In October 2022, the U.S. Food and Drug Administration (FDA) announced that the Department of Justice (DOJ), on its behalf, filed complaints against six electronic nicotine delivery system (ENDS) companies in federal district courts, seeking permanent injunctions. These cases are important because they mark the first time the FDA has litigated against companies to enforce the Federal Food, Drug, and Cosmetic Act’s premarket review requirements for new tobacco products.
California Voters Approve Flavored Tobacco Ban in Referendum; Is It Unconstitutional?
California voters have approved Senate Bill 793, which prohibits tobacco retailers from selling flavored tobacco products or tobacco product flavor enhancers. A lawsuit has been filed in federal court claiming that it is unconstitutional.
On November 8, 2022, California voters said “yes” to Proposition 31, a referendum on a 2020 law that would prohibit the retail sale of certain flavored tobacco products. The constitutionality of the referenced law, Senate Bill 793 (“SB793”), is at issue in a case filed the next day in the U.S. District Court for the Southern District of California, R.J. Reynolds Tobacco Co., et al. v. Bonta, et al., No. 3:22-cv-01755 (S.D. Cal.); however, the plaintiffs’ success in that case will likely depend on the development of favorable precedents in other cases pending before appellate courts.
Practical Tips for Avoiding and Contesting Tobacco Tax Assessments
Dealing in goods subject to cigarette and other tobacco products (OTP) taxes presents considerable administrative burdens. The sale of cigarettes and other tobacco products, on which all 50 states impose an excise tax, requires accurate bookkeeping, regular reporting, and tax remittance practices. In addition, manufacturers, distributors, and wholesalers of these highly-regulated products will be the subject of audits by state revenue departments.
Oregon Court Sides with Businesses Challenging Local Flavor Ban Ordinance
Over the past few years, at least five states and several hundred localities have passed, or attempted to pass, laws banning flavored tobacco products. There have been a number of challenges to those laws—few of which have been successful. In a recent ruling, the Washington County Circuit Court handed a win to businesses challenging a local ordinance (the Ordinance) seeking to impose a ban on the sale of flavored tobacco products.
House Representatives Ask FDA to Explain its Handling of PMTAs and Other Issues Within Center for Tobacco Products
House Representatives Morgan Griffith (R-VA) and Brett Guthrie (R-KY) recently sent a letter to FDA Commissioner Robert Califf expressing “continued concerns involving systemic problems within the” Center for Tobacco Products (CTP). The first half of the letter asks FDA to explain its continued failure to issue meaningful regulations for CBD products, while the second half focuses on issues within CTP that have been echoed across the tobacco industry.
FTC Releases Second Report on E-Cigarette Sales and Advertising in the US
In a recent press release, the Federal Trade Commission (FTC) issued its second e-cigarette report, analyzing domestic sales and marketing trends for the years 2019 and 2020. While FTC has issued a similar report for cigarettes and smokeless tobacco products since 1967 and 1987, respectively, it only recently
Eleventh Circuit Sets Aside FDA Marketing Denial Orders Issued to Bidi Vapor and Others
Litigation challenging FDA’s cursory denial of thousands of premarket tobacco product applications (PMTAs) continues. We have previously written about electronic nicotine delivery system (ENDS) manufacturers’ claims that the Food and Drug Administration (FDA) acted arbitrarily and capriciously by, among other things, denying their PMTAs without fully considering all elements of the applications. Numerous appeals of PMTA denials are pending before several different federal appellate courts, and decisions continue to trickle in.
FDA Cigarette Graphic Warning Rule Delayed … Again
In a prior update, we discussed the ongoing legal challenges to the U.S. Food and Drug Administration’s (FDA) March 2020 rule on a graphic-warning requirement for cigarettes. Initially slated to take effect June 18, 2021, the rule would require 11 new textual, health warning statements accompanied by color, “photorealistic”
State Taxation of Remote Sellers: US Supreme Court Declines Review of First Post-Wayfair Decision from a State Supreme Court
In determining whether the commerce clause of the U.S. Constitution prohibits a state’s taxation of a remote seller, the U.S. Supreme Court for decades has upheld a tax if (1) there is a substantial nexus between the taxing state and the taxpayer; (2) the tax is fairly apportioned; (3) the tax does not discriminate against interstate commerce; and (4) the tax is fairly related to the taxing state’s provision of services to the taxpayer.[1]
What kind of nexus is substantial enough to allow a state to tax a business’s sales in interstate commerce? In its 2018 decision in South Dakota v. Wayfair, Inc., the U.S. Supreme Court held that a business’s physical presence in the taxing state is not required.[2] Describing the remote-seller litigants as “large, national companies that undoubtedly maintain an extensive virtual presence,” the Court held that substantial nexus was clear in view of “both the economic and virtual contacts” that the remote-seller litigants had with South Dakota.[3] The U.S. Supreme Court recited the general rule that substantial nexus exists when a taxpayer has availed itself of the substantial privilege of carrying on business in the taxing state, and it appeared to describe “virtual contacts” and “virtual presence” as follows: “Between targeted advertising and instant access to most consumers via any internet-enabled device, ‘a business may be present in a State in a meaningful way without’ that presence ‘being physical in the traditional sense of the term.'”[4] Wayfair left many questions unanswered, including whether (and, if so, how) “virtual contacts” and “virtual presence” may be required for a substantial nexus to tax in compliance with the commerce clause.
Minnesota Department of Revenue Revokes and Replaces Guidance on Remote Sellers’ Tobacco Tax Responsibilities
The Department has issued updated guidance addressing remote sellers’ cigarette and tobacco tax responsibilities after the Minnesota Legislature’s mid-2021 amendments to the State’s cigarette and tobacco tax and tobacco product delivery sales statutes, Congress’ late-2020 amendment of the Jenkins Act, and a 2018 decision of the U.S. Supreme Court on permissible state taxation of remote sales.
On May 9, 2022, the Minnesota Department of Revenue (the “Department”) issued Revenue Notice # 22‑02 on remote sellers’ tax payment responsibilities under the State’s cigarette and tobacco tax and tobacco product delivery sales statutes. The notice applies to all delivery sales after December 31, 2021, and it revokes and replaces the Department’s earlier notice on these subjects.