The U.S. We Card program is encouraging retailers to make employee training a top priority in promoting responsible retailing of age restricted products.
In addition to educating staff, retailers should update in-store signage, gauge employee performance through “mystery shopping,” and compare their store practices against We Card’s Guide to Best Practices, according to the organization.
“There are lots of changes in laws, regulations and age restricted products sold at retail,” said We Card President Doug Anderson in a statement. “In September, we kick off Awareness Month with a focus on elements that help reduce underage access: effective employee training that ensures retail employees are trained-and-confident and ready to deny underage purchase attempts of tobacco, vaping and nicotine pouch products.”
To ensure compliance, the U.S. Food and Drug Administration inspects up to 9,000 stores per month. Simultaneously, state government authorities also measure retailers’ compliance with state youth access laws.
“Keeping tobacco, vaping products, nicotine pouches and all age-restricted products out of the hands of everyone under 21 years old is our top priority,” said Lyle Beckwith, senior vice president of government relations for the National Association of Convenience Stores and a We Card founding board member.
“A well-trained staff helps stores establish a reputation as a responsible retailer in their communities.”
This month, Stop & Shop stores will discontinue the sale of all tobacco products, aligning with other major chains that have already ceased cigarette sales.
The grocery retailer with 360 stores across Massachusetts, Rhode Island, Connecticut, New York, and New Jersey plans to end sales of all tobacco products at all stores by August 31 as a part of the brand’s commitment to community wellness. The changes are part of its “dedication to community wellness” and will discontinue the sale of all cigarettes and tobacco products on Saturday, August 31.
“Our responsibility as a grocer goes far beyond our aisles, and we are committed to taking bold steps to help our associates, customers, and communities work towards better health outcomes,” said Gordon Reid, Stop & Shop president, in a statement, according to a press release.
Public health advocates have long urged retailers to stop selling tobacco products, and some cities and states have also banned tobacco sales in pharmacies. The American Cancer Society responded that it was “pleased to partner” with Stop & Shop to end sales.
“This is a step in the right direction toward ending Big Tobacco’s influence on kids, and we know even more can be done to reduce the toll of tobacco in our communities,” said Karen Knudsen, CEO of the American Cancer Society and the American Cancer Society Cancer Action Network, in the statement. “We urge state lawmakers to prioritize tobacco control program funding so that those inspired to quit by this effort have the resources they need to help them succeed.”
Previously, Walmart in 2022 announced it would stop selling cigarettes at some of its US stores. In 2014, CVS stopped selling tobacco, saying it was “inconsistent with our purpose” as a health care provider. Target ended tobacco sales in 1996.
The Cigarette Store, which operates as Smoker Friendly, announced on Monday that Dan Gallagher will be its new president, effective April 17.
Gallagher has worked for the fuel and tobacco retailer since it was founded in 1991 and has been its executive vice president and chief operating officer since 2012. He’ll continue in those roles as he takes on the additional title of president, according to a press release.
Gallagher is replacing his brother Terry Gallagher Jr. as the president of Smoker Friendly. Terry Gallagher will remain the CEO and chairman of the board of the family-owned company.
Terry Gallagher Jr.
“Dan has been instrumental in the growth of Smoker Friendly since its inception and key in establishing the great culture we have in this company,” Terry Gallagher Jr. said in the release. “Those of you who have worked closely with Dan know he is very deserving of this role and extremely capable of leading this company.”
Smoker Friendly’s change at the president level comes during a busy period for the company, which is coming off a 54-store acquisition in March. Those locations, formerly Bob’s Discount Tobacco Shops in Indiana, are being rebranded to Smoker Friendly stores.
Boulder, Colorado-based Smoker Friendly owns and operates 342 stores across 13 states. The Cigarette Store is the largest tobacco store retailer in the U.S., operating a mix of tobacco stores, cigar lounges, liquor stores, and fueling locations under the Smoker Friendly, Tobacco Depot, Smoke ’N Go, Havana Manor, and Gasamat banners.
The U.S. Food and Drug Administration has again issued warning letters to several small business owners for selling flavored disposable vaping products.
