Cigarettes and other tobacco products are top earners for convenience stores, but there are risks associated with selling these products.
Given the fact that 20% of high school students admit to vaping, store owners can expect increased attempts to purchase tobacco products illegally and increased scrutiny from law enforcement and local regulators.
Other than the risks of selling tobacco products, these products are known to have negative health effects and store owners should consider this fact before deciding to sell them to their customers.
However, thousands of stores sell tobacco products around the United States and, as long as you follow federal, state and local requirements for tobacco retailers, you can reap the benefits of selling tobacco products in your convenience store.
The Risks of Selling Cigarettes for Retailers
Before you decide to carry cigarettes or other tobacco products, you should know the risks involved so you can avoid penalties of violating rules for retailers.
Here are some common questions retailers have about the risks of selling cigarettes:
What is the penalty for selling cigarettes to minors?
There is no federal penalty for selling tobacco products to minors, but each state has its own penalties for retailers who sell tobacco products to minors.
State specific regulations will determine the penalties you will receive for selling tobacco products for minors, and will effect punishment factor like:
- Whether you will be fined on your first offense.
- How many offenses will cause your tobacco license to be suspended or permanently revoked.
- Whether the individual who sold the tobacco product to the minor is specifically liable or if the store/company is liable.
To learn what is the fine for selling cigarettes to minors in your state, search “penalties for selling cigarettes to minors in (your state),” as each state has its own specific penalties.
What is the penalty for selling cigarettes without a license?
Selling tobacco products without a license is a serious offense and results in large fines, up to a year in prison or both.
What taxes am I liable for when selling cigarettes?
On top of the $1.0066 federal tax due for each pack of cigarettes, each state has its own cigarette excise tax, ranging from $4.35 in Connecticut and New York State, to $0.30 in Virginia and $0.37 in Georgia.
Additionally, counties and cities can add additional taxes on cigarettes, Philadelphia adding a $2 tax and New York City adding $1.50, for example.
These taxes on packs of cigarettes are separate from other tobacco products like cigars and e-cigarettes, which are also regulated and taxed on the state and local level.
Failure to pay local, state or federal taxes on packs of cigarettes and other tobacco products sold is an offense that can result in the suspension of tobacco retailer license and fines in addition to payment of back taxes.
Information for Retailers of Tobacco Products
Now that you know the risks associated with selling cigarettes and other tobacco products, we can cover information to help you get your tobacco retailer license.
Here are common questions that store owners have about the process of obtaining a Cigarette and Tobacco Products Retailer's License and the requirements for these store owners once they have obtained this license.
How do I get a License to sell cigarettes and other tobacco products?
To sell tobacco products in your store, you will need to obtain a Cigarette and Tobacco Products Retailer's License and be registered as a “Cigarette/Tobacco Retailer” in your state.
You will need a separate license for each retail location selling tobacco products and a separate license for each cigarette vending machine you maintain.
To start the application process, search “Apply for tobacco retail license in (your state),” and you will be able to begin the application process online.
Generally, the application process will involve:
- Creating an online account through the agency that regulates tobacco sales in your state.
- Submitting personal and business information through your online account.
- Paying a one time application fee and paying an annual license renewal fee.
Every state has different information submission requirements, but here’s an example of the initial information you will be required to submit, based on California’s submission requirements:
- Driver License Number
- Social Security Number (SSN)
- Email Address
- Supplier Name/Address
- Personal References
- Bookkeeper/Accountant Address and Phone Number (if applicable)
- FEIN (Partnership, Association, Organization, Trust, Estate, Joint Venture, Receivership/Fiduciary, Unincorporated Business Organization, Limited Liability Partnership, Limited Partnership, Limited Liability Corporation)
- California Secretary of State Entity Number (Limited Liability Partnership, Limited Partnership, Limited Liability Corporation)
- Agency Name (Federal, State, and Local Government)
- Name, address and phone number of the person(s) who maintains the books and records
Once you have obtained your state Cigarette and Tobacco Products Retailer's License, you should see what additional regulations have been put in place by the city and/or county you operate in.
Who can I sell cigarettes to once I have my tobacco retailer license?
Cigarettes are only for sale to people who can prove that they are 18 years or older with a valid government issued photo ID.
Some states, counties and cities have voted to raise the minimum age for the purchase of tobacco products past 18, and have imposed other regulations limiting sales of cigarettes. Before making sales of cigarettes and other tobacco products, you need to be sure that you aren’t in violation of local tobacco sales ordinances.
Here is a resource displaying many of the states, counties and cities that have increased the minimum age for tobacco sales, but to be safe, you should always conduct your own research on the requirements for tobacco retailers in the state, county and city you do business in.
What is considered a tobacco product?
A tobacco product is any product that contains tobacco or nicotine, and this definition has expanded in recent years with the rise in popularity of vaping.
Here’s the FDA’s definition of a tobacco product:
Any product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product (except for raw materials other than tobacco used in manufacturing a component, part, or accessory of a tobacco product).
Here are some quick rules related to the official definition of tobacco products:
- Any tobacco product you purchase for resale should clearly be labeled as a tobacco product.
- You should NEVER purchase a tobacco product that is not clearly marked as such or unlicensed by the FDA.
What taxes do I need to pay on the cigarettes I sell?
In addition to federal taxes on the tobacco products you sell ($1.0066 per-pack), you are also responsible for paying state and local taxes.
This information can easily be found online by searching “retail tobacco tax (your state),” “retail tobacco tax (your county)” and “retail tobacco tax (your city)”
In New York City, for example, you would combine the federal tobacco tax ($1.0066/pack), the state tobacco excise tax ($4.35/pack) and the city’s local tax ($1.50/pack) to get a combined tax rate of $6.8566/pack of cigarettes sold.
Here’s the formula for calculating the taxes you will owe for each pack of cigarettes sold:
Federal Tobacco Tax (Per-Pack of 20) + State Tobacco Tax (Per-Pack of 20) + City Tobacco Tax (Per-Pack of 20) = Taxes You Owe Per-Pack of 20 Cigarettes Sold
What are federal requirements for sale of tobacco products?
Federal rules for selling tobacco products:
- Check photo ID of everyone under age 27 who attempts to purchase any tobacco product.
- Only sell tobacco products to customers age 18 or older.
- Do NOT sell tobacco products in a vending machine unless in an adult-only facility.
- Do NOT give away free samples of tobacco products to consumers, including any of their components or parts.
Federal requirements for tobacco retailer license:
- Prominently display the license at each retail location in a manner visible to the public.
- Keep complete and legible purchase invoices for cigarettes and tobacco products for four (4) years.
- Keep these invoices at the location indicated on your license for the first year after purchase.
- Allow Board staff or law enforcement agencies to review your invoices upon request.
Resources for Retailers of Tobacco Products
These resources can help you better understand the requirements for retailers of tobacco products and how to better follow these requirements:
- This is our watch is a federal resource for retailers of tobacco products.
- Summary of Federal Requirements for Retailers of Tobacco
- Video Guides for Compliance with Retailers of Tobacco Requirements
Because record keeping is so vital to the lawful sale of tobacco products, it is essential that your inventory management of these products is top of the line.
CStorePro allows you to easily track daily and overall sales of cigarettes and other tobacco products, retain invoices for purchases of tobacco products according to federal requirements and manage inventory in real time to ensure cigarettes are never out of stock.