A major vaping retailer in the UK is launching a new vape clinic service with a goal of helping to increase numbers of smokers quit. The move comes as VPZ vape shops announced a 165 percent increase in “New to Vaping” kit sales in the first week of re-opening following the relaxation of Lockdown measures.
Credit: VPZ
The uptake and demand for stop smoking services underlines and re-affirms VPZ’s recent calls for vaping stores to be classed as an essential retailer during the Pandemic, according to VPZ director Doug Mutter. “We are investing to help smokers quit and to support the country in its ambition to be a tobacco free nation by 2030.”
Following over a year of having no NHS stop smoking services available, the company has been inundated with smokers looking to quit since reopening its full estate of stores on 26 April, according to Mutter. The retailer has seen a huge demand for New to Vaping (NTV) kits since it reopened its 150+ UK stores, with an unprecedented demand for NTV kits in the first week.
“With access to local stop smoking services and vaping retailers massively reduced during lockdown, thousands of smokers have been left without any services to help them quit,” a press release states. “Since re-opening its stores to bring customers a Covid-secure retail experience, VPZ has faced record demand from smokers looking for expert advice and personalized support to help them make the switch.”
The quit clinic investment and recruitment drive are part of VPZ’s commitment to play its part in helping the UK achieve its ambitions to be a tobacco-free nation by 2030, set out by the Government in 2017. “VPZ is the UK’s leading vaping specialist and we are spearheading the fight against the nation’s number one killer – smoking,” said Mutter. “We are excited to be launching the Vape Clinic concept following strong demand and recognizing the need for an enhanced level of service since reopening our doors. The huge reduction in NHS stop-smoking services, through COVID-19 and local authority cuts have been devastating in the country’s efforts to reduce smoking rates.”
A new bill that would establish a federal tax on vaping products has been introduced in the U.S. Senate. Senate Majority Whip Dick Durbin, Senate Finance Committee Chair Ron Wyden (D-OR), Representative Raja Krishnamoorthi (IL-D-08) and seven other Senate Democrats have introduced the bicameral Tobacco Tax Equity Act of 2021, which would also increase the traditional tobacco tax rate for the first time in a decade.
Credit: Steve Buissine
“Tobacco-related disease accounts for one out of every five deaths in America, and I know that story firsthand,” said Durbin, according to CStoreDecisions. “Data shows that the most effective strategy to prevent children from starting this deadly habit is to price it out of their range. This bill would help reduce tobacco and e-cigarette use by ending loopholes that the industry has exploited to target our children. If America can kick its nicotine addiction it would go a long way to improving our public health for generations to come.”
Joining Durbin and Wyden in introducing the bill in the Senate includes U.S. Senators Patty Murray (D-WA), Sherrod Brown (D-OH), Jack Reed (D-RI), Jeff Merkley (D-OR), Richard Blumenthal (D-CT), Ed Markey (D-MA), and Mazie Hirono (D-HI).
The Tobacco Tax Equity Act of 2021 aims to “close tax code loopholes for tobacco products by increasing the federal tax rate on cigarettes, pegging it to inflation to ensure it remains an effective public health tool, and setting the federal tax rate for all other tobacco products at this same level.”
“Loopholes in our tax code continue to favor big tobacco while the American public, especially our youth, pays the price,” said Krishnamoorthi. “The Tobacco Tax Equity Act increases taxes on cigarettes and finally imposes taxes on the e-cigarettes hooking our children on nicotine, which would generate billions of dollars in federal revenue. As a father of a high schooler and middle schooler, I’m determined to make sure we end the youth nicotine and vaping epidemic.”
The Tobacco Tax Equity Act of 2021 is endorsed by the Campaign for Tobacco-Free Kids, American Academy of Pediatrics American Lung Association, American Heart Association, American Cancer Society Cancer Action Network, American Public Health Association, National Association of County and City Health Officials, Trust for America’s Health and American Thoracic Society.
The total number of warning letters issued by the U.S. Food and Drug Administration (FDA) to e-liquid manufacturers for illegally marketing vapor products now stands at 80 in 2021. The FDA issued four more warning letters for marketing illegal vapor products. Kidney Puncher, Vapor Gold, Violet Vapor and Voltage Vapor all received letters on March 26 and those letters were posted to the FDA’s website on April 1.