The regulatory agency issued letters to 14 online businesses for selling unauthorized e-cigarette products. The warning letters cite the sale of disposable e-cigarette products marketed under brand names, including Elf Bar/EB Design, Lava Plus, Funky Republic/Funky Lands, Lost Mary, Cali Bars, Cali Plus, and Kangvape.
“These warning letters were informed by FDA’s ongoing monitoring of multiple surveillance systems to identify products that are popular among youth or have youth appeal, an agency press release states. “Findings from the 2023 National Youth Tobacco Survey found that more than 50 percent of youth who use e-cigarettes reported using the disposable e-cigarette brand Elf Bar; in 2023, the manufacturer of Elf Bar began marketing the product under the name EB Design.”
In addition, the brands Lava Plus, Funky Republic/Funky Lands, Kangvape, Cali, and Breeze were identified as popular or youth-appealing by the agency following a review of retail sales data and emerging internal data from a survey among youth, according to the agency.
Retailers receiving warning letters sold or distributed e-cigarette products in the United States that lack marketing authorization from the FDA violate the Federal Food, Drug, and Cosmetic Act.
Warning letter recipients are given 15 working days to respond with the steps they will take to correct the violation and to prevent future violations. Failure to promptly correct the violations can result in additional FDA actions such as an injunction, seizure, and/or civil money penalties.
As of Jan. 30, 2024, FDA issued more than 440 warning letters and 88 CMPs to retailers for the sale of illegal e-cigarettes, including through a series of nationwide inspection efforts of brick-and-mortar retailers, according to the release.
In a press release, the agency stated that it had previously issued each retailer a warning letter for their sale of unauthorized tobacco products. However, follow-up inspections revealed that the retailers had failed to correct the violations.
The agency now seeks the maximum penalty of $20,678 from each retailer.
The U.S. Food and Drug Administration has issued complaints for civil money penalties (CMPs) against 21 brick-and-mortar retailers for selling unauthorized Esco Bars e-cigarettes.
In a press release, the agency stated that it had previously issued each retailer a warning letter for their sale of unauthorized tobacco products. However, follow-up inspections revealed that the retailers had failed to correct the violations.
The agency now seeks the maximum penalty of $20,678 from each retailer.
The complaints announced today represent the first set of CMPs FDA has filed for the sale of unauthorized Esco Bars e-cigarettes. “These retailers were duly warned of what could happen if they continued selling these unauthorized e-cigarettes,” said Brian King, director of the FDA’s Center for Tobacco Products (CTP). “They should have acted responsibly to correct the violations, but they chose not to do so and now must face the consequences of that decision. FDA won’t sit back and tolerate inaction to comply with the law.”
Currently, $20,678 is the maximum civil money penalty amount FDA can seek for a single violation from each retailer, consistent with similar CMPs sought against retailers for the sale of unauthorized Elf Bar products in Sept., Nov., and Dec. of 2023.
The retailers can pay the penalty, enter into a settlement agreement based on mitigation factors, request an extension of time to file an answer to the complaint, or file an answer and request a hearing. Retailers that do not take action within 30 days after receiving a complaint risk a default order imposing the full penalty amount, according to the release.
“Today’s CMP actions are just the latest in the continued, comprehensive push by FDA to take action across the supply chain to remove unauthorized e-cigarettes, particularly those that are popular among youth, from the marketplace,” the release states. “As of Jan. 30, 2024, FDA has issued more than 440 warning letters and 88 CMPs to retailers, including brick and mortar and online retailers, for selling unauthorized tobacco products.
“In addition to actions involving retailers, FDA has issued more than 660 warning letters to firms for illegally manufacturing and/or distributing unauthorized new tobacco products, including e-cigarettes.
“The agency has also filed civil money penalty complaints against 48 e-cigarette firms for manufacturing unauthorized products and sought injunctions in coordination with the U.S. Department of Justice against seven manufacturers of unauthorized e-cigarette products.”
