The Basics of Selling Tobacco: Laws, Regulations, and Requirements
Maybe you’re a cigar connoisseur or a pipe collector. Maybe you’ve just checked the margins and know selling tobacco is a good business. Either way: You’re dreaming of opening a tobacco store.
It sounds deceptively simple to “open a store” — you sell, customers buy, you make a profit — but behind tobacco retailing is a complex web of laws and regulations. Maybe you’re reading this and you already have a tobacco store — and you’ve gotten a fine for failing to stay compliant.
Whatever the case, selling tobacco isn’t as simple as selling chips and soda.
Use this comprehensive guide to sell tobacco products legally and successfully. We'll discuss tobacco licensing, sales rules, FDA oversight, inventory control, staff training, and more. Your tobacco operation can be legal and profitable if you have the right information.
Selling Tobacco: What Do You Need To Know?
Tobacco use is still common — around 28 million people smoke cigarettes and other tobacco products — and having somewhere to safely and legally buy tobacco products is important for enthusiasts. Specialty tobacco shops can provide expertise, rare products, and a welcoming space, creating a lucrative business in the process.
Related Read: [ANSWERED]: How Profitable Is a Smoke Shop?
But it’s not as easy as opening a simple tobacco counter anymore. A complex set of legal and regulatory requirements governs every aspect of tobacco retail operations. And if you don’t comply? Expect steep fines and possible jail time.
You’re in the right place to educate yourself on tobacco laws before jumping into tobacco sales. There are a few topics to cover, from minimum age requirements to flavored tobacco bans.
Fortunately, modern technology like point of sale (POS) systems can make legal compliance much easier for tobacco retailers. POS solutions empower sellers to operate responsibly with features such as electronic age verification and sales restriction settings. With the right information and technology, your dream of opening a tobacco shop can become a rewarding reality.
Tobacco Laws To Be Aware Of
To operate a tobacco shop, you must comply with local, state, and federal laws and regulations. Here are some key legal obligations to look out for.
Local Zoning and Land Use Laws:
- Many municipalities restrict how close your tobacco shop can be to sensitive areas. Get zoning approvals before signing a lease, especially if your location is close to schools, churches, and certain residencies.
- Specific rules govern what signs and window displays you’re allowed to use. For example, some laws ban outdoor tobacco ads within a certain distance of schools. Check the local laws to ensure compliance.
- Tobacco shops must comply with more general retail restrictions on noise, traffic impacts, operating hours, customer capacity, and more.
Related Read: How To Start a Smoke Shop: Your 10-Step Guide to Success
To ensure legal compliance, consider the following:
- Follow all federal, state, and local tobacco laws. You need to know the specific state, county, and city regulations. Laws like minimum age or flavored tobacco bans vary.
- It’s crucial to stay on top of deadlines for tobacco retail licenses, and to renew your licenses and permits on schedule.
- Audits can happen at any time. Carefully track sales, inventory, tax liabilities, and other records to prove compliance during audits.
- Regulations are subject to change. Check frequently for new tobacco laws proposed or passed in your jurisdiction. Sign up for update alerts from regulatory agencies.
You can lose your business if you violate any of these laws or obligations. If you plan to open a tobacco shop, contact your local government office immediately. Even after your doors open, remain diligent about legal compliance.
Tobacco Regulations To Follow
Various federal and state regulations govern tobacco products. The FDA regulates the production, marketing, and distribution of tobacco products and requires compliance with the following:
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- Reporting ingredients, harmful constituents, and submitting applications. Retailers don't have to do this directly, but you must ensure your inventory comes from compliant manufacturers.
- Cigarette packs must bear one of the FDA's 11 approved health warning statements on the side panels and the top 50 percent of the front and back panels. Warning labels on advertisements must occupy at least 20 percent of the total ad space. Point of sale displays cannot use graphics, colors, or interactives that could detract from health warnings.
- Federal rules prohibit free samples or multi-pack incentives for tobacco customers.
Also be aware of Inventory regulations. For example, you must affix a state tax stamp to every pack of cigarettes. You can’t sell single or loose cigarettes — only sealed packs. The best way to track inventory is using your POS system. A tobacco-specific point of sale system can block prohibited sales like loose cigarettes or unstamped inventory, helping you stay compliant.
Requirements and Best Practices for Lawfully Selling Tobacco
Here’s a quick breakdown of the process for lawfully selling tobacco.