The FDA states that the company’s failed to submit premarket tobacco product applications (PMTA) by the required Sept. 9, 2020 deadline. The FDA also states that “the violations discussed in this letter do not necessarily constitute an exhaustive list” and companies should quickly address any products that violate the same rules as the product mentioned in the letter.
Kidney Puncher has more than 1,000 products registered with the FDA; Vapors Gold has more than 500; Voltage Vapor has more than 1,500 products registered; and Violet Vapor has more than 4,900 products listed with the regulatory agency.
Companies that receive warning letters from the FDA have to submit a written response to the letter within 15 working days from the date of receipt describing the company’s corrective actions, including the dates on which it discontinued the violative sale, and/or distribution of the products. They also require the company’s plan for maintaining compliance with the FD&C Act in the future.
The U.S. Food and Drug Administration (FDA) issued its 70th warning letter this year to a company the regulatory agency says is violating marketing rules. Vintage Vapors received the letter on March 22 and the FDA posted the information on its website on March 25.
The FDA states that it determined the company did “manufacture, sell, and/or distribute to customers in the United States Vintage Vapors Unflavored Tobacco 03MG 30/70 e-liquid product without a marketing authorization order.” Premarket tobacco product applications (PMTA) were due to be submitted to the FDA by Sept. 9, 2020.
The FDA also states that “the violations discussed in this letter do not necessarily constitute an exhaustive list” and companies should quickly address any products that violate the same rules as the product mentioned in the letter. “Your firm is a registered manufacturer with 1,433 products listed with FDA. It is your responsibility to ensure that your tobacco products comply with each applicable provision of the FD&C Act and FDA’s implementing regulations,” the letter states.
Companies that receive warning letters from the FDA have to submit a written response to the letter within 15 working days from the date of receipt describing the company’s corrective actions, including the dates on which it discontinued the violative sale, and/or distribution of the products. They also require the company’s plan for maintaining compliance with the FD&C Act in the future.
Update: The U.S. Food and Drug Administration (FDA) said it received thousands of premarket tobacco product application (PMTA) submissions covering millions of tobacco products, the majority of which came in very close to the Sept. 9, 2020 deadline. The submissions varied substantially in number of tobacco products contained in each submission, size, format and organization, according to a press release.
More than 15,000 premarket tobacco product applications (PMTA) were submitted to the U.S. Food and Drug Administration (FDA) during fiscal year 2020, according to data provided on the regulatory agency’s website.
In August 2020, the FDA received 10,184 applications and in September 2020 it received 4,567. Prior to August, the FDA had only received 686 applications. The FDA does not distinguish how many of those products are electronic nicotine-delivery system (ENDS) devices.
Of the 15,437 applications turned in during fiscal year 2020 (October 2019 to September 2020), 767 PMTAs were closed, according to FDA data. An application is considered closed after the FDA issues an order letter, a refuse-to-accept letter or the PMTA is withdrawn by the applicant.
Companies that submitted a PMTA by the Sept. 9, 2020 deadline and were previously on the market before Aug. 8, 2016, can remain on the market for up to one year while the FDA reviews the PMTA. The FDA said it will release a list of the deemed new tobacco products that were subject to the Sept. 9 PMTA deadline, however, no date has set for the list’s release.
Swissx Labs sent a cease and desist letter to hundreds of companies today demanding they stop selling Juul and other companies that manufacturer patent infringing products within 30 days. The goal is to protect the public from dangerous unapproved uses of its inventor’s IP, according to a press release.
Credit: Bill Oxford
The cease and desist letter demands that stores and chains remove vape products made by Juul and others from their shelves or risk being included in the massive lawsuit already underway for patent infringement. SwissX says it is concerned about the integrity of its inventor’s patent, as well as the safety of the public who may be being put in danger by infringing products.
When the suit is done it is expected the final penalty will top infamous cases on the level of the Enron scandal, the release states. Recipients of the cease and desist letter include 7-11, Speedway, Casey’s, Cumberland Farms, Quick Stop, AMPM, Wawa, ExtraMile and other roadside favorites. Also receiving the letter are major tobacco shop chains such as the 800+ store Smoker Friendly chain. They have 30 days to comply.
“We don’t want innocent retailers to get swept up in this,” said Rudy Delarenta, senior vice president of sales and marketing for SwissX. “That’s why we’re giving them 30 days notice to pull Juul’s infringing products. But if they refuse, we’ll do what we have to do.”
