How the Federal PACT Act May Impact Your Online Hemp or Cannabis Retail

With the rapid growth of e-commerce, the federal Prevent All Cigarette Trafficking (PACT) Act, found at 15 USC §§ 375 – 378, has become increasingly relevant for online retailers. Originally aimed at regulating the sale and distribution of tobacco products, the PACT Act has been updated to include vaping products, impacting how these products are sold online. For online retailers of hemp vapes, understanding and complying with the PACT Act is crucial to avoid legal repercussions and maintain business operations.

What is the PACT Act?

The PACT Act, initially passed in 2009 and expanded under the Consolidated Appropriations Act of 2021, is designed to combat illegal trafficking and sales of cigarettes and smokeless tobacco. The act was expanded to include Electronic Nicotine Delivery Systems (ENDS), and this term encompasses e-cigarettes, e-liquids, and vaping devices.

“ENDS” are defined by the Act as “any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device,” and can thus be read broadly to include hemp and cannabis vape products, such as those containing cannabis concentrates, cannabidiol (CBD), or hemp-derived tetrahydrocannabinols (THC) such as delta-8 and delta-9 THC. (See ATF’s answer to this question here). “ENDS” also includes “any component, liquid, part, or accessory of [the device], without regard to whether the component, liquid, part, or accessory is sold separately from the device.” Thus, online retailers of hemp and cannabis vape products, as well as accessories for such products, must be aware of the PACT Act’s requirements.

Key Requirements of the PACT Act for Online Retailers

1. Registration with ATF and State Authorities Online retailers of ENDS that are taxed by the state into which they are shipped must register with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and with the tobacco tax administrators of any states where they ship products.
2. Compliance With Destination State’s Laws: When shipping direct to consumer, the PACT Act requires that delivery sellers comply with the laws of the State or locality into which they are shipping, including licensing and other sales restrictions. This means that even if a seller’s home state does not require licensing to sell hemp vapes, there may be a licensing obligation based on the laws of the state into which you are shipping your products.
3. Monthly Reporting: Retailers must submit monthly reports to each state’s tobacco tax administrator where they ship products. These reports must detail the sales made to customers in those states, including the names and addresses of purchasers, and the quantities and types of products sold.
4. Age Verification: The PACT Act requires rigorous age verification processes to prevent sales to minors. Online retailers must use age verification at the point of sale and during delivery. This typically involves third-party verification services to confirm the buyer’s age before purchase and requiring an adult signature upon delivery.
5. Shipping Restrictions: With some exceptions, the Act prohibits USPS from shipping vape products directly to consumers. Retailers must find compliant alternatives, such as smaller regional carriers that adhere to the PACT Act’s regulations. It is important to check the policies of other major carriers such as UPS and FedEx, as their policies may mirror those of the PACT Act.
6. Labeling and Tax Compliance All packages containing vaping products must have clear labels indicating the contents and adhere to all applicable local, state, and federal tax regulations. Retailers must ensure that all taxes on vaping products are collected and remitted according to the laws of the destination state.
7. Record-Keeping Retailers must maintain records of all transactions for a minimum of four years. These records should include sales data, shipment information, and age verification details, ensuring they can provide proof of compliance if audited.

Consequences of Non-Compliance

The PACT Act provides that delivery sellers who do not properly register and comply with the Act may be placed on a list of non-compliant entities that can be distributed to the attorneys general and tax administrators of every state and to common carriers and other persons that deliver small packages to consumers in interstate commerce. Once placed on the list, common carriers that deliver ENDS to consumers are prohibited from making a delivery for a person on the list.

The Act further provides for criminal and civil penalties, including fines of up to $10,000 per violation. ATF does monitor the web for possible violations, so your website advertising your sale of vape products may make you a target for enforcement.

Conclusion

The federal PACT Act may significantly impact the online sale of cannabis and hemp vapes, requiring rigorous compliance with registration, reporting, age verification, and shipping regulations. For online retailers, understanding and adhering to these requirements is crucial in order to avoid a run-in with federal authorities.

If you have concerns about the PACT Act’s application to your business, please reach out to Holon’s Cannabis and Hemp team at info@holonlaw.com.

Holon Law Partners has 100+ years of experience combined guiding clients through complex cases and legal intricacies. Our approach is empathetic, customized, and client-centered with a focus on you and your unique business needs. To schedule a consultation with us, call our team at (866) 372-0726 or email us at: info@holonlaw.com.