The worldwide Tobacco Products market is projected to generate a revenue of $965.1 billion this year alone. Online sales are expected to account for nearly five percent of that total.
As a smoke shop owner, you want to open as many avenues as possible for your business to cash in on tobacco sales — including e-commerce tobacco.
But managing online shopping tobacco for your smoke shop isn’t as simple as creating a retail page and preparing your inventory. Careful and intentional steps are necessary to set you up for online retail success.
This article covers the basics of managing online shopping tobacco for your smoke shop, and five key point of sale (POS) system features to help you manage the process effectively and in compliance with state and federal regulations.
Managing Online Shopping Tobacco for Your Smoke Shop: The Basics
Let’s start by addressing the elephant in the room: Tobacco sales are always riddled with regulatory and logistical challenges, and managing online shopping tobacco is no different. Unlike standard e-commerce, online tobacco sales are highly regulated to ensure safety, security, and compliance. If you want to sell tobacco online, you need to have a firm grasp of those laws and regulations.
Related Read: 9 Differences of E-Commerce vs. Retail: Can You Do Both?
What laws do you need to keep in mind?
At the federal level, you must consider the Prevent All Cigarette Trafficking (PACT) Act. This act mandates age verification on all tobacco deliveries to prevent unlawful purchases by minors. Retailers must check photo ID upon delivery and secure a signature from the recipient that matches the order. At the state level, you should consider additional tax requirements.
Managing these complex requirements can be extremely challenging for smoke shop owners without the right systems in place. However, smoke shops can overcome these hurdles with a robust POS system tailored for tobacco that handles compliance and reporting and integrates with e-commerce platforms. The right tools enable you to sell online safely and successfully while avoiding major pitfalls.
By leveraging the right technology, your staff can focus on customer service instead of constantly struggling with regulatory red tape. With this in mind, let’s explore the features you need from a point of sale system to help you manage online shopping tobacco for smoke shops.
5 POS Features Key to Managing Online Shopping Tobacco for Your Smoke Shop
You need a strong point of sale system to manage your online tobacco sales, but not all POS systems are created equal. The right solution for your shop and needs will have several key capabilities, which we will explore in more detail below.
1. Age Verification Integrations
The first feature your point of sale system needs is an integration for automated age verification. Under the PACT Act, tobacco retailers must validate every customer’s age before selling or delivering tobacco products to them.
The stakes for tobacco sellers are high. If you violate the PACT Act, you’ll face fines and penalties of up to $10,000 per offense. Repeated infractions may result in temporary license suspension or even permanent loss of tobacco retail licenses. These requirements can cause a challenge for in-store tobacco sales, but the challenges are double for online sales.
One of the easiest ways to ensure compliance with these laws and regulations is to invest in a point of sale system with air-tight age validation integrations.
A modern smoke shop POS system can scan customer ID data upon delivery and purchase and automatically compare the information against what was provided in the original tobacco order. If the name, age, or other details don't match at the destination, the system can instantly flag the discrepancy and reject the package.
By handling these checks behind the scenes, your POS safeguards you against PACT Act violations while providing speed and convenience during sale fulfillment. Compliance becomes far less burdensome with the right technology partner for your online tobacco store.
2. Tax Automation Integrations
Another feature you should consider when managing online shopping tobacco for your shop is tobacco tax integrations.
Tobacco tax regulations are complex and vary widely between states. Tax collection rules consider product type, weight class, price points, and destination locales. You’ll calculate tax rates using intricate formulas that change over time. Without automation, compliance with all these ever-shifting rules and regulations is challenging at best.
What’s the penalty for getting things wrong regarding tobacco taxes? If you inadvertently collect taxes incorrectly, you will owe back payments and may face severe financial penalties. Intentional tampering triggers harsh fraud charges, lawsuits, and even potential jail time in some cases. Fines for nonpayment can also stack up quickly, reaching thousands of dollars. Quarterly audits are likely until the issues are corrected and accounted for.
Related Read: Small Business Tax Preparation Checklist for New Business Owners
You can mitigate your risk of facing these challenges with the right POS solution. Modern POS systems can be configured with detailed tax profiles for tobacco products, accurately accounting for multifaceted state and municipal excise tax rates. Custom logic can factor in elements like product categories, Manufacturer’s Suggested Retail Price (MSRP), weight classes, and other criteria that inform tobacco tax calculations.
When customers place orders, your POS automatically applies the correct tax based on the destination’s jurisdictional rates. This feature prevents surprise deficits from improperly assessed taxes. With retail automation maintaining precision behind the scenes, retailers avoid the risk of compliance gaps while providing customers with accurate totals.
