Online and electronic forms of payment are a big chunk of tobacco purchases today. If a tobacco merchant can’t accept online payments, they may miss key business opportunities. For example, it’s estimated that 6.8% of total tobacco product revenue will be generated online in 2023. Additionally, online sales come with upsell opportunities such as smoking accessories and e-cigarettes (eCigs). 

However, tobacco merchant accounts come with several challenges. For new tobacco merchants, it’s quite a surprise to learn about all the obstacles the tobacco industry faces. Fortunately, understanding the challenges and partnering with the right payment solutions provider can make it easy to accept online payments without breaking the bank. 

So, what are your options when you’re looking for the right tobacco merchant account? This article will help you answer that question. 

Understanding Tobacco Merchant Accounts

When customers walk into a smoke shop, they can pay with cash or card. Finding a merchant account for in-person payments is easy enough for tobacco retailers with a physical storefront. The real challenges come when you’re looking to process online payments.

Online payment gateways allow customers to enter their payment information from their phone or computer. Just as with in-person payments, the charge is sent to the bank where it will be verified and checked for signs of credit card fraud. If all is well, the payment will be approved and funds disbursed to the merchant. If the payment is declined, the company will receive the reason why in the form of a card decline code. To facilitate this process, tobacco merchants need a secure PCI DSS (Payment Card Industry Data Security Standard) compliant payment solution that doesn’t unnecessarily erode their profits. 

Tobacco companies already deal with strict government regulations. So, finding merchants for card-not-present and online sales takes a lot of work. This is when a high-risk tobacco merchant account can help. It’s a good idea to partner with a merchant account provider with a vast banking and processing partner network. 

What makes a tobacco merchant high risk?

“High risk” means a business has a high risk of chargebacks and fraud. From a bank’s perspective, it’s riskier than normal to provide services to these industries. 

For example, industries like tobacco, alcohol, firearms, adult sites, and online gambling are high risk. Traditional payment solutions providers often overcharge or outright refuse to service these industries. If your business is in one of those industries, you’ll likely need a high risk merchant account. High risk merchant accounts serve businesses operating in high risk industries that might otherwise be left underserved or overcharged by traditional payment processors. 

Staying compliant as a tobacco merchant

Maintaining compliance is of utmost importance to tobacco merchants. Due to extensive government regulations, tobacco companies can face hefty fines for violations. To prevent and avoid these, yearly audits are necessary to maintain compliance. It is also recommended that you post all necessary legal notices on your website.

A letter of compliance is usually required from your lawyer. This verifies your customers’ ages, as well as sales transactions. It also verifies government guidelines for recorded tobacco sales. The merchant will use an assigned merchant code to organize your records. This tells the governmental agency what industry your business is in.

A New Wave of Tobacco E-Commerce

The world is buying tobacco online, and trends show this will continue to increase. Fortunately, TailoredPay has made finding an online merchant easy. And they are one of only a few who offer e-commerce payments.

Tobacco prevention awareness is huge in the US. Yet the tobacco industry is as profitable as ever. With the introduction of e-commerce, selling tobacco online is almost a necessity.

Through ecommerce, you can sell a variety of tobacco products. From cigarettes to smoke-less products to accessories. All through your online store. Our underwriters will work to verify your website and keep you compliant. There are many laws governing the mailing of tobacco products. It will also be necessary to have a transparent refund and shipping disclosure.

Despite all the requirements and barriers, selling tobacco online is quite profitable. As with any business, you must prove that you and your business are in good standing. You will have to provide company sales reports and bank statements. This information will give you a better chance of finding a tobacco merchant account provider that will work with you.

TailoredPay’s digital application process is simple. You’ll receive a response or approval in 72 hours. They also don’t charge set-up fees, making it a perfect choice for many high-risk online businesses.

Choosing the Right Tobacco Merchant Account

Online tobacco sales come with a high risk of chargebacks and regulatory challenges. At TailoredPay, we’re uniquely equipped to service merchants in the tobacco industry. We focus on right-sizing tobacco merchant accounts and believe in affordable and transparent terms that enable your business to scale. We can demystify the process, help you work through the complexities of the tobacco industry, and find the right solution for your business. When you partner with TailoredPay, you can benefit from:

• Low fees 
• Transparent terms
• Powerful chargeback mitigation 
• Tobacco industry expertise that can get you approved even if you’ve been rejected by other payment solutions providers.

If you’d like to learn more, give us a call at (888) 599-6482, or fill out this simple form (we’ll get back to you in 24 hours!) to get started on your next merchant account.