The Indiana state legislature has begun to debate raising taxes on vaping products … again. The annual introduction centers on a proposed tax rate of $1.56 on a two-pod pack, the equal nicotine content to a pack of combustible cigarettes.
Credit: Davis Mark
Indiana’s traditional cigarette tax of just under a dollar a pack is the 13th lowest in the nation. Legislators are considering a bill to double it, and tax e-cigarettes for the first time, according to an article on wibc.com. Marion County health director Virginia Caine says it’s critical to include e-liquids in the bill.
She says vaping among teenagers has doubled in the last two years, wiping out any progress the state has made in reducing teenage smoking. Recent U.S. CDC reports say that teen smoking rates declined in 2020. Mason Odle, owner of Just Vapors in Fishers, says he fully supports raising the cigarette tax, but argues e-liquids shouldn’t be included.
He contends e-cigarettes are a more popular and effective means of quitting smoking than FDA-approved products like nicotine gum or patches. That brought a fierce pushback from health officials, who point out the FDA has specifically banned vape manufacturers from marketing their product as a stop-smoking aid until they produce more evidence that it works. And Caine says there are serious concerns about lung damage from vaping.
Former Libertarian candidate for governor Don Rainwater argues increasing cigarette taxes would punish store owners at a time when they’re already reeling from the coronavirus pandemic. But the main objection from House Public Health Committee members centered on the lack of a specific plan for the proceeds from the tax. A vote has been put off till next week to add language earmarking the money for health programs.
Governor Holcomb and House and Senate leaders have all said a cigarette tax hike isn’t on their agenda, without flatly ruling out the possibility. The House approved an increase in 2016 and 2017, and a vape tax in 2019. All three times, the proposals died in the Senate.
South Africa’s ban on vaping and tobacco sales during the country’s hard lockdown earlier this year was unconstitutional, the country’s High Court ruled Dec. 11.
From March to August, the government prohibited sales of tobacco products and alcohol to help stem the spread of the coronavirus. Market leader British American Tobacco South Africa (BATSA) and smaller companies united in the Fair-trade Independent Tobacco Association (FITA) challenged the ban, arguing that a short-term ban on a product whose health risks become evident only in the long run makes no sense.
They also questioned the rationale of the argument around cigarette sharing. Tobacco shortages and high prices of black-market cigarettes would only increase the likelihood of smokers sharing their “stompies,” the tobacco companies said.
The government lifted the ban before the matter had been heard in court, but BATSA decided to proceed with the court action to prevent the ban from being reintroduced at a later stage of the pandemic.
In its ruling Friday, the Western Cape High Court judges who presided over the case said Regulation 45, which Minister Nkosazana Dlamini-Zuma relied upon for the ban, “cannot and does not withstand constitutional scrutiny.”
In court, the government had argued that the ban was aimed at reducing the occupation of intensive care unit beds by smokers. If people didn’t vape or smoke, they would likely not get Covid-19 in a more severe form, it argued. But BATSA maintained the government had not justified the ban in law or science.
Tobacco companies expressed satisfaction with Friday’s ruling.
“British American Tobacco South Africa has been vindicated in its view that the disastrous ban on tobacco sales was unjustified and unconstitutional after the Western Cape High Court ruled in its favor,” the company wrote in a press release.
“The five-month ban on tobacco and vapor products sales was ill-considered, unlawful and has worsened the illicit trade in cigarettes and vapor products in the country.”
“We note and welcome the judgment of the full bench of the Western Cape High Court, wrote FITA in a statement.
“The court further found Regulation 45 to be neither necessary nor that it furthered the objectives set out in section 27(2) of the Disaster Management Act. This, of course, was one of the arguments advanced by FITA in its challenging of the ban on the sale of cigarettes and tobacco-related products, which the full bench of the North Gauteng High Court erred in finding same to be necessary.”
In the wake of the court ruling, BATSA also renewed its call for South Africa to urgently ratify the World Health Organization Illicit Trade Protocol to eradicate the illegal sale of cigarettes. The company stated that ratifying the protocol is “the only way for the country to claw back tax losses resulting from the explosion in illicit trade that occurred during the ban on tobacco and vapor products.”
In July, BATSA estimated that the ban on legal cigarette sales had cost South Africa ZAR4 billion ($241.7 million) in lost excise tax revenues and 30,000 lost industry jobs.
The regulatory wave is crashing down on internet ENDS retailers.
