The Vape Shipping Ban Amendment to the PACT Act

The Vape Shipping Ban enacted in late December 2020 was last-minute thrown into a COVID-19 relief package as an amendment to the Prevent All Cigarette Trafficking (PACT) Act.

The PACT Act was an extension of the Jenkins Act of 1949, which was passed to prevent cigarette trafficking and made illegal interstate cigarette trafficking a federal crime.

This puts PACT Act 2.0 under the jurisdiction of the Bureau of Alcohol, Tobacco, Firearms (and Explosives), the ATF. In this bill is the Electronic Nicotine Delivery Systems (ENDS), which presupposes that all cartridges are for nicotine use, and the Preventing Online Sales of E-Cigarettes to Children Act (no acronym, so we'll call it Kids PACT).

This amendment to the PACT Act basically made it illegal for the use of shipping related to vaping products, filled or unfilled, or any part of a vape device, without enacting a litany of requirements. To be PACT compliant, a shipping service must:

  • Register with the US Attorney General and the tax administrators in any state the product is sold.
  • Implement a third-party identity and age verification system for sales.
  • Verify the customer's age at the point of delivery.
  • Adhere to local tax laws where the product is sold.
  • Create a log of all transactions based on the name, age, and address of the customer and the person who delivers the ENDS.
  • This log must also record the quantity and brand of the product purchased.
  • Keep a log of failed delivery attempts due to a lack of age identification for five years.
  • The ATF can audit these logs at any time.

This will go into effect April 26. Stock up now!

As one last middle finger to the cannabis, hemp, and nicotine industry from the last administration, this piece of legislation will disrupt the market for vaping products for a while until companies can adapt.

 

Prices will go up nationwide due to tax. There could be a short period of scarcity. 

The United States Postal Service is in official review of how it will follow the specifications of the PACT Act. Fed Ex and UPS will probably follow suit in the same mode. DHL will add the feature of requiring in-person signatures. 

Violation of the PACT Act penalties are stiff: it is a criminal felony and each violation carries a civil fine of $5000 to $10000.

This is primarily about tax revenue. Let's be upfront about that. Which is why online retailers must affix tax stamps to all products sold and collect and pay all applicable local, state and federal taxes. Nobody wants a RICO charge. Is this the end of days for the ability to order products from out-of-state? Perhaps, but hopefully this will just be a hiatus.

Say that hypothetically someone from Connecticut buys a vape product from us, they currently would pay North Carolina state taxes. The PACT Act would enforce that the buyer pays Connecticut taxes on the product, and we would have to pay ours.

Where does that put the online retailer in this? To comply with the PACT Act Kanna must:

  • Verify age of customers using a commercially available database.
  • Register with the ATF and the U.S. Attorney General.
  • Register with state and local tax administrators in all states and localities where business is done,
  • Each month, a list of all transactions must be sent to each state’s tax administrator that includes the names and addresses of each customer sold to, the quantities and type of each product sold, and the name, address, and phone number of the person delivering the shipment to the recipient.

I don't know if this more Huxley-esque or Orwellian, but your humble narrator believes the federal government is laying the infrastructure to brace itself for a discussion about cannabis legalization, by which it means to oversee and tax the hell out of it; it currently receives $2 billion a year from 250,000 tax payers who work in states with legal marijuana. Steep, my friends, steep. It is worth noting that delta 8 THC is illegal in 11 states, two of which have fully legalized marijuana and one with medical use legalized, Arizona and Alaska, and Mississippi. Stay classy Mississippi. #kannavapelife. Be well America.