Selling Cigars Question

**chefchris** · 02-26-2007, 01:38 PM

So there's a nice wine and spirits place down the street from where I work. They might be interested in putting in a humidor into their store. Now I'm asking because I don't even know where to begin looking, but what would I need to do to just run a little 300-500 case? I'm guessing I need a license. Also, would I have to buy from a retailer, or could I sell what I have in stock? I have no clue where to begin. If someone could just point me in the right direction, I would really appreciate it.

**597** · 02-26-2007, 01:51 PM

I’m not sure if you would actually need a license just to sell cigars (it varies by state, location and probably amount of sales), however you would at least need a tax id license (which you should be able to apply for online for free, this is for tax purposes so you can pay and collect sales tax). You may want to get a business license (if you want to be incorporated) but its not necessary if your only going to act as a sole proprietor (there are numerous pros and cons for incorporating and being a sole proprietor and if you choose a buisness name you may still have to register it with the state). I’d imagine that you could sell the cigars you have (though I’m not positive, one would have to look to see if the there is a separate tax on tobacco in each state which probably exist), or you could buy from a wholesaler (which would be cheaper than what your currently paying and you would need a tax id to purchase from a wholesaler). I’ll look in to some of the information for you just let me know what state, county and municipality you live in. I’ll get back to you when I’m at home and out of class.

john51277 · 02-26-2007, 01:51 PM

I personally would check with your town hall about business licenses, and see if it would even be worth your while. I believe you would have to have a tobacco sales license, and a business license unless the current owner will let you run under yours. There are alot of things to look into as far as legality and so forth. Good luck!

**chadth** · 02-26-2007, 01:58 PM

If I understand your question, you are looking to start your own business and either selling directly to the business or place a humidor in their space so you can sell directly. The first thing you need to do is fill out the proper paperwork to obtain your business license. This is usually done with the state and with the federal government to obtain a federal tax id. On the business license form, you will be asked specifically about whether you are selling tabacco, alcohol, etc.

I poked around the internet for MS and it appears it is a bit different then most states. Start by reading up at http://www.mississippi.gov/how_do_i_...Article_ID=458

Federal Tax ID:
http://usgovinfo.about.com/od/moneym...idhowtoget.htm

Hope this helps. I have started a few companies and would suggest going the LLC or Corporation route if possible.

Thanks,
-Chad

**chefchris** · 02-26-2007, 02:11 PM

thanks guys!

**chadth** · 02-26-2007, 02:14 PM

I thought about this a bit more and came up with a different approach. What if you went uder a 1099 with the business as a "cigar consultant"? The general idea is you would assist them with obtaining a quality display case, cigars, and perhaps marketing. In return, they would pay you an hourly rate, or even better, a % of sales. The % of sales works best as they can easily calculate the required margins and the risk of expanding their business is distributed.

The above would no require you to get any licenses, just pay taxes at the end of the year if the company doesn't take them out.

-Chad

**597** · 02-26-2007, 04:33 PM

As I eluded to earlier you would have to apply for a Tax ID. The tax Id would basically make you liable for collecting tax on all retail sales and reporting such. However, you may have to get some sort of special license for reselling tobacco since the state more than likely will want you to pay the in-state tobacco tax (which your online purchase would not charge or account for). You may be able to get by without getting a special tax license if you only purchase your cigars from retailers in the state you do business in (since the tax is already paid) but if you don’t get the special license then you more than likely would not be able to purchase from wholesalers. (I’ll try and contact my old boss, who owned a convenient store that sold tobacco and see if he needed a certain license, just as a side note selling tobacco is very profitable and actually generated 60% of the sales for the store he owned).

The next thing you may have to do is get a business license. This normally requires letters of incorporation and certificate of trade name, if that is the way you want to go. You may not have to get a business license if you want to act as a sole proprietor, however you will be held liable personally for any action taken against the business entity (This means personal assets may be forked over in the event you are sued). I would recommend some form of incorporation in the event you do sell tobacco and another party is actually selling the items for you (which in this case seems to be what you are implying). The reason I say that is just in case someone doesn’t ID someone and that person the cigar is sold to is under 18, you would be held liable for any suit as well as any possible fines the state may impose.

If you were to create this business and let the wine place sell the cigars for you, (following the above guidelines) you would probably be ok. I think the wine bar would want you to take the action on your behalf (in creating the business) since then they would have no liability essentially. Otherwise if you just sold them the cigars they would still have to apply for the license and such to legally sell the cigars (which essentially you would be of no use to them since they could inevitably buy the cigars cheaper than you anyway).

All in all you would be essentially starting you own cigar retail shop. You could inevitably expend and sell online. You would incur costs on setting up the business by creating an article of incorporation (which is normally drafted by a lawyer), paying the state for certificate of trade name (this searches to make sure you don’t use a copyrighted name for you business) and may have to pay for the special tobacco license (if there is one). The sales tax id is normally free (at least it is in MD and can be applied for online in most states). Well hopefully that helps out a bit.