By Nicholas A. Ramos, Agustin E. Rodriguez and Bryan M. Haynes
Online businesses selling electronic nicotine delivery systems (ENDS) to consumers must contend with a “patchwork quilt” of state laws. This patchwork of laws creates significant regulatory uncertainty and risk for businesses selling online in this space. There are many legal issues facing online retailers, like bans or restrictions on “flavored” tobacco products, minimum age and age-verification requirements, and state and local licensing and tax requirements. This article discusses some of the key legal issues associated with selling ENDS to consumers online and highlights proposed state legislation that may impose more requirements on the industry.
State licensing
Online retailers looking to comply with the myriad of state laws should first look at the states in which consumers purchase their products and, for each state, identify potentially applicable licensing laws. States may require licensing or registration under tax laws, health and welfare laws, and/or general business laws before online retailers may sell to consumers in their states. Idaho, for example, requires licenses from its Department of Health and Welfare to prevent youth access to tobacco products and electronic smoking devices. Washington, D.C., however, requires a basic business license from its Department of Consumer and Regulatory Affairs.
In addition, online retailers of ENDS should determine whether state licensing law definitions actually cover their products. While states have required licenses for the sale of tobacco products for years, they have only recently added definitions of ENDS to their licensing statutes. ENDS may be covered under licensing laws either because the category is explicitly defined, or the definition of tobacco products is broad enough to cover ENDS products.
Nicholas A. Ramos
Online retailers should also determine whether state licensing laws actually cover remote sales. Some states only require licenses for retailers that have a “place of business” or “business location” in their states. Hawaii, for example, is unique in that it requires ENDS retailers to obtain a registration from the Hawaii Attorney General. At this time, however, the Attorney General only requires retailers to register if they are located in the State, which excludes out-of-state online retailers.
It is also important to keep in mind that most state laws regulating ENDS were only passed within the last 3-5 years. Many of those new laws simply amended existing tobacco product laws, and legislatures may not have carefully incorporated those changes in all of the critical statutory sections. Consequently, there are often situations in which the legal requirements are not clear. In those cases, it may be prudent to reach out to regulators to better understand how they interpret their statutes.
State taxes
When online retailers face ambiguous licensing laws, it may be helpful to look to the purpose of those laws. For example, if licenses are required by a tax department, the online retailer should look at the tax statute to determine who and what is subject to taxes. Many states require licenses to facilitate payment of sales or excise taxes.
Almost all states impose sales and use taxes on remote sales of products. For out-of-state online retailers, most states follow the analysis outlined in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), which generally permits a state to impose sales tax on an out-of-state seller where the seller has a “substantial nexus with the taxing State.” Some states require a business or tax registration to file returns and pay sales taxes.
Missouri, for example, does not tax or regulate ENDS as tobacco products, but it requires online retailers to obtain a retail sales tax license for sales tax purposes. Furthermore, states typically only require sales taxes from remote sellers when a certain sales volume or revenue threshold has been met. Virginia, for example, requires a remote seller to register for the collection of sales and use tax if it received more than $100,000 in gross revenue from sales in Virginia or engaged in 200 or more separate retail sales transactions during the previous or current calendar year.
In addition, like state licensing laws, the applicability of excise taxes to ENDS products sold online can depend on the specific product definitions in the relevant statutes. Some states’ excise tax statutes explicitly define and include ENDS products, while others attempt to fit those definitions into terms like “tobacco products” or “other tobacco products.” Utah, for example, explicitly taxes “electronic cigarette substances,” “prefilled electronic cigarettes,” “alternative nicotine products,” “nontherapeutic nicotine device substances,” and “prefilled nontherapeutic nicotine devices” in its Electronic Cigarette and Nicotine Product Licensing and Taxation Act.
Agustin E. Rodriguez
Some states explicitly exclude ENDS from definitions that would subject them to excise taxes. Texas, for example, provides defines taxable “tobacco products” to exclude e-cigarettes, or any other device that simulates smoking using a mechanical heating element, battery, or electronic circuit to deliver nicotine or other substances through inhalation.
It is also important to keep in mind that states tax various parts of ENDS products in different ways. Virginia, for example, imposes an excise tax on liquid nicotine products at the rate of $0.066 per milliliter of liquid nicotine, but the State does not impose taxes on other components of ENDS. Washington, D.C., on the other hand, taxes vapor products by making the tax rate equal to the cigarette tax, expressed as a percentage of the average wholesale price of a pack of 20 cigarettes.
