The COVID-19 relief legislation passed by Congress in December, included a provision to expand the existing Prevent All Cigarette Trafficking Act (PACT Act) to include e-cigarette products. This move caused concern among those in the cannabis industry, largely due to exaggerated claims by vaping industry interest groups.
BY EMILY BURNS, GREEN LIGHT LAW GROUP —
The PACT Act was enacted in 2010 after states like New York, which has the highest cigarette taxes in the nation, discovered that common carriers (UPS, Fedex, DHL) had allowed cigarette manufacturers to avoid paying millions in state and local taxes. The original PACT Act prohibited the US Mail Service from delivering cigarettes, requiring registration at the federal and state level for cigarette retailers that advertise or ship products to states with cigarette taxes, and requiring delivery drivers to verify the identity and age of recipients of cigarette products. While public health groups wanted to prohibit online sales of tobacco products altogether, the original PACT Act did not go that far but did require registration at the federal and state level for cigarette retailers that advertise or ship products to states with cigarette taxes, and required delivery drivers to verify the identity and age of recipients of cigarette products.
With the recent amendments to the PACT Act, the law does not just apply to traditional cigarettes and smokeless tobacco, but is also expanded to include delivery of electronic nicotine delivery system (ENDS) products, i.e. e-cigarettes and other vaping products. The definition of ENDS is extensive and could theoretically cover vaping parts and components that are used for either nicotine or cannabis cartridges, but the actual effect of the definition is much less dramatic than the vaping industry continues to suggest. The reality is that ENDS products can still be delivered by common carriers like UPS and FedEx, but the US Postal Service cannot—and that is a good thing. Why? It means that the US Mail Service is not positioned to violate the PACT Act and therefore, taxpayers are not on the hook for violations of the law. Additionally, the taxes applied to ENDS products at the state and local level remain an important public health policy tool for reducing youth smoking rates and this is something that benefits the overall population and taxpayer base through reduced healthcare costs.
The primary goal of the PACT Act is to lower youth smoking rates because the failure to collect taxes imposed on cigarette manufacturers would reduce the cost of cigarettes, and youth populations are the most price-sensitive consumers, so public health advocates argue that enforcement of tax laws inhibits youth access to cigarette products. The Food and Drug Administration (FDA) regulates electronic nicotine delivery system (ENDS) products in several ways, but FDA is not responsible for overseeing the PACT Act enforcement provisions. Rather, the Alcohol, Tobacco, and Firearms (ATF) Bureau ensures compliance with PACT Act requirements and ATF handles those not in compliance with the reporting and registration requirements, or subject to legal proceedings for non–compliance, based on reports from state and local authorities. The ATF circulates a list of these offenders to the attorney general and tax authorities in each state, all common carriers, and others. The law makes it unlawful to aid anyone on the list with a delivery or partial delivery of cigarettes.
The cannabis industry is not really going to feel the impact of the PACT Act changes for a few reasons, including the fact that the ATF and FDA have no authority to regulate cannabis products or cannabis taxes—these federal government agencies are not interested in cracking down on cannabis vaporizers because it is not their responsibility. FDA cannot regulate ENDS products that do not contain nicotine or tobacco, or that do not use health claims like smoking cessation, as a matter of the federal Food, Drug, and Cosmetic Act. ATF will enforce the provisions of the PACT Act to ensure that ENDS manufacturers are paying the necessary state and local excise taxes applicable to ENDS products, but this is limited given that only a handful of states do tax ENDS products in the same way that cigarettes are taxed. The definition of ENDS in the PACT Act is designed to encompass all ENDS products that are taxed by local authorities because each state has its own definition of ENDS products—not to mention the definition that is used by FDA for purposes of federal law, which is different from state legal definitions in some cases. The definition that is used by a state for purposes of taxation is what matters under the PACT Act because states distinguish between cigarettes with tobacco or e-nicotine, and cannabis vaporizer products, for taxation purposes, not to mention the fact that state cannabis regulators have substantial opportunity to track, record, and audit sales of cannabis products that could fall within the PACT Act’s definition of ENDS.
This means any state cannabis regulatory agency is already in a much better position than anyone at the ATF Bureau to decide whether a manufacturer is avoiding sales and excise taxes applied to cannabis vaporizer products. In contrast, tobacco control laws at the state and local level are heavily underfunded and understaffed because the FDA and ATF are primarily responsible for regulation of the tobacco industry. It is also worth noting that interstate sales of “THC” vaporizers would also be illegal under the federal Controlled Substances Act, so the risk of being punished under the PACT Act is laughable in comparison to life in prison for trafficking in Schedule I controlled substances.
The bottom line is that public health advocates have not yet persuaded Congress to ban online cigarette sales altogether (for now), and that is a good thing for the cannabis industry. Responsible regulation of the cannabis industry is an important aspect of avoiding the fate of Big Tobacco – even if there are minor sacrifices that must be made in the short term.
You can contact Emily Burns at firstname.lastname@example.org or (503) 488-5424.