Getting your life back on track after a felony conviction can be difficult. Trying to find work can be especially frustrating as some employers are not comfortable hiring felons or restrict the type of labor they allow felons to perform.
For many people in this situation, starting their own business seems like a practicable solution to securing employment. One attractive product market is tobacco. Tobacco sales in the U.S. are projected to reach $130 billion in 2019.
It’s estimated that each smoke shop location can earn around $300,000 in revenue. New technology including e-cigarettes and vaping devices have opened a new line of products and attracted customers who were typically not users of traditional tobacco products. Although these products are still very new and regulation is trying to catch up, their popularity has been explosive and the growth undeniable. Another attractive quality of these new products is the profit margins are higher than traditional tobacco, boosting revenue for stores.
Opening a gas station, bodega, hookah lounge, cigar store or smoke shop can be a relatively easy entry point into this lucrative market.
Due to the highly regulated nature and involvement of the government in the cigarette and tobacco business, you may be wondering if you will be able to get a tobacco license with a felony on your record. The short answer is yes. Although it is ultimately at the discretion of the government entities involved in granting the license, so long as your felony conviction did not involve crimes related to tobacco, it’s unlikely your application will be denied.
When applying for a license, honesty is the best policy. If you lie about your past, and it is discovered later, you can end up having your license revoked or worse. Lying on a government document is frowned upon.
If it’s a possibility, having your record expunged would give you the best chance of being approved. If your record has been expunged, you can technically and legitimately answer that you have not been convicted of a crime on the application.
What is a Tobacco License?
The tobacco industry is heavily regulated in the United States, and you must have a license if you wish to import, manufacture or sell cigarettes or other tobacco products.
Depending on the location and nature of your business, tobacco licenses are granted by local, state or federal regulators.
There are four main types of tobacco licenses: retail, manufacture, wholesaler and importer/exporter. Next, we will go over the requirements for each one.
Retail Tobacco Licenses
Most states require a retail tobacco license for anyone selling tobacco products in its jurisdiction. A tobacco retailer is a person or business who sells tobacco products directly to the public from the location specified on their license.
Although the license is issued by the state, you may need signoff from the county or city as well. A retail tobacco license enables you to sell tobacco products in a brick and mortar store, i.e. a retail location. This license is issued for a specific location only, so if you are planning on having multiple locations or vending machines, you will need a separate license for each location/machine. This type of license signifies that your store is legally allowed to sell tobacco products in accordance with the laws of the state.
Please note tobacco vending machines are only permitted in places where minors aren’t allowed. Defined by the Food and Drug Administration (FDA) as “An adult-only facility is one in which minors are neither present nor permitted to enter at any time.”
Every retailer intending to sell cigarettes or tobacco products in states and/or jurisdictions requiring a cigarette/tobacco license must apply for and obtain one. All new applications must be submitted with a one-time license fee (amount varies by state). In most states a license is valid for a twelve-month period and must be renewed annually.
Tobacco Manufacturer License
If you plan to manufacture cigarettes or tobacco products, you will need to get a Federal license from the Alcohol and Tobacco Tax and Trade Bureau (TTB) in addition to a license from the state where you will be manufacturing the products. Tobacco products include hookah tobacco, loose tobacco for rolling your own, chewing tobacco, cigars, pipe tobacco, snus, snuff etc. State licensing websites have more exhaustive lists and definitions of what constitutes a tobacco product.
Tobacco Wholesaler License
A wholesaler and distributor do not sell directly to the public, the way a retailer would. They usually supply retail locations with their tobacco products. You will need to get a license from the state(s) where you plan to sell/distribute your tobacco products.
Like a tobacco manufacturer, importers of raw tobacco or tobacco products must get a Federal license from the TTB as well as a license from the state the tobacco will be imported to. Additionally, manufacturers or importers are regulated by the FDA and must comply with the Tobacco Control Act (TCA).
One major requirement for compliance with the TCA is to submit required tobacco health documents. These documents include information about ingredients and additives in the tobacco products, as well as any known side effects or reported reactions. You must also submit information whenever any additive or quantity thereof is changed.
Responsibilities of having a license
To maintain your tobacco license and make sure you are abiding by the rules for selling tobacco, you must display your license to the public. This can be as simple as hanging it next to the register at a retail location or putting it on the wall of the business office if you are a manufacturer or wholesaler.
You must maintain purchase invoices for all tobacco products for four years. This is in case of an audit, to make sure all the tobacco products you are selling have been purchased legally and you aren’t selling stolen, illegal or fenced products. Speaking of an audit, if any law enforcement agencies, members of the TTB or local representatives request to look at your invoices or other records, you must oblige.
If you’re a manufacturer, you will need to comply with the record keeping requirements including source of tobacco used in manufacturing, losses during manufacturing, inventory, distribution, etc. You can find more information about these requirements at the TTB website here.
It’s important to make sure you and your employees are educated about the restrictions the FDA put on the sale of cigarettes and tobacco products. If you or any of your employees are caught selling cigarettes or tobacco products to a minor, you can face fines, suspension of your license or even jail time.
Your responsibilities as a tobacco retailer include checking the photo of ID of everyone under the age of 27 who attempts to purchase cigarettes or tobacco products. You can only sell cigarettes and tobacco products to customers who are age 18 years or older. You are prohibited from giving away free samples of cigarettes or other tobacco products. All cigarettes and tobacco products must display a health warning statement on their packaging. All advertisements displayed in your store for cigarettes or tobacco products must also have a health warning statement visible.
It’s also wise for you and your staff to go through the training offered by the FDA. “This is Our Watch” is a national program providing training and tools for tobacco retailers to better understand and comply with FDA regulations. The main goal of the regulations is to prevent minors from accessing tobacco. Tools include posters, stickers and age verification tools.
One final requirement to keep top of mind is taxes. Tobacco is a highly regulated and highly taxed product. As a retailer, you will be required to keep track of the taxes collected on tobacco products and remitting them to the government. The TTB website has many resources to assist with this process.
Starting any kind of business requires dedication and hard work, especially in the beginning. A business involving the sale, manufacture, distribution or import of cigarettes and tobacco products is more difficult and regulated than selling clothing or hardware, but the financial gains can be much higher as well. You will have a higher likelihood of success if you are organized and can keep your legally required records in order. Another factor for success will be keeping abreast of any changes to the law or regulations for the products you sell, and keeping your staff trained and alert for anyone under the age of 18 trying to illegally purchase products.