What is the PACT Act and It's Affect on Vapes

What is the PACT Act and It's Affect on Vapes

There has been a lot of confusion in our industry on the PACT Act and how it affects us. We have taken a great deal of time in staying on top of the rulings and making sure our business remains in compliance. Below is a breakdown of what the PACT Act is and what the final rulings entail. These agencies are actively enforcing these new regulations. 

Want to by pass all the details and get straight to becoming PACT Act Compliant Registered with Canvast Supply Co?

 

What is the PACT Act?

The Covid Relief omnibus bill that went through Congress was one of the longest bills in history at 5,593 pages. The key area of interest on this bill was Covid relief, however, several inclusions were tucked away in a complex legislative language. One inclusion to the omnibus bill was the Preventing Online Sales of E-Cigarettes to Children Act. The intent was preventing underage smoking and implementing restrictions on electronic nicotine devices, but the ambiguous and overly broad language opened the door for a complete ban on shipping of all cannabis vaporizers through most major carriers.

The PACT Act was originally passed in 2009. It amended the Jenkins Act of 1949, which was designed to combat illicit sales and use tax avoidance and required interstate shippers to report cigarette sales to state tobacco tax administrators. About the time the PACT Act became law, the FDA was given regulatory authority over tobacco products via the Tobacco Control Act.

Under the amended PACT Act, anyone who advertises, sells, transfers, or ships for profit, cigarettes or smokeless tobacco in interstate commerce must comply with a host of complex registration requirements. They must also pay all applicable taxes, including excise tax, and adhere to monthly reporting of shipments and verified business document requirements.

Who is required to register? And with which agencies?

Registration requirements established by the new PACT Act are designed to serve as a check and balance: Businesses must now have all these requirements in order to remain compliant. As a wholesaler, Canvast is ahead of the curve, we are fully registered with all agencies and doing proper monthly reporting - this is why we need the 3 documents from you to ship vapes to your business in full compliance.

If you sell cigarettes or ENDS units (CBD or Delta 8 Vape Carts) into a state — or if you advertise your product in that state in any way — you must register with the following:

  • The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) 
  • The tobacco tax administrator in the shipping state, if applicable in that jurisdiction. Requirements for registration with state authorities vary state-by-state.
  • USPS for ENDS shipping exception with a link to it (https://postalpro.usps.com/product-classification/tobacco)  
  • Once approved through USPS for shipping, you then must get all businesses you ship to pre-approved. This means we must submit your paperwork to USPS for approval to be able to ship you ENDS products (vapes) before we ship to you. 
  • This registration requirement applies to companies that sell directly to consumers as well as distributors and manufacturers shipping in and out of state.

    In the following, we will break down the details of each of the 3 main categories above where compliance is required.

    ATF Compliance

    Reporting: Under the PACT Act, businesses are required to file detailed shipping reports on a monthly cadence on a state level as well as directly with USPS. A number of details are required about the orders shipped: 

  • which product(s)
  • how much
  • to whom
  • via what carrier
  • and more. 
  • You may also be required to provide a copy of each invoice and retail customer business details including EIN, and Re-sellers Permit and Tobacco License (where applicable). 

    Not registering correctly with any of these agencies can lead to a $10,000+ fine for every instance of non-compliance. (That means every single shipment sent without the correct paperwork, verified business documents like EINand Reseller Permit, and timely reporting is subject to fines)

    State Agency Compliance

    Tax compliance: Additionally, businesses may now be required to collect and remit all applicable, state and local excise taxes in states where it is applicable. Though it is not applicable in all states, the number of states where excise tax is imposed on vape products is growing fast: For example Georgia recently started taxing vapor products. If you’re unsure of your state's tax obligations as it pertains to PACT, a tax or legal specialist can help uncover where your business is at risk of tax non-compliance. 

    We are happy to make referrals and share resources where possible. 

    Reach out to us!

    USPS for ENDS shipping exception

    With the new PACT Act changes, shipping under major carriers is no longer an option. However, under the USPS Final Rule, USPS provides some limited exceptions, including the one we currently fall under:

  • Business/Regulatory Purposes: Shipments between verified and authorized tobacco-industry businesses for business purposes, or between such businesses and federal or state agencies for regulatory purposes;
  • Outside of these exceptions, USPS will not accept or send any package that it knows, or has reasonable cause to believe, contains non-mailable ENDS. Furthermore, non-mailable ENDS deposited in the mail are subject to seizure and forfeiture and senders of non-mailable ENDS are subject to criminal fines, imprisonment, and civil penalties.

