The Securities and Exchange Commission (SEC) continues to investigate cannabis companies for possible enforcement actions related to investment fraud and market manipulation, with an increasing focus on Canadian companies. Most recently, Cronos Group, one of the largest cannabis producers in Canada, received an inquiry from the SEC related to its revenue recognition practices. As reported by MarketWatch, a Cronos company lawyer sent an e-mail to employees on March 10 instructing staff to retain certain records pertaining to a “confidential and non-public inquiry by the Securities and Exchange Commission.”
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Did you know that there are special environmental requirements for businesses manufacturing, distributing and selling electronic nicotine delivery systems (ENDS)?  Late last year, the Environmental Protection Agency added e-cigarettes, vape pens and certain e-liquids as hazardous waste pharmaceuticals under a final rule entitled “Management Standards for Hazardous Waste Pharmaceuticals and Amendment to the P075 Listing

Did you know that businesses selling tobacco products on the Internet can potentially be required to comply with requirements under the Americans with Disabilities Act?  There is a line of cases ruling that websites must be accessible for individuals who are sight-impaired, and there are specific requirements for doing so.  As some of our clients

We hope that our clients and friends are managing in these unprecedented times.  The Troutman Sanders Tobacco Team is now working in a remote environment, thanks to amazing support from the Firm.  As part of our business continuity planning, Troutman Sanders has a plan to address situations where our physical offices may be unavailable or where our attorneys and staff might need to work outside the office for extended periods of time. The plan provides capabilities for attorneys and staff to work remotely and continue to provide legal services to our clients.  We continue to actively serve clients (and are as busy as we have ever been), so please let us know how we can help.
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The U.S. Court of Appeals for the D.C. Circuit will hear another challenge to the FDA’s rule Deeming Tobacco Products to Be Subject to the Federal Food, Drug, & Cosmetic Act, 81 Fed. Reg. 28,973 (May 10, 2016) (the “Deeming Rule”). The challenges are based on the Constitution’s Appointments Clause and First Amendment. The cases are Moose Jooce, et al. v. FDA, et al., Nos. 20‑5048, -5049, & -5050 (D.C. Cir.).
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Do you have a business that sells across State lines? Do you have a substantial number of transactions, or substantial gross receipts from such transactions, across State lines? Are you paying tax to the States and localities where your purchasers reside? These are among the questions businesses should be asking themselves after the Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc.

Wayfair increases State and local power to tax remote sellers.

In Wayfair, the Court overturned prior holdings that prohibited States from collecting sales tax from sellers lacking a physical presence in the State. After Wayfair, the question is not whether the seller has a physical presence in the State but whether it has a “substantial nexus” with the State. A “substantial nexus” can exist when a remote seller has substantial numbers of transactions with purchasers in a State or substantial receipts from such transactions. After Wayfair, many States have set transaction and/or gross-receipts thresholds to determine which out-of-State sellers must collect and remit sales and use tax.
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In October 2019, the California Department of Tax and Fee Administration (CDTFA) issued a blatantly discriminatory Special Notice changing how the CDTFA will apply the excise tax for Other Tobacco Products (OTP) to the wholesaler’s cost basis when an out-of-state California distributor sells tobacco products to wholesalers, retailers, or consumers located in California. When a shipment is made by an out-of-state distributor to an in-state customer (retailer or adult consumer), the tax base will be the “wholesale cost” of the in-state purchaser and not the wholesale cost of the distributor.
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Following its appeal to the U.S. Court of Appeals for the Sixth Circuit, Vapor Stockroom LLC (the “Appellant”) has filed a motion for injunction pending the decision on the merits or, alternatively, for the expedition of briefing, oral argument, and decision of its appeal.

In the Appellant’s words, “The impetus for the present motion . . . is that if this Court fails to grant injunctive relief . . . by May 12, 2020, FDA has threatened industry-wide enforcement action after that date that would require [Appellant] to shutter its business.”
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The U.S. Department of Agriculture (USDA) today announced the delay of enforcement of certain requirements under the interim final rule (IFR) establishing the U.S. Domestic Hemp Production Program. Under the new guidance, USDA will delay enforcement of the requirement for labs to be registered by the Drug Enforcement Administration (DEA) and the requirement that producers use a DEA-registered reverse distributor or law enforcement to dispose of non-compliant plants under certain circumstances. While lab tests can be conducted by labs that are not yet registered with DEA, the labs must still meet all the other requirements in the IFR.
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On February 15, 2020, Plaintiff Vapor Stockroom LLC filed a notice of appeal in Vapor Technology Association v. FDA, No. 5:19-cv-00330-KKC (E.D. Ky.). Vapor Stockroom is appealing the district court’s order granting the FDA’s motion to dismiss and denying their motion for preliminary injunction. The Plaintiffs alleged that, in requiring the submission of premarket tobacco applications by May 12, 2020, the FDA violated the Administrative Procedure Act, 5 U.S.C. § 500, et seq., and the Due Process Clause of the Fifth Amendment to the Constitution.  
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