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.

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.

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.”

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.

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.  

On January 2, 2020, the FDA issued guidance concerning its enforcement priorities for electronic nicotine delivery systems (“ENDS”) and other deemed products on the market lacking premarket authorization (the “Guidance”). Just over a month later, the Comptroller of the State of Maryland has announced that the State will increase its enforcement against certain flavored ENDS products. The State purports to shore up a “loophole” in the FDA’s Guidance.

Earlier last week, a US District Court ruled that the Food and Drug Administration’s subjecting of premium cigars to warnings requirements was arbitrary and capricious in violation of the Administrative Procedure Act (“APA”), insofar as the agency failed to provide a reasoned explanation for this action. The court thus declared unlawful (and vacated) the portion of the FDA’s so-called “Deeming Rule” mandating that premium cigars display designated public health warnings on packaging and advertisements.

The question has been raised in a complaint filed on September 24, 2019, by Swisher International, Cheyanne International, and the Cigar Association of America (“Plaintiffs”) for declaratory and injunctive relief against Nebraska’s Attorney General, Department of Revenue, and Tax Commissioner (the “State”).

The case arises over a Department of Revenue notice declaring that “certain little cigars, certain filtered and non-filtered little cigars, and certain flavored little cigars may be reclassified as cigarettes effective September 1, 2019.”

Bryan Haynes of the Troutman Sanders Tobacco Team will attend to the Tobacco Plus Expo Conference in Las Vegas on January 29-31, 2020.  The trade show features a number of education sessions addressing regulatory topics and other areas of interest to the tobacco industry. We look forward to seeing our …

On January 21, 2020, the U.S. Court of Appeals for the Fourth Circuit issued an order disposing of several motions before it in American Academy of Pediatrics, et al. v. U.S. Food & Drug Administration, et al., Nos. 19-2130, -2132, -2198, -2242. This is an appeal from the U.S. District Court for the District of Maryland, which:

  1. held that the FDA’s August 2017 guidance did not lawfully extend tobacco product compliance deadlines; and
  2. ordered new deadlines of May 12, 2020, for filing applications, and one year after application for approval.

The district court’s rulings amounted to a roughly two-year acceleration of the FDA’s deadlines.