The PACT Act 2022 is just one of the countless laws surrounding the cannabis industry. As a dispensary owner, it's crucial to stay on top of things as the laws are changing rapidly. For dispensary owners who have online ordering, the PACT Act 2022 will significantly impact your business.
So, whether you are new to the PACT Act 2022 or looking to learn as much as you can about it, you've come to the right place. We want to help you understand the latest in terms of legalization and laws surrounding the PACT Act 2022.
This article will provide you with the most up-to-date and easy-to-digest information regarding this legislation. We want to help you understand what needs doing to protect your business and explain any action that might be needed.
What is the PACT Act?
What some might find surprising is that the Prevent All Cigarette Trafficking (PACT) Act is, in fact, not a new piece of legislation. No, the PACT Act has been in effect since June 29, 2010.
The original PACT Act focuses explicitly on smokeless tobacco products and cigarettes, applying strict regulations to the mailing and taxation of these products. According to the PACT Act, the mailing of cigarettes is banned without authorized exception.
Requirements of the PACT Act 2022.
As with any legislation, understanding what you need to do to meet the requirements of the PACT Act 2022 can be complicated. Help your business stay compliant and make your business run more efficiently by following these steps:
Registration
Registration is now required with both the tobacco tax administrator in the shipping state and the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) if you:
- Sell cigarettes into a state
- Advertise your product in that state in any way
- Sell directly to consumers, distributors, and manufacturers shipping interstate
Even if you don't sell to consumers in a specific state, you'll have to comply with all registration requirements if a consumer can reach your website in a state since that's considered advertising.
To complicate things even further, every instance of non-compliance, including not registering correctly, can lead to a fine ranging from $5,000 all the way up to $10,000.
Licensing
Some sellers may find that they need one or more new business licenses. This will include those who were previously able to "fly under the radar" or didn't meet minimum thresholds. The PACT Act 2022 is proving to serve the industry as a check and balance, explicitly addressing registration requirements.
Tax compliance
Continuing in its efforts to serve as a check and balance, the PACT Act 2022 now requires businesses to collect and remit all applicable local sales, state, and federal sales tax, and excise taxes.
Today, sales tax is not collected in all states across the country, but it's worth noting that the number of states imposing an excise tax on vape products is growing rapidly. For example, Georgia has recently started imposing a tax on vapor products.
Additional fields have been added to tax return forms to bring them in line with the PACT Act 2022. As such, new taxability codes are required for the modified state forms. Ensure your financial and tax systems can handle these modifications.
Lastly, dispensary owners must know that tax returns must be filed in all jurisdictions where you're registered, even if no sales were made (a zero return).
Reporting
Businesses are now required to file detailed shipping reports monthly under the PACT Act 2022. You'll need to provide detailed information regarding the shipment of your orders, including:
- Who it is being sent to
- Which products were shipped
- How much the total items where
- What carrier was used for shipping
- And more!
You'll need to file a copy of retail customer details along with each business invoice for up to four years.
Staying on top of reporting can be incredibly tedious. Thankfully, with the help of software integration, it's becoming easier than ever. KayaPush is cannabis software that makes people management easy. Streamline reporting while ensuring your business stays compliant with the PACT Act 2022.
Certificate management
To ensure you collect tax properly, you must manage reseller certificates if you're not selling to an end-user but selling to a retailer or distributor. The responsibility of any uncollected tax, plus any penalties and fees that apply, will ultimately fall upon you if you're audited and cannot reproduce this certificate.
if you are a business dealing with a high volume of certificates, it might be more effective to integrate a system that is automated and directly ties into your POS system or eCommerce, rather than handling certificates manually.
When did the PACT Act change to include vaping, cannabis, and other e-cigarettes?
Congress decided to include vaporizers in response to the rise in popularity of e-cigarettes over the past decade, especially amongst the younger demographic.. As of December 27, 2020, the definition of the term "cigarettes" used in the PACT Act was changed, so that the PACT Act that we know today uses the term "cigarettes" as an umbrella term, including any Electronic Nicotine Delivery System (ENDS). Unfortunately for the cannabis industry, ENDS includes all vaporization products, whether or not they are used for nicotine or contain nicotine.
There has been much debate surrounding the inclusion of ENDS in the PACT Act revision, and while they awaited a final verdict, the United States Postal Service (USPS) determined its own ruling on the subject.
As of October 21, 2021, the PACT Act term for "cigarettes" would, in fact, include hemp/cannabis vaporization products in ENDS.
How will the PACT Act impact my dispensary?
For dispensaries across the country, the PACT Act 2022 makes it incredibly difficult for business-to-consumer (B2C) or business-to-business (B2B) mailing of any vaporization products. Even if you are not mailing out products directly from your business, you will likely face impacts from the new ruling on this legislation.
Business to consumer (B2C) impacts
Online (B2C) retailers who deliver vaporization products to consumers via the mail will need to apply for an exception through the USPS (detailed below).
Expect an increase in prices because of the extra costs placed on the suppliers if you buy the end products as a consumer.