“The more things change, the more they stay the same,” is an expression that has been around for almost two centuries, and it speaks to the fact that the small picture(s) of life may change, but the larger one does not. The vape industry and all the challenges and changes that have happened in the past decade are totally contrary to that famous saying.
A decade ago, the vape industry was the epidemy of the Wild, Wild West, full of vape shops springing up on every corner, and any/everyone creating e-liquids in their bathtubs at home. Regulation and competition changed all that and brought some semblance of “orderliness” to the market, but as state and federal regulations bombarded the industry, and with the FDA creating onerous and unattainable guidelines, the vape space has truly become one of survival.
I recently attended a vape event in Phoenix which brought together several dozen top manufacturers, distributors, and buyers, and universally everyone lamented the same concern: business is down.
Why is business down?
The reasons are many, including strict regulations, and now, even more enforcement of those regulations, but overall, the cause was much simpler. The huge COVID-19 rebound in 2020-22 put more money in consumers’ pockets and more time on their hands. Those issues combined created an artificial bubble that many thought would last. But time has passed. Add in the inflation that has pushed up food and other cost of living expenses, and some former necessities are now becoming unaffordable luxuries.
“It’s a balancing act between the addictive nature of some nicotine products and the limitations of buyer’s budgets,” said Jamie Reed with Simple Vape Supply from Orange County California. “I’ve been in the industry for over ten years, and this is evolution in its purest form and based around ’survival of the fittest.’”
Simple manufactures and distributes over 100 different assortments of nicotine cartridges, including disposables, including various iterations of CBD, Delta-8 and Kratom.
“It’s interesting,” Reed added. “When I got hired, I was told that there was an ‘expiration date,’ and we all knew that this industry might not last, and that the cream would rise (to the top). We planned to be one of those surviving companies, and we’ve been able to adapt to the times.”
Her company, along with many that are still around, were mostly run by rebels, radicals, and envelope pushers; and many have in fact changed accordingly, but some have merely learned how to “play the game” and outwardly appear to be toeing the line, but the reality may be different.
“We were aware that the COVID blip was a one-time event. People were home, they had government money to spend, and no one was checking in on them or requiring any urine tests. The Delta (8,10) boom really added to that, and everyone jumped on that bandwagon,” she said excitedly.
That line of CBD was an example of how the industry has and continues to push back. The FDA says you can’t do this, so the industry says, “F-you, then we’ll do that.”
With regulation eliminating or reducing product selection, almost any industry will do the same thing: adapt; repurpose, or reposition.
Of the dozens of people I spoke with at the event, the numbers (from shop owners and manufacturers) were pretty consistent, and most of them were down 20 to 30 percent. Many were saying that purchase sizes were lower than normal and a typical ten-thousand-dollar order was now half that. They saw some shops closing, but most were working on smaller revenues.
Manager J-K Thorne holds some of the flavored products that are no longer available at Wild Impulse vape shop. (Shane Hennessey/CBC)
Meanwhile, on the other side of the equation, vape liquid manufacturers who are trying to “play the game” right and submitting premarket tobacco product applications (PMTAs) to the U.S. Food and Drug Administration are frustrated at the amount of time it takes and how much money is being thrown into a (seemingly) dark hole.
I spoke with one of the owners of a large vape manufacturing business and distribution company in Idaho, and he shared some facts and figures about their process of trying to make their products “legal.” Legal, in the eyes of the FDA, has caused his company to squander over $5 million in the past few years trying to get authorization.
Mike Larsen is a detailed and focused vape guy who has been in the industry for over a decade and is with Lotus Vaping Technology, which started in 2011. As a partner and director of sales, he is on the front line of everything the company does to stay legal and compliant and is riding the roller coaster ride on a daily basis.
“Disposables have really changed the game,” he said, “and they have reduced the role of vape shops where people used to come for education and guidance. Consolidations and closures have also reduced the shop numbers by 30 to 40 percent, and now you have larger conglomerates doing the work of the multitude of shops.”
We spoke about a possible flavor ban nationally, and he said he was skeptical.
