Senate Bill 1147 became effective on March 31, 2010 and is important because its inclusion of a “sense of Congress” that physical presence is a viable nexus standard. Public Law No: 111-154, or the PACT Act (“Prevent All Cigarette Trafficking” Act of 2009 – a misnomer for the sake of a clever acronym because the bill covers smokeless tobacco as well as cigarettes) is aimed at reducing illegal remote tobacco sales to consumers. Amid menacing words like “al Qaeda” and underage smoking, Congress provides a rare federal acknowledgment of state tax nexus, both overtly and through a vocal silence on the issue.  

First, the Bill specifically requires remote tobacco vendors, regardless of their presence in a state, to comply with state excise tax collection laws and reporting requirements “as if the delivery sales occurred entirely within the specific State.” § 2A. Thus, Quill Corp. v. North Dakota, 504 U.S. 298 (1992), is not an impediment to state enforcement of excise tax collection on remote tobacco vendors.  

The Bill becomes of further interest to many multistate businesses because Congress explicitly notes that the removal of Commerce Clause nexus rules for remote tobacco sellers should not be interpreted to mean anything regarding the nexus issue in general. After 24-plus pages of tobacco selling regulatory minutia, Congress recognizes that broader nexus questions could be implicated by the law and squashes any argument for an implied broader meaning. That Congress was aware of the possibility of a broader meaning, and its decision to explicitly prevent one is curious evidence that Congress actually is paying attention to the nexus wars.  

In Section 8, the final section of the Act, Congress includes a “Sense of Congress Concerning the Precedential Effect of This Act” that reads: “This Act is in no way meant to create a precedent regarding the collection of State sales or use taxes by, or the validity of efforts to impose other types of taxes on, out-of-State entities that do not have a physical presence within the taxing State.”  

In the Bill, Congress notes that it has been involved for at least 50 years (since the passage of the Jenkins Act) in urging compliance with state laws regulating remote sales of tobacco products. The Jenkins Act established reporting requirements for out-of-state companies that sell tobacco products to citizens of taxing states and provided federal level enforcement of the reporting requirements. The amendments expand on the record keeping and reporting requirements to include that: “Each delivery seller shall keep a record of any delivery sale, including all of the information described in [other sections of the Bill], organized by the State, and within the State, by the city or town and by zip code, into which the delivery sale is so made.” If Congress felt it necessary to authorize such record keeping, perhaps the notice and reporting regime newly enacted by Colorado and being considered elsewhere similarly needs federal authorization.