The devil really is in the details of the PACT Act amendment. Understanding what you need to do to meet requirements, as well as what will make your business run more efficiently, will help you stay compliant.
Registration: If you sell cigarettes into a state — or if you advertise your product in that state in any way — you must register with both the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the tobacco tax administrator in the shipping state. The registration requirement applies to companies that sell directly to consumers as well as distributors and manufacturers shipping interstate. Note: If your website can be reached by a consumer in a state, that’s considered advertising; you’ll have to comply with all registration requirements even if you don’t sell to consumers in that state.
Not registering correctly can lead to a $5,000 to $10,000 fine for every instance of non-compliance.
Licensing: Sellers who previously didn’t meet minimum thresholds or were able to “fly under the radar” may now find they need one or more new business licenses. Registration requirements established by the new PACT Act are designed to serve as a check and balance: Business must now have all these requirements in order.
Tax compliance: Furthermore, businesses are now required to collect and remit all applicable federal, state, and local sales tax and excise taxes. Though not all states collect sales tax, the number of states where excise tax is imposed on vape products is growing fast: Georgia recently started taxing vapor products. If you’re unsure of your tax obligations, a nexus assessment can help uncover states where there’s risk of noncompliance.
The PACT Act also added new fields to existing returns, and new taxability codes were needed to stream into the modified state forms. You should ensure your tax and financial systems can handle this information. In addition, returns must be filed in all jurisdictions where you’re registered, even if no sales were made (a zero return).
Reporting: Under the PACT Act, businesses are required to file detailed shipping reports on a monthly cadence. You’ll need to provide a number of details about the orders you shipped: which product, how much, to whom, via what carrier, and more. You’ll need to provide a copy of each invoice and retail customer details for four years. Carriers will file a similar report.
Certificate management: If you’re selling to a distributor or retailer and not to an end user, it's critical to manage reseller certificates so you aren’t held liable for not collecting tax. If you’re audited and cannot reproduce this certificate, you’ll be responsible for any uncollected tax, plus applicable fees and penalties.
Rather than handling certificates manually, businesses dealing with a high volume of certificates may find it more efficient to use an automated system that’s tied directly into your ecommerce or POS system.