Business to business (B2B) impacts
Dispensaries that buy, sell or manufacture vaporization products will be impacted. Those who manufacture and distribute products via mail business to business (B2B) for resale must apply for an exception (detailed below).
You will have to work with the business that mails it to you to be included in their exception as a recipient if you are a business receiving these products from a manufacturer and distributor.
How to mail vaporization products moving forward
According to 18 U.S.C. 1716, the only way to mail vaporization products following the PACT Act 2022 is by filing for an exception through the USPS (detailed below).
If you are thinking of opting for alternative delivery methods, you might want to think again. UPS and FedEx have both already imposed an outright ban on delivering these products.
What should dispensary owners do about the PACT act in 2022?
You should get familiar with the final rule of the PACT Act 2022 if your business has anything at all to do with the manufacturing, delivery by mail, or retail of cannabis/hemp vaporization products. These products may include things such as empty cartridges, batteries, liquids, etc.
Thankfully, the National Cannabis Industry Association (NCIA) is vigilant in ensuring its members are fully educated on this issue and ensuring that the federal government understands this unnecessary hardship to the industry. Despite the massive burden it is currently putting on the cannabis/hemp vape industry, there are ways to deal with the PACT Act 2022.
One of the primary ways that dispensaries can learn to live with the PACT Act 2022 is by filing for an exception through the USPS Pricing and Classification Service Center.
Exceptions through the USPS pricing and classification service center
To help prepare businesses for the final rule of the PACT Act 2022, the USPS issued a guidance document (86 FR 20287) in April 2021. Included in the April 2021 Guidance are the exceptions and what documentation is needed to apply.
For dispensaries looking to apply through the USPS, the following exceptions will be considered:
Public health
Manufacturers conducting consumer testing may be allowed limited shipments of cigarettes by federal agencies for public health purposes.
Consumer testing
Verified and authorized manufacturers may be allowed to make limited shipments of cigarettes to adult smokers for consumer testing purposes.
Certain individuals
Non-commercial shipments by adult individuals may be considered as long as they are lightweight and limited to 10 shipments per 30-day period.
Business and regulatory purposes
Verified and authorized tobacco-industry businesses may be allowed shipments for business purposes or between such companies and federal or state agencies for regulatory purposes.
Intra-Alaska and intra-Hawaii mailings
Intrastate shipments within Alaska or Hawaii may be permitted.
When to apply for an exception
While the USPS was still discussing the PACT Act terms, they were not allowing any exceptions to be filed. Since the final decision has been made, as of October 2021, exceptions are now allowed.
If you have a dispensary and are being impacted by the PACT Act 2022, it is time to file for your exception ASAP.
Where is the PACT Act 2022 enacted?
The United States federal government has enacted the PACT Act, meaning that it impacts dispensaries or other manufacturers, providers, or retailers in the entire country.
While there are exceptions in Alaska and Hawaii, they must be processed through the USPS Pricing and Classification Service Center.
Is there a PACT Act in Canada?
The PACT Act applies to the United States. While Canada does not currently have a PACT Act, the Tobacco and Vaping Products Act (TVPA) is similar.
Tobacco and Vaping Products Act (TVPA) of Canada
The regulation of the manufacturing, selling, labeling, and promotion of tobacco products and vaping products sold in Canada is subject to the Tobacco and Vaping Products Act (TVPA).
Formerly known as the Tobacco Act, enacted in 1997, it was modified to include vaping products and passed on May 23, 2018.
Initially enacted in response to the national public health problem posed by tobacco use, the TVPA and its regulations have been a critical component in advancing the government's strategy to protect the health of Canadians from tobacco-related death and disease.
Mailing tobacco and vaping products in Canada
According to Canada Post, while the shipping of tobacco and vaping products is controlled under several laws and regulations in Canada, you can find some of the details directly through them.
You cannot typically mail tobacco products from one province or territory to another unless the shipment meets one of the following exceptions:
- Shipment is between manufacturers or retailers
- Shipment is between two consumers
- Mailer is otherwise expressly permitted by federal law to mail the products from one province or territory to another
In the instance of tobacco shipments, the originator of the shipment holds the responsibility of meeting the requirements of the TVPA, and proof of age is required.
Vaping products are typically considered non-mailable items unless the shipment meets one of the following exceptions:
- Lithium battery in the device meets the requirements in ABCs of mailing for domestic ground/surface mailing of lithium batteries
- Product is shipped using a ground service
Conclusion.
The PACT Act 2022 is a complex piece of legislation that will impact the majority of the cannabis industry. Rather than being caught off guard and facing fines, it's crucial to stay ahead of the game and understand all the implications that the new legislation has for you as a dispensary owner.
Keep your business running smoothly and avoid penalties from the government by staying compliant with the PACT Act 2022. For assistance with reporting, seek out industry leaders like KayaPush to help save countless hours and payroll dollars.
Are you looking to learn more about how you can streamline and optimize your dispensary? Download our free dispensary SOP checklist below!