Retail Tobacco Dealer License
A retail tobacco dealer license is required for any business selling tobacco to consumers in most states. Some states require separate licenses for each tobacco product category, like conventional cigarettes, cigars, e-cigarettes, smokeless tobacco, and more.
You can apply for a license, including details like your business address, ownership structure, inventory plans, and intended hours of operation. Additional requirements vary by state.
Related Read: How To Get a Tobacco License [4 Steps]
Once you have a license, ensure it’s prominently displayed in customer facing areas. Initial license fees typically range from $25 to $500 depending on the state. And it’s not a one and done thing — you’ll need to renew either annually or every other year. Mark your calendar! Lapses in licensing can lead to disruption in your business and financial penalties.
A valid tobacco license tells customers, regulators, and the community that you are a responsible merchant and will help build your reputation.
Tobacco Distributor License
You'll also need a tobacco distributor license if you’re a tobacco retailer who acquires inventory directly from manufacturers, wholesalers, or other suppliers. This helps states closely track tobacco products' flow for tax collection purposes.
With this license, you'll be part of a traceability system that meticulously documents tobacco products from production to sale. You'll have to provide detailed monthly reports on all inventory purchased and transported, products sold and transferred, and taxes paid.
Tobacco distributor license fees can range from a few hundred to thousands of dollars per year, depending on your sales volume. Make sure you select the appropriate license tier for your inventory and sales volume.
Maintaining compliance with license requirements is essential. Incomplete, inaccurate, or late reporting can result in fines or license suspensions until records are reconciled. To avoid problems, mark calendar deadlines clearly and keep meticulous inventory logs and sales records.
The Application Process
There’s more than just paperwork involved when applying for a tobacco retail license. Expect background checks, requests for personal identification, and fingerprints as part of the process. States may also dig into your financial history. Prior convictions can be a stumbling block.
Along with licensing, your business location needs local zoning approvals and permits from agencies like the fire marshal, health department, and building inspector. Your retail operation will be safe as long as all codes are met.
The tobacco licensing process takes time, so start before you open. Invest in location, financing, inventory sourcing, and the qualifications of owners and key staff. The approval process will be smoother.
Training Your Staff
Staff training is crucial to the success of your tobacco retail business. Employees need to know legal requirements and sales best practices. Key training areas should include:
- Checking IDs and legal sales age: Staff should ensure all tobacco purchases are legal and recognize valid age verification forms. Show them how to spot fake IDs and ask questions when they're unsure.
- Preventing proxy sales: Employees should learn the common situations where adults illegally buy tobacco for minors. Tactical advice on how to decline these sales is essential.
- Managing difficult situations: Roleplay situations like refusing sales, dealing with angry customers, and reporting violations to management. Prepare staff to make legal decisions under pressure.
Your POS system is an essential tool for managing tobacco operations. Some POS systems come with integrated age verification that allows you to scan customer IDs in seconds. Demonstrate to your employees how the POS restricts sales of banned items like loose cigarettes and flavored products. Practice processing age-restricted sales and checking IDs.
Security and Safety Protocols
You’ll need robust security and safety measures to protect your inventory, customers, and local community.
For example, you can install video surveillance covering all sales areas, product storage spaces, and exterior areas of the premises. You’ll need the evidence if any incidents occur. It’s best practice to keep the footage for 90 days.
You should store tobacco products in locked, secured areas inaccessible to customers. Never leave tobacco unattended or within reach. You can prevent theft and unauthorized access with safes and reinforced storage rooms.
You can stop prohibited tobacco sales with point of sale systems that integrate age verification scanners, biometric ID checks, sales alerts, and more. Transactions are automated so there's no human error.
Selling Tobacco: Follow the Rules and Open Your Store!
Operating your store and legally selling tobacco requires a big push initially, but can bring great rewards. You must balance customer demand with a duty to protect public health, particularly among youth. You can be a leader in your industry by consistently following best practices and becoming the go-to for regular tobacco buyers.
The legal requirements can seem complicated, but tools like POS systems make it much easier to comply. With features like age verification, sales alerts, and detailed reporting, tobacco-specific POS systems give retailers built-in safeguards.
POS Nation works with thousands of tobacco store owners to provide POS software tailored to their needs. From carton-pack inventory tracking to sales reporting and kit building, our software makes running your store easy.
Want to see how? Schedule a demo with our tobacco experts today!