“The PMTA process has already reduced or eliminated flavors, so it may not be necessary to go to that length. There have been between six and seven million submissions by thousands of companies, and so far, just 23 have been approved. I know of a few companies that submitted over a million applications themselves. And here’s the irony: everyone approved has been a Big Tobacco company, and they make up just a fraction of the total vaping market.”
The second irony on top of that, is that those so-called approved products are ones that no one wants.
We talked about whether those approvals were fair or were the result of favoritism and bias, and he smiled since we both knew the answer.
“When you look at the PMTA process and the rigid requirements, it seems pretty obvious that they were written to the advantage of the larger, established companies, and the “small guy” had very little chance in this skewed game. You can’t even budget for something like this,” he continued. “The original filing costs over a million dollars, and I know several companies that have put another ten million in, only to get denied. Who has deep pockets like that? In 2016 I could have named over 150 liquid companies doing good business; today I can name about three dozen.”
And that is why the number of companies manufacturing tobacco and vape products is half what it was and is getting smaller every year. The FDA changes the rules of the game continually.
“There’s something happening here, but what it is ain’t exactly clear,” is the beginning line of a song that speaks to changes going on in society. That song by Buffalo Springfield may have nothing to do with vape, but the message says the same thing: there is something happening here although it may be clearer than we realize. We all knew this would happen; it was predicted a decade ago.
In the vape space, the more things change…the more things change.
Norm Bour is the founder of VapeMentors and works with vape businesses worldwide. He can be reached at norm@VapeMentors.com.
The withdrawal of European and American tobacco manufacturers and the gradual reduction of foreign e-cigarette brands doing business in Russia due to its war with Ukraine has allowed for the growth of Chinese e-cigarettes in Russia.
As Russia’s tobacco industry relies heavily on the support and investment of foreign brands, the withdrawal of international tobacco companies will cause a large shortage in the Russian tobacco market, which will lead to a sharp increase in the price of tobacco products sold in Russia, according to iGeekPhone.
By the end of 2021, there were more than 5,000 stores selling e-cigarettes in Russia, including more than 1,100 in the Moscow region.
According to real estate platform DNA REALTY, the number of tobacco shops in Russia grew by at least 20 percent in 2022, with the bulk of their profits coming from e-cigarette sales.
BAT announced it will withdraw from the Russian and Belarusian tobacco markets in 2023. Philip Morris International (PMI) and its subsidiary Fimo International, are also considering retaining their business in Russia because Russia is the seventh-largest tobacco market for PMI.
Japan Tobacco suspended investments in Russia and Imperial Brands transferred its Russian operations to a successor in Russia.
“E-cigarettes have great potential as alternatives to the tobacco market in Russia, where e-cigarette consumers account for 6.8 percent of the total number of smokers,” the article states. “After the United States and Europe, Russia is the world’s third-largest importer of electronic nicotine delivery systems (ENDS).
“China accounts for 90 percent of the global market. In 2021, China’s exports to Russia reached 82.5 billion rubles. This year it could increase by 35 percent to 111 billion rubles.”
By Nicholas A. Ramos, Agustin E. Rodriguez and Bryan M. Haynes
Online businesses selling electronic nicotine delivery systems (ENDS) to consumers must contend with a “patchwork quilt” of state laws. This patchwork of laws creates significant regulatory uncertainty and risk for businesses selling online in this space. There are many legal issues facing online retailers, like bans or restrictions on “flavored” tobacco products, minimum age and age-verification requirements, and state and local licensing and tax requirements. This article discusses some of the key legal issues associated with selling ENDS to consumers online and highlights proposed state legislation that may impose more requirements on the industry.
State licensing
Online retailers looking to comply with the myriad of state laws should first look at the states in which consumers purchase their products and, for each state, identify potentially applicable licensing laws. States may require licensing or registration under tax laws, health and welfare laws, and/or general business laws before online retailers may sell to consumers in their states. Idaho, for example, requires licenses from its Department of Health and Welfare to prevent youth access to tobacco products and electronic smoking devices. Washington, D.C., however, requires a basic business license from its Department of Consumer and Regulatory Affairs.
