Selling tobacco in California can be challenging. Not only is there the disparage public stigmatism that goes along with selling tobacco, general business hurdles, but there is additional government strict licensing and tax requirements. To ensure business viability, it is advisable to learn the laws yourself or onboard a professional to help you navigate the landscape.
The government of California defines a cigarette as a rolled product made of tobacco designed for smoking. Tobacco products include cigars, products made or derived from nicotine, e-cigarettes, and e-cigar accessories. Retailers and wholesalers of tobacco and cigarettes in California must have licensing before purchasing, distributing, or making tobacco products.
Cigarette and Tobacco Retailer in CA
On top general business licensing, zoning and permits, tobacco and cigarette retailers must have a cigarette and tobacco retailer's license to sell at retail. Depending on their business, retailers may need to have more than a cigarette and tobacco license. For instance, new retailers may be required to have a seller's permit from the CDTFA for reporting sales and tax use. Additionally, retailers that are distributors/wholesalers need to have a cigarette or tobacco license. However, running your business can be really burdensome for online retailers as you must obtain a license from every state you sell in. Also, retailers outside CA are required to have a license before selling in the state.
This license remains valid for only 12 months, and you can transfer or assign it. You must renew it annually to continue operating legally in California. If you open another retail location, you're required to renew your license for that location for 12 months. The 12 months are counted from the first month you got your license for the first retail shop.
As of January 2017, retailers must pay an annual fee for each of their stores. Failing to renew your license means that it will expire, and hence, you may not be permitted to sell cigarettes or tobacco products.
Cigarette and Tobacco Wholesalers
Wholesalers need to have a cigarette and tobacco products license from the CDTFA to sell or distribute these products to retailers in California. This is on top of other licenses and permits you may require depending on the nature of their business. But this license is costly, and you'll have to pay wholesale taxes.
PACT Act Reporting Requirement
Prevent All Cigarette Trafficking (PACT) is designed to reverse tax collections and trafficking provisions. It requires internet and online cigarette and tobacco products sellers to comply with the same laws applied to other sellers of these products.
- Registration requirements- imposed on those with a business that sells, ships, advertises, offers, or transfers cigarettes or tobacco products through interstate commerce in CA or an Indian country located within CA's borders. They need to register online with the CDFTA.
- Monthly report filing- these people must also file monthly reports using the PACT Act forms.
However, PACT is more complicated, especially for those selling e-cigarettes. Complying with it if selling in different states can be burdensome.
Tax on E-Cigarettes
Electronic cigarettes are taxed from the wholesaler's first distribution as other tobacco products. They attract an OTP rate of 63.49% of the total wholesale cost. At the retail price, e-cigar sellers pay 12.5% in taxes. California charges a tax of $2.87 per pack on cigarettes.
A new tax proposed on e-cigarettes will see a rate of $1 for 20 mg of nicotine in a product. Visit the CDFTA website to fill in tax returns online. You can also contact us if you have any questions.
It is burdensome to say the least to setup a physical or online tobacco, cigarette, or ends business. On top of the normal challenges that make businesses challenging, the government makes having a cigarette or tobacco business next to impossible. Please contact a professional at our business to help you navigate this industry.