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Growing and selling tobacco has become more than a hobby over the years. There is the enjoyment of planting the seeds, cultivating and curating the crop, and then being paid for your hard work. If you are one of these people who have aspirations for starting a tobacco company, it is important to do your due diligence. It’s not an easy business to get into, but loyal customers are easy to find when you fulfill a niche in the market. You just have to be sure that you have the tobacco licenses, the website or storefronts, and the business plan to help you when selling online.
Is it Legal to Grow Tobacco?
For personal use, cultivating and consuming tobacco is not federally regulated and is therefore legal in most states.
But when growing and selling tobacco, things get a little more complicated. So, then is it legal to grow tobacco? According to federal law, all businesses who sell tobacco, or any of its by-products, must pay taxes on their sale. In addition to this, the business must have all proper licenses for their state.
Get Your Tobacco License
Now that it is legal to grow tobacco, how do you make a business out of it? Well, first of all, you need the proper licenses.
The industry of tobacco is heavily regulated, and as a business owner, you will need to know all about it before jumping in. Many of the regulations depend on the location that you will be growing and selling the tobacco from, so be sure to check with your state and local laws beforehand. But these are the 4 types of licenses that you may need to obtain before you begin to sell:
1. Retail tobacco licenses
Any time a new retailer is coming to the market intending to sell tobacco or any of its by-products, it will need to get a Cigarette and Tobacco License. You will be required to apply and submit a one-time fee for each retail location that you have. Many times this license is required to be renewed annually.
2. Tobacco manufacturing license
As a manufacturer of tobacco, you will also need to have a state license from the location of the manufacturing plant. This license is obtained through the Alcohol & Tobacco Tax and Trade Bureau.
The same is true for any manufacturers that are producing any by products using tobacco.
3. Tobacco wholesaling license
If you are planning to sell wholesale or distribute to other businesses, you will need a license for that as well. The license should be obtained through the state that you are planning to distribute to.
4. Importing/ exporting tobacco license
The same general guidelines for the wholesaling license also apply here. You will need to obtain a license for each state that you plan on distributing to as well as to the federal government. This license is also obtained through the Alcohol & Tobacco Tax and Trade Bureau.
Start Your Business Growing and Selling Tobacco Online
If you are contemplating opening your own business to supply tobacco seeds and equipment here are a few facts.
- According to the CDC, in 2017 an estimated 34.3 million adults in the United States smoked cigarettes. This is not even counting those who smoke cigars and pipes.
- The production of all tobacco products in the US is governed by the US Food and Drug Administration and the Bureau of Alcohol, Tobacco, and Firearms. Neither of these governing bodies forbids homeowners from growing their own tobacco to be used for personal use making it legal.
- It is not legal to sell any type of tobacco without following certain regulations, paying taxes, and having all required licenses.
Opening an online business for selling tobacco seeds to those who want to grow and harvest their own tobacco can prove to be very profitable. With most of the tobacco in the United States being sold on large plantations there are those who want a healthier and more affordable option. This is where your business comes in.
Draft a tobacco business plan
With the internet now available to those who want to grow their own tobacco, your business has no boundaries. Setting up a tobacco eCommerce website allows customers from all over the globe to find your business and the products you have to offer.
There are a couple of things before you get rolling with your seed and equipment business.
- Know the local laws for growing and selling tobacco in your area. No matter if you plan on selling tobacco online or in person, you will need to know the requirements.
- Choose your suppliers wisely. If you are purchasing from suppliers, you will want to have the best products that they can offer.
- Launch your website or open your storefront. Depending on how you plan to blitz the market, you will have to have a place that people can find you.
- Advertise your tobacco business. Getting the word out, in the beginning, is crucial but it doesn’t need to break the bank. Establish your business online via SEO and content as well as on social media platforms. Asking your customers to write reviews is also a great way to advertise without it costing a lot of money.
- Consider the structure of your business. Will you sell items on their own or will you have an option for customers to subscribe to a continuity service. In this case, a tobacco or cigar club subscription style business may add value and help retain customers for a longer period of time.
- Find a high risk merchant account provider. In order to process customer cards, you will need a processor that will accept your business and its inherent risks
With so many things to consider, hashing all of these details before jumping in will make your business run smoother.
Diversify Your Company by Selling Cigarettes Online
As obvious as it may seem, branching out to selling cigarettes when you already sell tobacco online seems like a no-brainer. There are many more people who prefer purchasing the final product: cigarettes, rather than tobacco, rolling papers, and any additional equipment needed to make their own.
Other ancillary products:
- Chewing tobacco and snuff
- Sell pipe tobacco
- Cigars and cigarillos
- Rolling papers
- Pipes and rolling machines
- Ashtrays, carrying cases, etc.
Any of these items would fit well into your tobacco business, bringing in a diverse clientele and higher profits.
The Tobacco Industry is High Risk
When applying for a merchant account for your tobacco growing and selling business you may be in for a surprise. The fact of the matter is that traditional banks consider this type of business high risk. The reasons for this include fraud, high chargeback rates, and the industry’s issues with legality.
All types of online businesses deal with fraud much more often than traditional, brick-and-mortar businesses. It is easier for customers to get away with fraudulent activity behind the anonymity of the internet. Selling physical items also puts you at risk of chargebacks. If customers aren’t happy with the quality of your products, they may resort to requesting a refund through their bank. This is bad news for the merchant and may result in account pauses or closure. The legality portion of tobacco is mainly due to the strict laws concerning the sale of the plant itself. If you misstep, your business is in jeopardy which isn’t a good thing for anyone involved.
Get credit card processing for your tobacco company
New business owners will turn to companies like Stripe or PayPal and open a merchant account. What happens in many cases is that the accounts get shut down without any warning or explanation. The reason this happens is that it is against the terms of service which is written in fine print. But, it is possible to get a merchant account without the fear of being shut down.
Opening a merchant account safely is possible with high risk merchant account specialists. These are the experts that are able to work with the leading banks on your behalf. The application process is not much different than with a traditional bank and can be completed online.
Once your merchant account is approved, you will be able to integrate a secure and PCI compliant virtual terminal.
When searching for high risk merchant account specialists be sure to choose a company that you can trust. Do not be afraid to ask questions. As a business owner, you will want to make sure that you are able to concentrate on your business and not worry about processing your payments.