The Recent PACT Act and Vape Ban: What Does it Mean for Consumers?

During the pandemic in December 2020, Congress passed a monumental bill that included coronavirus relief. However, within this 5,000-page legislation, the Preventing Online Sales of E-Cigarettes to Children Act was buried. This amendment will cause trouble for business operators and consumers in the vape space, which is why we’re covering these changes and what we can expect.

While cannabis was deemed essential at the height of the COVID-19 pandemic, a bill was passed to put more restrictions on the vaping community. But is there any one person responsible for these changes?

After signing this bill into law, President Trump's "vape mail ban" would ban postal delivery for vape consumers. However, it's important to note that the Preventing Online Sales of E-Cigarettes to Children Act isn't a new idea. Thus, we can’t put the entire blame for this decision on the former president.

The bill passed in the House in October 2019, as well as the Senate in July 2020. The CASAA demanded the bill pass, but the idea of this passing wasn't particularly threatening to vapers and vaping operations at that point.

Here's what the new bill demands:

• The United States Postal Service will need to put together new regulations to ban U.S. Mail shipping for all vaping products to residential addresses.
• Includes vape products in the Prevent All Cigarette Trafficking (PACT) Act. This is an amendment to the federal Jenkins Act, which was signed into law on March 31, 2010.

The Preventing Online Sales of E-Cigarettes to Children Act now includes more products than what's found in the FDA's Deeming Rule. This coverage isn't related to the FDA's tobacco and vaping regulations. However, the broad nature of the product definition provided in this legislation, nicotine vaping devices and e-liquid, along with anything consumers can use to vape liquids or oil-based substances, are included.

The PACT Act provisions and the United States Postal Service ban include e-liquids and oil vaping devices. It also covers nicotine and nicotine-free e-liquids, CBD and delta 8 cartridges, oils and liquids, and all parts and accessories created for these products.

After passing this new law, many major private delivery companies will no longer deliver vaping products to consumers and businesses. FedEx stopped vape product shipping on March 1, and UPS stopped shipping on April 5. DHL is unaffected by the law because the company already refused to ship vaping and nicotine products in the U.S.

So what can we expect with the new shipping restrictions and the PACT Act? Let's discuss how this will impact vaping consumers and vape businesses.

The following is not legal or business advice. If you operate a business in the vaping sector, consult a knowledgeable lawyer, your state trade organizations, and your suppliers for accurate information as it pertains to your unique situation.

U.S. Postal Service Shipping Ban

"Treatment of E-Cigarettes in the Mail" was published by USPS on February 19, 2021. These regulations on vapor products offer a 31-day period allowing public comment, which ended on March 22. We're still waiting on the final rule.

For anyone interested in commenting on the regulations on vaping products, the postal service has limited accountability. Congress has ordered the USPS to issue the ban, which means the service can't do much to combat it.

With this in mind, the CASAA suggests vapers express their concerns to the USPS and members of Congress. The mail carriers and Congress need to understand how the law is hurting vape consumers and businesses.

The postal agency will have to add vaping products to its current cigarette and smokeless tobacco mailing regulations. Some small changes will not impact online vape purchasers. But the rules ban U.S. Mail shipments to retail customers, besides shipments within Alaska and Hawaii. This has made business-to-business shipping challenging.

At this point, the USPS rule offers an exception that permits mailing up to 10 small packages under 10 ounces each monthly for private individual shipping purposes. These packages can contain cigarettes or smokeless tobacco. We believe this exception applies to vaping products, which could facilitate gifts and returns. However, private senders have to follow specific rules.

The PACT Act and Tax Avoidance

Tax compliance is essential for the Prevent All Cigarette Trafficking (PACT) Act, which was an amendment to the Jenkins Act of 1949. The original law passed mainly to combat tax avoidance occurring through online cigarette sales. With the 2009 update, the U.S. Mail delivery of smokeless tobacco and cigarettes demands e-commerce sellers register with the Bureau of Alcohol, Tobacco, Firearms and Explosive (ATF), as well as every state tobacco tax administrator.