In addition, online retailers of ENDS should determine whether state licensing law definitions actually cover their products. While states have required licenses for the sale of tobacco products for years, they have only recently added definitions of ENDS to their licensing statutes. ENDS may be covered under licensing laws either because the category is explicitly defined, or the definition of tobacco products is broad enough to cover ENDS products.
Online retailers should also determine whether state licensing laws actually cover remote sales. Some states only require licenses for retailers that have a “place of business” or “business location” in their states. Hawaii, for example, is unique in that it requires ENDS retailers to obtain a registration from the Hawaii Attorney General. At this time, however, the Attorney General only requires retailers to register if they are located in the State, which excludes out-of-state online retailers.
It is also important to keep in mind that most state laws regulating ENDS were only passed within the last 3-5 years. Many of those new laws simply amended existing tobacco product laws, and legislatures may not have carefully incorporated those changes in all of the critical statutory sections. Consequently, there are often situations in which the legal requirements are not clear. In those cases, it may be prudent to reach out to regulators to better understand how they interpret their statutes.
State taxes
When online retailers face ambiguous licensing laws, it may be helpful to look to the purpose of those laws. For example, if licenses are required by a tax department, the online retailer should look at the tax statute to determine who and what is subject to taxes. Many states require licenses to facilitate payment of sales or excise taxes.
Almost all states impose sales and use taxes on remote sales of products. For out-of-state online retailers, most states follow the analysis outlined in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), which generally permits a state to impose sales tax on an out-of-state seller where the seller has a “substantial nexus with the taxing State.” Some states require a business or tax registration to file returns and pay sales taxes.
Missouri, for example, does not tax or regulate ENDS as tobacco products, but it requires online retailers to obtain a retail sales tax license for sales tax purposes. Furthermore, states typically only require sales taxes from remote sellers when a certain sales volume or revenue threshold has been met. Virginia, for example, requires a remote seller to register for the collection of sales and use tax if it received more than $100,000 in gross revenue from sales in Virginia or engaged in 200 or more separate retail sales transactions during the previous or current calendar year.
In addition, like state licensing laws, the applicability of excise taxes to ENDS products sold online can depend on the specific product definitions in the relevant statutes. Some states’ excise tax statutes explicitly define and include ENDS products, while others attempt to fit those definitions into terms like “tobacco products” or “other tobacco products.” Utah, for example, explicitly taxes “electronic cigarette substances,” “prefilled electronic cigarettes,” “alternative nicotine products,” “nontherapeutic nicotine device substances,” and “prefilled nontherapeutic nicotine devices” in its Electronic Cigarette and Nicotine Product Licensing and Taxation Act.
Some states explicitly exclude ENDS from definitions that would subject them to excise taxes. Texas, for example, provides defines taxable “tobacco products” to exclude e-cigarettes, or any other device that simulates smoking using a mechanical heating element, battery, or electronic circuit to deliver nicotine or other substances through inhalation.
It is also important to keep in mind that states tax various parts of ENDS products in different ways. Virginia, for example, imposes an excise tax on liquid nicotine products at the rate of $0.066 per milliliter of liquid nicotine, but the State does not impose taxes on other components of ENDS. Washington, D.C., on the other hand, taxes vapor products by making the tax rate equal to the cigarette tax, expressed as a percentage of the average wholesale price of a pack of 20 cigarettes.
Finally, if online retailers determine state excise tax laws apply to their ENDS products, they must still determine who is required to pay those taxes and when they are due. For example, some states, like Kentucky, require that excise taxes be paid by the licensed distributor that first possesses the ENDS products for sale to a retailer or unlicensed person in the State.
Potential penalties & enforcement climates
Online retailers facing ambiguous licensing statutes should consider two major factors in their risk analysis—statutory penalty provisions and enforcement climate.
Penalties for operating without a license can be steep. In Idaho, for example, it is a criminal offense to sell ENDS without a permit issued by the Department of Health and Welfare. In addition, a court may impose a fine of $1,000 per day beginning the day following the date of citation as long as the illegal ENDS sales continue. In other states, however, penalties are relatively low. In Montana, for example, failure to obtain a vapor product license is punishable by a civil penalty of $100.
