The Oregon Legislature’s 2023 regular session kicked off with a bang for the tobacco industry when House Bill 2128 (HB2128) was introduced at the request of Attorney General Ellen Rosenblum who also happens to the be president-elect of the National Association of Attorneys General. If passed, HB2128 would replace Oregon’s escrow deposit system, applicable to tobacco product manufacturers that are nonparticipating manufacturers (NPMs) under the Master Settlement Agreement (MSA), with an equity assessment. While HB2128 was only recently introduced and has a number of hurdles to overcome before it becomes law, we are not aware of any other state that has made a similar proposal to retroactively change escrow deposit systems for NPMs. Thus, HB2128 is worth monitoring, not only for its potential impact to Oregon NPMs, but also to see whether similar legislation will be introduced in other states.Continue Reading Oregon Bill Proposes to Replace Escrow Deposit System With “Equity Assessment” for Certain Tobacco Product Manufacturers
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.Continue Reading FDA Implements More Aggressive Approach to Enforcement of ENDS Premarket Requirements
The Senate recently passed the Medical Marijuana and Cannabidiol Research Expansion Act (the Act) by a voice vote after the House of Representatives passed the bill with strong bipartisan support (325-95) last July. The Act is the first stand-alone marijuana legislation passed in decades and, according to some news sources, President Biden will likely sign it within the next two weeks. Historically, conducting research with Schedule I controlled substances has been subject to numerous administrative hurdles and onerous security requirements that have deterred many potential researchers. The Act amends key sections of the Controlled Substances Act (CSA) to ease some of those restrictions and to facilitate research on marijuana and its potential therapeutic benefits, without changing marijuana’s designation as a Schedule I controlled substance. Some of the key provisions are summarized below.Continue Reading Bipartisan Marijuana Research Bill Heads to Biden’s Desk
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.Continue Reading California Voters Approve Flavored Tobacco Ban in Referendum; Is It Unconstitutional?
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.Continue Reading Oregon Court Sides with Businesses Challenging Local Flavor Ban Ordinance
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 decided to analyze this type…
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” images displayed on the top…
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.
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. 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. 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.’” 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.Continue Reading State Taxation of Remote Sellers: US Supreme Court Declines Review of First Post-Wayfair Decision from a State Supreme Court
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.
Continue Reading Minnesota Department of Revenue Revokes and Replaces Guidance on Remote Sellers’ Tobacco Tax Responsibilities
The US Food and Drug Administration (FDA) recently announced plans to publish a proposed rule that would establish a maximum nicotine level in cigarettes and certain “other combusted tobacco products.” At the moment, it is not clear what “other combusted products” FDA might have in mind. According to the Spring 2022 Unified Agenda of Regulatory and Deregulatory Actions, FDA is targeting May 2023 to issue the proposed rule, but that could always change.
Continue Reading FDA Set to Propose Maximum Nicotine Level in Cigarettes