New Legislation Imposes Huge Burdens on Vape Retailers with Online Sales
Updated: Jan 9
The Consolidated Appropriations Act, 2021, which gives much-needed pandemic aid to Americans, was signed into law by President Trump on December 27, 2020. Couched in the lengthy legislation (see page 5136) are a series of provisions that will undoubtedly prove burdensome for the retail vape and CBD market. The new rules take effect 90 days after the enactment.
The legislation makes several important changes to existing law, such as adding electronic nicotine delivery systems or “ENDS” to the definition of a “cigarette.” Despite the word “nicotine” appearing in the name, ENDS are bafflingly defined as, “any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device” [emphasis added], and further includes specifically “any component, liquid, part, or accessory” of such a device.
Such an overly broad definition appears to say that virtually any vaping device and even liquid meant to be used for inhalation are now classified as Electronic Nicotine Delivery Systems, regardless of nicotine content.
The poorly drafted legislation brings vaping products under the rule of the Prevent All Cigarette Trafficking (“PACT”) Act (which amended the Jenkins Act of 1949 (15 U.S.C. §375-378) that governs the collection of taxes on, and trafficking in, cigarettes and smokeless tobacco), and imposes numerous requirements on “delivery sellers.” A “delivery sale” is defined as “any sale of cigarettes or smokeless tobacco to a consumer if:
(A) the consumer submits the order for the sale by means of a telephone or other method of voice transmission, the mails, or the Internet or other online service, or the seller is otherwise not in the physical presence of the buyer when the request for purchase or order is made; or
(B) the cigarettes or smokeless tobacco are delivered to the buyer by common carrier, private delivery service, or other method of remote delivery, or the seller is not in the physical presence of the buyer when the buyer obtains possession of the cigarettes or smokeless tobacco.”
The new rules require that delivery sellers, among other things,:
Register with the Attorney General of the United States;
Register with the tobacco tax administrator of every state in which their products are offered or available for purchase;
File monthly memorandums or copies of detailed invoices covering all shipments of the above products for the prior month with the tobacco tax administrator of every state where any shipments are made (which must include the name and address of the person to whom the shipment was made, the brand, the quantity thereof, and the name, address, and phone number of the person delivering the shipment to the recipient on behalf of the delivery seller, with all invoice or memoranda information relating to specific customers to be organized by city or town and by zip code);
Also file copies of the above memorandums or invoices with the tobacco tax administrators and chief law enforcement officers of the local governments and Indian tribes operating within the borders of the State that apply their own local or tribal taxes on cigarettes or smokeless tobacco.
Additionally, shipments of applicable products can no longer be made via U.S. Mail; any products shipped must contain specific language on the package label and bill of lading; and the person accepting delivery must provide proof they are the minimum age required for the legal sale/purchase of tobacco products in that place of delivery. Violations can carry penalties of imprisonment for up to 3 years as well as hefty fines. The changes do not appear to affect in-person retail sales of tobacco or vaping products.
Regrettably, the financial burdens imposed by the new legislation will likely mean many small businesses will simply be unable to participate in delivery sales of such products. More information will be provided in the coming weeks and months as the effective date of the new rules approaches.
About the Author
Jonathon W. Baker, Esq., President of Baker Law, P.A., has extensive experience in business, licensing, and regulatory law at the local, state, and federal levels. He routinely offers corporate counsel and represents clients in all stages of licensing for alcoholic beverage, food service, and hemp/CBD, and many other licenses. Jonathon also handles complex transactional matters such as stock purchase and assets acquisition agreements. He has years of experience representing borrowers and lenders in foreclosure litigation. Outside of his law practice, Jonathon is a trained musician who has played multiple styles of guitar for over 20 years and also enjoys exercising and spending time on Florida's sunny beaches.
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