It’s tax season, and as a business owner, we’re sure you understand how the tax regulations change every year. It’s a hassle, for sure, but regulatory compliance requires keeping up with the changes as necessary. You get it. Well, the same is true about how companies perform trades and sales online, especially for those who sell anything that is even remotely related to high risk or illicit materials. That places things like online tobacco, nicotine, and especially vape merchants who take vape payments online directly in the regulatory cross-hairs.
This year, experts believe that the federal government is going to take aim at businesses that sell cigarettes, tobacco, and, more importantly, vape products online with a set of laws known as the PACT ACT. It stands for “Prevent All Cigarette Trafficking,” and it stands to take a big bite out of your business. Here, we’re going to explain what the new PACT Act laws are, how they work, and what you can do to avoid any regulatory air-strikes against your bottom line.
What is the PACT ACT?
The PACT Act is actually a revision of an act that dates back to 1949 called the Jenkins Act. The Jenkins Act mandates that anyone shipping cigarettes or tobacco across state borders must report any and all such shipments to local state authorities. The original purpose of the act was to prevent illegal transactions and to catch tax dodgers.
The PACT Act has actually been around since 2010 as a revision of the Jenkins Act. It was designed to regulate the sales of cigarettes, tobacco, and vape products online. It affects reporting and registration requirements, as well as delivery and record-keeping regulations. Those who are found to be in violation of the act can be charged with a felony and sentenced to as much as three years in prison. So, yes, it is quite serious.
So why are we bringing it up now? The reason is largely to do with the fear lawmakers have of vape products. The act was revised within packages known as PACT Act 2020, PACT Act 2021, and most specifically PACT Act section 230- which takes aim specifically at the vape industry.
As you know, some people got their hands on some altered e-juice cartridges and were severely injured by them. While these incidents were few in number, and the public quickly wised up about unprofessional and shady vape vendors, the news media was making hay on the fear and outrage. Lawmakers saw it as an opportunity to look like heroes and started waving their pens around.
Changes to the PACT ACT for 2021
What’s more, some additional revisions have been made for the current year, and they’ve got industry experts sounding the alarm to responsible merchants like yourself. This year’s changes to the act were included in the recent COVID relief bill which became law in late December 2020 and is about adding e-cigarettes to the provisions laid out by the original Jenkins Act.
The bottom line is that industry experts have good reason to believe that lawmakers are looking to make an example of any vape seller they manage to show has acted in violation of federal law. Our goal here is to help you to avoid getting caught up in the temporary outrage and being falsely persecuted.
New Vape Laws & The Vape Mail Ban
Unfortunately, online vape sellers are going to be hit the hardest by the PACT Act vape mail ban. The parts of the PACT Act passed at the end of last year include an amendment to the PACT Act that places restrictions on mail-order tobacco products, including a ban on mailing vape products. According to the new PACT Act vaping equipment using the U.S. Postal Service.
The good news is that you can still ship your products to your customers. The bad news is that you must use a shipper that will probably charge you more and that will record and report all the details of the transaction to state authorities.
How it Affects Your Business
The act makes it necessary for all vape sellers to proactively report all transactions of nicotine and vape delivery systems to their local, state authorities. As a seller of vape and nicotine products, you will be required to:
Online retailers will be required to:
- Register their vape sales business with the ATF and U.S. Attorney General
- Register their vape sales business with state and local administrators in all states and locations where they do business
- Verify the age of all customers using commercially available database systems
- Use only private shipping services which require adult signatures at the point of delivery
- Collect and pay all applicative taxes, and affix all required tax stamps to products sold
- Failure to comply with these regulations will also affect your credit card processing services and result in an immediate account closure.
Each month, a record of all transactions must be sent to the state’s tax administrator including the names and addresses of each customer, the type and quantities of each product sold, as well as the name, address, and phone number of the person delivering the shipment to the recipient
What You Need to Do to Stay in Business
For those who already do business selling items that attract the scrutiny of lawmakers online, you likely already perform a number of similar transparency measures in the name of preventing men in ATF vests from knocking on your door. Adding any of the above requirements that you don’t do already is likely to have an impact on your productivity as well as cost you extra in additional services.
The sad truth is that smaller vendors who already cannot afford to endure regulations placed on them over the last 12 months will probably not survive the additional time and monetary expense. The good news is that payment processors who specialize in working with “high risk” online vendors have technology and experience that can help and could keep you in business.
PACT Act FAQs
When does the PACT Act take effect?
March 27th, 2021, 90 days after passing. At the time of this article’s posting, tomorrow.
When was the PACT Act signed?
In the last week of the year, December 27th, 2020.
What is the vape age verification?
Vendors are required to use systems that verify the age of buyers and to provide proof of such use.
What is the PACT Act vape mail ban?
It restricts sending vape materials through the U.S. Postal service, requiring the use of shippers that track merchant/customer data, and require a delivery signature.
What is a vape merchant account?
It is an account designed especially for retail and online vape sellers to process credit card payments while also staying compliant with these regulations with automated reporting. It is also known as a high-risk merchant account.
Key Takeaways for Your Vape Business
- PACT Act age verification means you must prove you check the age of your customers through E-commerce age verification systems.
- The Vape online age restriction will be enforced strictly and must be adhered to.
- Vape credit card processing services can streamline much of your efforts to comply with these new regulations.
How Leap Payments Can Help
Here at Leap Payments, we specialize in working with vapor vendors like you who are operating above board, and who care about their customers, but who also have been placed in the hot seat for political or regulatory reasons. Simply by working with us, you automatically get much of the reporting requirements the new law demands under control. We are in the business of keeping you in business when other forces seem to be aligned against you!
We work with all three of the nation’s top vapor approving banks, and service thousands of other vape merchants. We can offer lower processing rates than our competitors and the newest credit card equipment and terminals. We provide robust, 24/7 U.S.-based customer support. And, our same-day funding options lets you get your business’ batches within 4 hours.