Finally, if online retailers determine state excise tax laws apply to their ENDS products, they must still determine who is required to pay those taxes and when they are due. For example, some states, like Kentucky, require that excise taxes be paid by the licensed distributor that first possesses the ENDS products for sale to a retailer or unlicensed person in the State.
Potential penalties & enforcement climates
Online retailers facing ambiguous licensing statutes should consider two major factors in their risk analysis—statutory penalty provisions and enforcement climate.
Penalties for operating without a license can be steep. In Idaho, for example, it is a criminal offense to sell ENDS without a permit issued by the Department of Health and Welfare. In addition, a court may impose a fine of $1,000 per day beginning the day following the date of citation as long as the illegal ENDS sales continue. In other states, however, penalties are relatively low. In Montana, for example, failure to obtain a vapor product license is punishable by a civil penalty of $100.
Finally, online retailers should consider the enforcement climate surrounding regulation of ENDS products in certain states. For example, Attorneys General in various states have filed lawsuits against an ENDS manufacturers and online retailers. Although these cases do not directly implicate licensing or tax issues, enforcement actions by Attorneys General may suggest a more aggressive enforcement climate when it comes to licensing or tax violations.
Proposed state legislation
Online retailers should expect upcoming state legislative sessions to be fairly active with regard to regulation of ENDS products. In Colorado, for example, there is no current nicotine products or ENDS tax or licensing scheme. But Colorado HB20-1472 established a voter referendum on whether there should be a tax on “nicotine products,” which would include “products that contain nicotine and that are ingested into the body.”
Bryan M. Haynes
In Georgia, the legislature is considering a bill that will amend its tax and revenue laws “to provide for excise taxes to be levied on certain alternative nicotine products and vapor products” and to “require licensure of importers, manufacturers, distributors, and dealers of alternative nicotine products or vapor products.” HB 1229.
South Carolina is also considering a bill (H.4714) that will “provide for the levying, assessment, collection, and payment of certain taxes on vapor products.”
These are just a few examples of states that are considering ways to regulate and tax ENDS products. Therefore, it is important for online retailers to incorporate accurate state legislative tracking into their compliance strategies.
Conclusion
As with any other new technology, the law is often playing catch up with new business models and products, like the online sale of ENDS products. But given the issues discussed above, online retailers should prioritize compliance with varying state laws to reduce the risks of enforcement action.
Nicholas A. Ramos is an associate with Troutman Pepper. His practical advice enables clients to navigate regulatory compliance and licensing issues, complex investigations, and high stakes enforcement actions that arise under state and federal law.
Agustin E. Rodriguez serves as counsel for Troutman Pepper and has almost two decades of experience counseling tobacco companies in-house and in private practice on tobacco product regulation, taxation and multi-jurisdictional state and local enforcement issues.
Bryan M. Haynes is a partner with Troutman Pepper who specializes in tobacco industry regulatory compliance and enforcement matters. He efficiently assists clients in complying with regulatory obligations and managing risk, consistent with clients’ business objectives.
The legal e-liquid market continues to grow. Bantam Vape announced yesterday that it had received an acceptance letter for its premarket tobacco product application (PMTA) from the U.S. Food and Drug Administration (FDA). The brand’s application now moves to the next step in the PMTA process—a preliminary scientific review to ensure the application contains all required items to permit a substantive review by the FDA.
Bantam submitted its application to the FDA on Sept. 2.
“Bantam has been anticipating and planning for these regulations since entering the e-liquids category,” said Bantam spokesperson Anthony Dillon. “The receipt of this acceptance letter is a significant milestone for Bantam. It reiterates a commitment to providing adult-use consumers with high-quality, science-based and compliant e-liquid products that can be enjoyed for years to come.”
In preparation for its submission, Bantam worked with highly-qualified labs to conduct the in-depth product-specific and non-product specific testing needed for its PMTA, including: storage and stability testing; toxicity testing; and pharmacokinetic and topography studies. Bantam also submitted an extensive review of available literature on electronic nicotine delivery systems (ENDS) products.
“Bantam has always supported the need for science-based regulation for the e-liquids industry. And while the PMTA process is complex and resource intensive, it is necessary to establish much needed standards and oversight across the board,” said Dillon. “Bantam is confident in the content and quality of materials prepared by its hardworking team of experts, and remains committed to working with the FDA throughout the PMTA process.”