Finally, online retailers should consider the enforcement climate surrounding regulation of ENDS products in certain states. For example, Attorneys General in various states have filed lawsuits against an ENDS manufacturers and online retailers. Although these cases do not directly implicate licensing or tax issues, enforcement actions by Attorneys General may suggest a more aggressive enforcement climate when it comes to licensing or tax violations.
Proposed state legislation
Online retailers should expect upcoming state legislative sessions to be fairly active with regard to regulation of ENDS products. In Colorado, for example, there is no current nicotine products or ENDS tax or licensing scheme. But Colorado HB20-1472 established a voter referendum on whether there should be a tax on “nicotine products,” which would include “products that contain nicotine and that are ingested into the body.”
In Georgia, the legislature is considering a bill that will amend its tax and revenue laws “to provide for excise taxes to be levied on certain alternative nicotine products and vapor products” and to “require licensure of importers, manufacturers, distributors, and dealers of alternative nicotine products or vapor products.” HB 1229.
South Carolina is also considering a bill (H.4714) that will “provide for the levying, assessment, collection, and payment of certain taxes on vapor products.”
These are just a few examples of states that are considering ways to regulate and tax ENDS products. Therefore, it is important for online retailers to incorporate accurate state legislative tracking into their compliance strategies.
Conclusion
As with any other new technology, the law is often playing catch up with new business models and products, like the online sale of ENDS products. But given the issues discussed above, online retailers should prioritize compliance with varying state laws to reduce the risks of enforcement action.
Nicholas A. Ramos is an associate with Troutman Pepper. His practical advice enables clients to navigate regulatory compliance and licensing issues, complex investigations, and high stakes enforcement actions that arise under state and federal law.
Agustin E. Rodriguez serves as counsel for Troutman Pepper and has almost two decades of experience counseling tobacco companies in-house and in private practice on tobacco product regulation, taxation and multi-jurisdictional state and local enforcement issues.
Bryan M. Haynes is a partner with Troutman Pepper who specializes in tobacco industry regulatory compliance and enforcement matters. He efficiently assists clients in complying with regulatory obligations and managing risk, consistent with clients’ business objectives.
The entrepreneurial spirit displayed by vape shops during the U.K. government’s 10-week coronavirus lockdown will help them bounce back after the economy reopens, according to the U.K. Vaping Industry Association (UKVIA).
On Monday, the government announced it would allow vape shops to reopen June 15.
The UKVIA said it is “immensely proud” of vaping businesses for the responsible approach they have taken during the lockdown.
John Dunne
“The response from the industry to the challenging conditions has been both staggering and exemplary,” said John Dunne, director at UKVIA. “I know that our members that make up a large share of the vaping market have been working around the clock to provide online and home delivery services to the 3.2 million vapers across the country.
Dunne believes that the industry will be well placed to more than meet the social distancing guidance when shops reopen.
“All our retail members have still been ‘open for business’ since the lockdown begun and have introduced social distancing measures that go well beyond the government guidance,” he said. “This should give vapers confidence when going to their local stores.”
RELX Technology announced the extension of the RELX “For You With Care” project to support its international partners during the COVID-19 crisis. RELX will initially send 78,200 masks and over 515 gallons of hand sanitizer to its global distributors, partners and store owners.
The supplies will be sent to countries in Asia, Europe, Canada and South America. RELX will continue to follow the developments of COVID-19 globally and will send essential supplies to its partners and employees that are in need.
“RELX is wholly committed to supporting the well-being of our employees, partners, and store owners during the COVID-19 pandemic. As a global startup, we are doing what we can to help our global community. We hope our modest donation will help them during these trying times,” said RELX founder and CEO Kate Wang.
In late
January, RELX kicked off the RELX For You With Care Project by donating RMB 1
million to the Institute of Psychology, China Academy of Science through the
Shanghai Soong Ching Ling Foundation to support a training program designed to
provide mental health support services.