    In order to become compliant, several pieces of information are required to have our Retail Partners be specifically approved for shipping. The information that is required for the USPS ENDS shipping approval includes:

  • EIN
  • State Business License or Tobacco/Vape Licenses (must contain Mailing Address) 
  • Mailing Address
  • All of this information must be on file for all verified businesses to lawfully ship to through the USPS.

     

    What is a State Business License?

    As a retailer you may already be familiar with Resale Certificates. Even prior to the PACT Act, a distributor selling to other wholesalers and retailers, not to an end user, was required to manage collection of  reseller certificates. A resale certificate allows a business to make tax-free purchases for resale. With the proper documentation, our retailers avoid paying additional sales tax in the purchases of products from their distributors and wholesalers.   

    To receive approval for vape shipping through USPS, a Resale Certificate is acceptable documentation, if the sales permit license number is listed on the certificate. Most states will have this visible on the Resale Certificate, making the document collect less burdensome. However, if the Resale Certificate does not happen to list the sales permit number, then we will need to obtain a copy of the sales permit as well.      

    A State Business license may otherwise be known as a Seller’s Permit, Sales Tax License or Permit, Sales & Use Tax License or other applicable names for a Retailer’s certificate of authorization to sell products to the public. These licenses are often required to be renewed regularly and available for display to the public. We are now required to collect both the business license and the Resale certificate in our partner onboarding to remain in compliance with all relevant rules and regulations.

    Fortunately for our Retail partners, Canvast works to ensure all our partners are following the compliance standards with our brand, while continuing to stock your shelves with products that will sustain as these new regulations are enforced and many brands begin to disappear. 

    Canvast Supply Co. is fully registered with USPS under the Business/Regulatory Purposes and can lawfully continue shipping vapes. This is why we must obtain documentation of your EIN and Reseller's Permit and Tobacco License (where applicable) so that we can verify you are an authorized business to receive vape shipments. 

     

    As a Retail Store - how does this affect me?

    As a retail store it is paramount that you comply with your state's PACT Act license and tax requirements. Don’t know where to find these requirements? Reach out to us! We are here as your partner, to help. We appreciate your business and willingness to provide us with the accurate information to remain in compliance. 

     

    As a Retail Store - Can I still sell vapes online?

    You can but get ready for a lengthy and costly process! You will need to follow the above steps to establish and remain in compliance. For the sake of clarity on what this entails, it is hundreds of hours in set up, monthly legal fees in reviewing registrations and setting up agents in each state. A requirement for clean data and document management systems to do the monthly reporting to the state and USPS. 

     

    As an online customer - can you ship to me?

    We are currently unable to ship directly to your door as a consumer. We are busy behind the scenes here and will have this back up in running soon. For now you can find a local Canvast dealer near you! 

     PS: We're still allowed to ship CBD Vape Carts!

    The PACT Act has greatly expanded compliance requirements for many sellers, added many new product taxability codes and tax returns, and created an absolute logistical maze. Most companies will not have the finances and man power it requires to reach and maintain compliance here. 

     

    Failure to comply with the PACT Act can send your business up in smoke - and its not the fun kind of smoke any of us want to catch ourselves in. 

    As your partner we are here to help you navigate new regulations and support you in growing a successful business. 

    Why are other brands/wholesalers not talking about this and still shipping to me without any changes?

     

    Many brands are willingly choosing to turn a blind eye to this new regulation, and are under a dangerous assumption that the PACT Act does not apply to CBD products. Through the updated definition of ENDS units - there are clearly no exemptions for hemp or CBD vapes. 

    We encourage you to ask your vape vendors if they are fully PACT Act compliant and maintain the proper business records and monthly reporting cadence. If they say no, please consider the risk this puts your business in - WE ARE HERE TO KEEP YOUR SHELVES FULL! 

     

    Want to back up the above data with your own research? We get it! 

     

    Here are some third party sites reviewing the PACT Act. 

     

    1. Hodgson Russ: Hemp and CBD Sellers Beware: Vapes Soon Subject to Significant Restrictions on Sales and Shipping

    1. Will USPS Continue to ship vapes (we are registered!)

    1. New Vape Rules: Here’s what you need to know

     

    Canvast Supply Co. prides itself on consumer safety and compliance. We are here to support your business growth. Reach out to us if you have any questions or need referrals or direction.

     

    Still unsure about providing us with the necessary documentation to ship vapes?

     

    Here is a copy of our official approval letter from USPS to drive home the importance of all the right records and documents being managed.

     

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