By handling intricate tax calculations seamlessly in the background, POS integrations can eliminate some major friction points for tobacco e-commerce.
3. Detailed Sales Reporting
Sales data tracking is vital in tobacco sales, as you must be able to access this data on demand for auditing purposes. Regulators analyze sales patterns to confirm legitimate inventory activities, with sudden volume spikes or dips raising suspicions of unlawful diversion. As a result, detailed sales reporting is a mandatory feature for your point of sale system.
If you struggle to explain any inconsistencies in your transactions, regulatory authorities may believe your store is engaging in illegal tobacco diversion. You may then deal with challenges like in-person audits or even license revocation.
Related Read: How To Use Your Point of Sale Analytics To Increase Profits
The solution? A modern POS system with advanced reporting features.
Useful data points include customer info, items purchased, taxes collected, order totals, and more. With the right system, you can export data and create the appropriate reports you need during monthly or quarterly compliance windows. The POS can also set reminders to pull these tobacco data reports before filing deadlines expire. Automating this process turns compliance into a simple process rather than a looming chore.
4. Fraud Prevention Features
Tobacco black markets cost states billions in tax revenue annually, as criminal rings strategically divert inventory for resale. Unusual ordering patterns or account mismatches can signal diversion to unlawful channels. And when fraud is detected, consequences for retailers are severe.
If you cannot justify spikes in sales volumes or gaps in tax remittance due to stolen stock, you may find yourself in hot water with authorities. Lengthy, profit-draining audits follow to reconcile losses. The worst-case scenario can even involve being prosecuted with racketeering charges.
The right POS system for your business will incorporate fraud prevention features to catch diversion early, and protect you and your business from criminal charges. Track key metrics like reorders, losses, and sales trends to catch anomalies suggestive of trafficking. Enforce purchase thresholds by customer to prevent bulk ordering through dummy accounts.
Fraud tools can also run fake test orders to check delivery addresses against account holder information, unveiling spoofing. POS tools combine more vigilant monitoring protocols with purpose-built fraud protection tools, providing tobacco retailers with essential insights and safeguards against inventory diversion. These features allow you to spot issues early and course-correct at the moment, rather than make unfortunate post-audit discoveries.
5. Shipping Integrations
Finally, you’ll want to explore a point of sale system with shipping integrations. As we’ve explored in the other sections of this post, regulatory compliance is critical for tobacco retailers — especially when it comes to online shopping tobacco. Connected systems allow customer age verification and delivery signature capture, closing potential loopholes that can set your business up for regulatory trouble.
Related Read: 5 All-in-One POS System Features Small Businesses Need
When you invest in a point of sale system with shipping integrations, you’ll have proof of ID checks and recipient records at every step of the chain of custody, from the merchant to the final buyer.
With the right POS system, you can enter carrier account credentials during onboarding. The system then allows for scanning customer IDs and capturing signatures directly within the carrier's mobile app. Data is then transmitted back to the merchant's POS dashboard, clearly displaying fulfillment of compliance requirements.
By investing in technology that bridges the gaps between the stages of your sales process, you can sell online with confidence, knowing you comply with all regulatory requirements.
Managing Online Shopping Tobacco for Your Smoke Shop: Set Your Store Up for Success
Keeping up with tobacco regulations is extremely difficult without the right software tools — especially when selling tobacco online. Traditional POS systems often don’t have the features you need to maintain compliance when selling online. On the flip side, many popular e-commerce platforms don’t have the features you need to meet tobacco industry regulations.
The right point of sale system for your business will have features for e-commerce and tobacco sales, including:
- Automation for handling complex tobacco tax rules that vary by state, product type, volume, and more.
- Integration with shipping carriers to enable compliant age verification and recipient signature capture upon delivery.
- Tobacco-focused inventory management functionalities for products sold by carton or pack quantities.
- Regulatory non-compliance prevention features to reduce infractions.
- Tools to make online tobacco sales easy, compliant, and profitable rather than a hassle.
Cigars POS offers a POS system built to empower smoke shops and cigar stores. Our solution is designed specifically to help tobacco retailers overcome compliance hurdles, optimize complex operations, and expand in-store and online revenue. Key features like automated age verification, carton-pack inventory management, scan data reporting, and custom label printing give shops everything they need to succeed.
Schedule a demo of Cigars POS today to learn more about our specialty tobacco retail solution and how it can set your store up for success.
