorney General through the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and state tobacco tax administrators in the state where the vape products are shipped or sold.
Failure to register will attract a $5,000 to $10,000 fine or possible three-year imprisonment for non-compliance.
What Are the Reporting Requirements?
After registration is done, the next thing is for ENDS sellers to:
- File a statement with the Attorney General and state tobacco tax administrators for shipment into the state. The statement requires having details such as the name and address of the seller and the principal place of business. Include the email address, website address, and name, address, and telephone number of the agent.
- Submit a report on or before the 10th of every calendar month with the relevant state tobacco tax administrators. Include a copy of the invoice showing the previous month's shipment or a memorandum. The seller must include full details of the shipment. For example, the quantity of shipment, name, and address of the recipient and the person delivering the shipment.
In addition:
- Sellers must remain tax-compliant by collecting and paying all federal, state, and local sales and excise taxes.
- Sellers must maintain records of any delivery sale for 4 years organized by state. Then, within the state by city or town and zip code to show proof of compliance.
Key Takeaway
Adopting a positive future outlook and making necessary arrangements toward the current PACT rules will help vape and e-cigarette businesses avoid taxation and litigation challenges. Manufacturers and distributors can get some reprieve from the mailing restriction by applying for an exception with the USPS, given it's an affordable mailing service.
If you're a seller or distributor with a vape or e-cigarette operation, consider working with Tobacco Tax Refund Inc. With our proven track record of offering tobacco tax consulting services, we will spend time resolving any issues or answering your questions concerning state PACT rules so that you can manage your vaping business smoothly. Get in touch with us today.