Through the PACT Act, online sellers must collect taxes for state tobacco tax administrators, as well as local taxes. This sets standards for private carriers that ship cigarettes and smokeless tobacco to both residential and business e-cigarette purchasers. It also imposes strict regulations for tax collection, payments, and reporting at the state and federal levels.

The Preventing Online Sales of E-Cigarettes to Children Act that passed in December 2020 offers an amendment to the PACT Act. With this alteration, the PACT Act now includes vaping products with smokeless tobacco and cigarettes. Even though the intent was originally to monitor tax compliance, including vape products with this new amendment focuses on minimizing the chance of minors purchasing the products online.

PACT Act Requirements for Online Retailers

With the PACT Act amendment, online retailers must:

• Ship using private shipping services that collect an adult's signature at the delivery point.
• Register with the U.S. Attorney General and the ATF.
• Register with state and local tax administrators in each state and locality the business operates.
• Verify customer age with a commercially available database.
• Collect and pay all applicable taxes at local and state levels, as well as place all required tax stamps on products sold.
• List all monthly transactions and send them to each state's tax administrator. This should include customer names and addresses, as well as how much of each type of product was sold. The list also demands the name, address, and phone number of the person who delivers each shipment.

Through the PACT Act, vape companies must obey more labeling, recordkeeping, and delivery rules. Federally speaking, these standards come with the threat of intense criminal penalties, which can include costly fines and federal prison sentences for infractions.

The ATF is a police agency that plans to enforce the mandate intently. Unlike the FDA's more relaxed enforcement procedures, the ATF will prosecute non-compliant retailers to the fullest extent.

Besides this, every state has regulations for companies that operate within them. States can cite retailers for compliance infractions regarding individual requirements for tax filings and payments. The businesses could also have to buy tobacco licenses, along with others, and they might need to hire a registered agent in the states they operate.

Online sellers of electronic cigarettes could be forced to collect sales taxes, as well as vaping product taxes, depending on the states they operate. This may be the case regardless of if the states have vaping product taxes. Economic nexus laws may demand online sellers collect sales taxes in accordance with the sales or number of transactions achieved, which varies from state to state.

In some cases, states are helping retailers get the licenses required to conduct business legally. However, not long after, the retailers receive bills for back taxes on their sales history to customers in the state. Unfortunately, the retailers must pay those back taxes to continue operating in the state without a lawsuit. The PACT Act places reporting demands that allow states to extract money from vendors in other states, which works with the economic nexus laws ordering sales tax collection.

Online Retail & B2C Shipping for Electronic Cigarette Sales

Electronic nicotine delivery systems cannot be shipped because of an amendment to the COVID-relief spending bill. This spending bill demands the PACT Act to include vapes in a mail ban similar to that of the tobacco industry. While these products are often free of tobacco, the omnibus spending bill outlines a mail ban that should include tobacco and vape products.

Large online tobacco less vape product sellers have attempted to apply for exemptions. This would have allowed UPS to continue shipping vape products through other carriers. However, this is out of these delivery services' control as the ATF's PACT Act enforcement of the bill has the potential to cause problems for these carriers.

Vapers may be able to bypass the regulatory bills. A national residential shipping carrier called X could serve consumers better than FedEx, DHL, UPS, and the USPS now that Trump signed the bill into existence. While the USPS was the industry standard for quite some time, the law change means most carriers will no longer be willing to act as carriers for the vape industry.

USPS, FedEx, UPS, and DHL are still applicable carriers for other products. However, for any website selling vape-, tobacco-, or cannabis-related products, the one option that could serve these needs is X. While we can expect elevated shipping costs, the increase will not far exceed UPS delivery costs.

The additional costs compared to UPS will not cause price increases. However, we can expect the forced reconfiguration of shipping processes to result in prices vapers pay for products and shipping.