The PACT Act is US legislation that regulates online and remote sales of cigarettes, smokeless tobacco products, and e-cigarettes. In June 2010, it came into force as an amendment to the Jenkins Act of 1949.
The original Jenkins Act required interstate shippers of vaping products to report sales to tobacco tax administrators to prevent illicit sales of cigarettes and tax avoidance. The new PACT Act adds:
The PACT Act is part of our series of articles about customer verification.
In this article:
Whether online or through mail-order sales, individuals and companies selling cigarettes, smokeless tobacco products, and e-cigarettes, whether online or through mail-order sales, often do so without paying tobacco taxes or complying with relevant laws. In some cases, these products are sold to or obtained by children.
US law enforcement has found it challenging to deal with the problem because sellers used the anonymous nature of online sales to evade detection. Also, in many cases, sellers were based in distant locations, Native American tribal lands, or in foreign countries, making enforcement of state laws very difficult.
The PACT Act intends to solve this problem and create a framework for easier regulation and enforcement of illegal tobacco sales. It requires Internet and remote sellers to:
The Consolidated Appropriations Act of 2021 was signed into law by Congress on December 27, 2020, and went into effect on March 27, 2021. This act amends the PACT Act, altering the definition of “Cigarette” to include Electronic Nicotine Delivery Systems (ENDS).
ENDS covers all electronic devices that use an aerosolized solution to deliver nicotine, flavor, or other substance to users inhaling through the device. It includes e-cigarettes, e-cigars, e-hookahs, vape pens, electronic pipes, advanced refillable personal vaporizers, and any component related to these devices purchased together or separately.
Any business or individual selling, transferring, or shipping ENDS for profit in interstate trade must register with the ATF and any state where a shipment will occur. The amendment also includes laws protecting young people from the long-term health effects of ENDS, extending the PACT age verification requirements to ENDS.
If an individual violates the PACT Act, they can face the following penalties:
Individuals who sell tobacco in a US state, or advertise products in that state, must register with the ATF and the Tobacco Tax Offices. Registration requirements apply to companies selling directly to consumers and manufacturers and distributors who ship interstate.
It is important to note that a seller is considered advertising products in a US state even if their website is accessible by at least one consumer. Therefore, sellers must comply with all the PACT requirements even if they don’t sell to consumers in the state. Failure to register properly can result in fines ranging from $5,000 to $10,000 for every violation.
Merchants who did not meet the minimum threshold for licensing under the previous law must check if they need new business licenses under The PACT Act.
According to the PACT Act, businesses must collect and pay all the applicable local, state, and federal sales and excise taxes. Many states impose excise taxes (on specific goods and services) on e-cigarette products. For example, Georgia recently started levying a tax on e-cigarette products.
The PACT Act also requires new taxability codes in modified state tax forms. Businesses must work with their tax and financial advisors to correctly provide this information. Returns must be filed in all registered jurisdictions, even if the seller did not do actual business (in this case, they must report zero returns).
The PACT Act requires companies and carriers to submit detailed monthly shipping reports. In addition, sellers must provide details about the shipped order, including:
It is mandatory to keep invoices and customer details for four years.
If individuals sell vaping products to a distributor or retailer, they are not responsible for collecting tax under the PACT Act. However, it is their responsibility to review reseller certificates to ensure that those resellers are collecting the tax. Otherwise, if they are audited and cannot produce this certificate, they will have to pay uncollected taxes and any fees or penalties instead of the distributor or retailer.
The recent amendment to the PACT act includes laws to protect minors from the long-term health effects of smokeless tobacco devices like vapes. It extends the PACT Act’s age verification requirements to ENDS and requires properly labeling any packages containing these products.
Sellers must verify the age of purchasers through commercially available databases. The amendment also requires signing shipments by an individual presenting proof of legal age to purchase these products. Additionally, sellers must keep records of delivery sales.
Vendors need a solution that reliably and affordably verifies age with as few data points as possible. Age verification platforms that ask the wrong questions or too few questions will result in a substantially greater rate of failed transactions. Conversely, platforms that ask too many questions deteriorate the user experience and often drive away users who would otherwise convert to a sale.
BlueCheck achieves this balance by combining a sleek, field-tested user interface with a robust verification engine that connects to a network of authoritative databases and credit bureaus. In addition, we partner with companies in various industries and growth stages to provide affordable, reliable online age verification. Learn more about how BlueCheck can help you solve your age verification challenges!