Tobacco and cigar excise tax requirements by state

Selling tobacco or cigars online triggers a compliance stack that goes well beyond standard sales tax: state tobacco excise tax, PACT Act federal reporting, age verification requirements, and state-specific tobacco dealer licensing. Each layer is separate and requires its own registration.

The compliance layers for online tobacco sellers

1. Federal excise tax (manufacturer/importer level) Federal tobacco excise tax is paid by manufacturers and importers, not by online retailers at the point of sale. However, retailers importing tobacco products from outside the US may face federal excise obligations.

2. State tobacco excise tax Separate from sales tax. Most states require online tobacco sellers to:

• Register as a tobacco retailer/dealer with the state revenue agency
• Collect and remit state tobacco excise tax on sales to in-state customers
• File separate tobacco excise tax returns (often monthly)

3. PACT Act compliance The Prevent All Cigarette Trafficking Act requires online sellers of cigarettes and smokeless tobacco to:

• Register with the ATF and each state where they ship
• Collect all applicable state and local taxes before shipment
• Report monthly to state tax authorities listing all customers and quantities shipped
• Prohibits using USPS for cigarette delivery (private carriers only, with age verification)

Note: PACT Act was extended in 2021 to cover e-cigarettes and vaping products.

4. State tobacco dealer licensing Many states require a separate tobacco retailer license or permit to sell tobacco products into the state. This is distinct from a sales tax permit.

5. Age verification Federal and state law requires age verification for all tobacco sales. Online sellers must use a commercially reasonable age verification service and maintain records.

Cigar excise tax rates by state (representative)

Rates change regularly, always verify current rates with the state revenue agency before filing.

What online cigar sellers need to do

1. Determine which states require tobacco excise registration for remote sellers
2. Register for tobacco excise tax separately from sales tax in each required state
3. Obtain any required tobacco dealer license
4. Implement PACT Act reporting for cigarettes and e-cigarettes
5. Use a certified age verification service at checkout
6. File separate tobacco excise returns on the state’s schedule (typically monthly)
7. Maintain records of all tobacco sales by state, customer, and product