E-Vapor Sellers To Do List
What Vape sellers Should do to Comply with PACT Act before Mar 28, 2021?
The new federal PACT Act includes all vape products (ENDS) and takes effect in one week. These are the steps that a vape seller should take immediately to be in compliance with the new tax rules required by the new federal law.
1. Register with the ATF
The new law requires any person who advertise, offers, sells, transfers or ships vape products for profit to register with the ATF and report a summary of shipments every month. This summary should include the total quantity or volume of vape products shipped to every state. The bill mandates that the ATF to produce list of non-compliant vape sellers.
2. Register with the states
The new law requires all vape sellers to obtain tobacco licenses in states they ship Vape products to before the effective date or stop selling in unlicensed states. Vape sellers should contact their law firm to get assistance with obtaining tobacco licenses as soon as possible. They should start the paperwork to register with the states even if the states don’t currently require a vape excise tax. This is to be in compliance with the new federal PACT Act law. The PACT Act requires all vape sellers to report the name, address, and products shipped to every state per month regardless who they are shipping to (consumer, retailer or wholesaler). If they ship vape product across state lines, that shipments should be reported to the origin and destination states each month.
3. Prepare for March 2021 Tax Filing
Once vape sellers get their tobacco licenses paperwork submitted and receive tobacco licenses from the states, they should contact their accountant, CPA, or tax compliance software vendor to start the process of tax returns and PACT Act reporting. Each state may have different tax reporting rules to comply with. This includes type of filing, tax rates, and tax filing due date. The tax filing processes may include using paper forms to print and mail with a payment check, electronic filing (e-file) data entry to state website portal, or file upload using Excel, CSV, or XML file formats. It is recommended to use Avior’s tax software to quickly and accurately file your returns.
4. Find Alternative Shipping Carrier
The new law restricts USPS postal services from shipping vape products, followed by FedEx and UPS announcing that they will stop transporting vape products to consumers. Sellers need to find alternative carriers for their vape products. There are smaller shipping carriers that may continue to ship vape products to retailers and other distributors, but not to end consumers. The PACT Act states when shipping vape products to end consumers you must keep records of the receiving persons signature and verify consumer information using commercially available database for age and identity authentication, which presents challenges to shipping companies. Instead of leaving the package at the door, now they have to check the legal identification of the end consumers to ensure the persons receiving then products are at least 21 years of age, similar to the current cigarettes or alcohol requirements.
5. Start Labeling Shipping Packages
Shipping packages and all invoices must be include the following statement.
Federal Law Requires the Payment of all Applicable Excise Taxes, and Compliance with Applicable Licensing and Tax-Stamping Obligations
6. Shipping Data
Sellers now, by law, they have to start keeping good records of shipment data. Federal and states tax returns or PACT Act reports include and require details like products category (e-liquid cartages, nicotine, CBD, refill, or e-cig device), line item price or cost, item e-liquid milliliter, name and detailed invoice addresses. The PACT Act reports may require more details depending on the state. ENDS Excel template, developed by FTA as part of tobacco tax uniformity, is a good source of details about what data needed for vape products.
Terminology & Abbreviations
Vape Seller: any person or business entity who sellers E-Vapor (ENDS) products to end consumers, retailers or other distributors.
ATF: The Bureau of Alcohol, Tobacco, Firearms and Explosive
A good list of states department of revenue contacts information can be found at FTA Tax Information By State.
Non-compliant vape sellers may face large penalties. Sellers need to start submitting tobacco license applications to the states that they are planning to ship vape products. Businesses should also start collecting and remitting excise tax to these states starting next week. States may require back taxes from vape sellers. Sellers who are not in compliance will be listed on ATF non-compliant list and face possible prosecution and penalties.