Saturday, January 31, 2015

Washington State Producers and Retailers of Mercury-Containing Lights Face New Regulations

Washington State Producers and Retailers of Mercury-Containing Lights Face New Regulations

 
The New Year brought with it new obligations for any company that produces or sells mercury-containing lights in (or into) Washington State.  As of January 1, 2015, the State’s recycling program and corresponding funding mechanism is fully operational, and participation is mandatory for producers of mercury-containing lights.

While the statute and regulations impose unclear requirements on retailers of mercury-containing lights – such as contributing to consumer education – the bottom line for retailers is that penalties are imposed on retailers for only one thing: selling bulbs from an unapproved producer. So retailers should talk to their producer, and check the list of approved producers.

Background
Mercury is an ingredient in high-intensity discharge bulbs (HID), neon bulbs, ultraviolet bulbs (often used to disinfect drinking water), and florescent lights, including the ubiquitous, spiral-shaped compact fluorescents used in homes.  Businesses that accumulate a significant amount of used mercury-containing bulbs should handle the bulbs as universal waste.  And individuals are now prohibited from disposing of the lights in the trash.

The legislature realized that it needed a way to pay for the handling and recycling of all the bulbs that came from historically unregulated sources like residences.  In 2010, Ecology passed the Washington Mercury-Containing Lighting Recycling Act, which established a product stewardship program funded by producers of the lights.  The producers didn’t like that idea, however, and the National Electrical Manufacturers Association (NEMA) sued to block the law’s implementation.  The State settled with NEMA by agreed to alter the program’s financing structure.

Implementation
As implemented, the law mandates that the product stewardship program is financed by the consumer.  Consumers pay a $0.25 charge on each bulb when purchased, but the producer is still responsible for remitting the fee to the State’s contractor that operates the program.  So as practical matter, the producer is still paying for the program by building the $0.25 fee into its costs and passing that cost along to the consumer.  Producers must register with an approved stewardship program, and there is currently only one approved program – LightRecycle  Washington, which is operated by PCA Product Stewardship, Inc. on the State’s behalf.

Things get trickier for retailers, however.  The primary requirement imposed on retailers is that they must sell bulbs only from approved producers.  Retailers need not register as part of the program unless they choose to remit the $0.25 fee on the producer’s behalf.  Some retailers opt to do so for simplicity.  In either case, retailers collect the $0.25 handling charge on the State’s behalf by building the cost into the sale price, or they eat the cost.

Constitutionality
When it comes to out-of-state or purely online retailers selling bulbs into Washington, the State may be walking a thin constitutional line.  The $0.25 fee looks a lot like a sales tax.  And U.S. Supreme Court precedent in Quill Corp. v. N. Dakota By & Through Heitkamp prohibits the imposition of sales taxes on retailers without a “substantial nexus” to the taxing state, which requires at least a physical presence.
The Washington statute appears to attempt to avoid this problem by requiring only “Washington retailers” to include the fee in the purchase price.  But the statute does not define “Washington retailer,” and even those who are not obligated to include the fee in the price must do so or take a loss.  The principle of Quill may be outdated in the Internet age, and other states have begun to push its boundaries, but it lives on for now.