As I've mentioned, I'm somewhat involved with a startup tobacconist.  We have plans to open a shop 3rd quarter next year, and currently have a small online presence.  When we were setting this whole thing up, it soon became apparent that credit card processing for online tobacco sales would be a problem - no one wants to deal with it.  The only standalone processing option for a group as small as we are is to go with a "high risk" merchant account that collects large upfront fees, as well as a pretty big percentage of sales (10-15%) and a rolling balance held in reserve.  Specifically, Mastercard refuses outright without paying a minimum of $1000 for their lawyer to review our policies and give a legal opinion that we comply with all applicable laws governing tobacco sales.  Paypal initially rejected the application, but when I inquired how bigger retailers could accept Paypal, they gave in a little and provided me a list of requirements.  I met those requirements to accept everything EXCEPT Mastercard through them (Paypal). This basically means I got a local lawyer to provide the legal opinion rather than theirs.  It was approved by Paypal, and the account was authorized.  Skip forward a few months to tonight.  I just got a call from Paypal saying they were going to cut us off because of the fact that we sell tobacco from our site.  I asked what had changed, because I had prior approval and the lady said she'd have to ask her supervisor because she doesn't have that information in front of her.  Now, I sit and wait to see what the story is.  Said she'd have someone call me back in the next couple days.  Needless to say, this is causing a great deal of consternation for me.  

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Sorry to hear ab out your troubles... that is truly %&^*$(#!!!

I wonder if there are retailers outside of your area (so that they don't perceive you as a competitor) that can advise you?   I know that I have frequently use MC to make purchases and have not had a problem.  I know that accepting PP is a business decision and all, but I still avoid them like the plague unless it is absolutely necessary...


Hope you get things figured out!   Best of luck to you!

This will work itself out one way or another.  It's just frustrating because I went to the trouble and expense to follow their rules, and even got approval.  Now, 3 months later I get this call.  I just don't understand.  Maybe it was a mistake, and they'll figure it out.  The lady who called did seem very uninformed, and seemed to be working off a script.  Once she realized I knew Paypal rules, she just said she didn't have the information in front of her, and she'd have to check with her supervisor to sort it out.  This whole process has made it clearer than ever how tough it is for tobacconists - not just these issues.  I recently had $300 in advertising credits because of some hosting plans I'd purchased that can't be used because there is tobacco involved - the credits were with Facebook and Google.  Both disallow advertising for tobacco sales.  I have to say, Google is much more upfront, and there are ways to deal with them by advertising other (humidor/accessory/etc) sales, as long as tobacco isn't the focus.  FACEBOOK, however, won't even approve an ad for my blog - featuring no sales whatsoever.  They'll allow the creation of a page, but no ads or featured stories if there's even a discussion of tobacco.  Their policies say you can place an ad for a cigar gathering place for enthusiasts, but that's doesn't seem to be the case at all.  I adapted everything specifically to meet their advertising policy, but was still disapproved for having "tobacco related content."  

Resolved!  Just got off the phone with PP a little while ago.  When the original app was processed, someone on their end forgot to check the "don't accept Mastercard" box.  So, some Mastercard advocate somewhere, in cruising the web for miscreants discovered you could use a MC on my site and kicked the system.  I'm satisfied with that.  The gentleman who called tonight was actually very helpful, and got it sorted out quickly.  I'm back!

Right on! Good on ya.

Glad to hear the good news!

Give me a jingle at I can get you hooked up with a good CC processing company. Low fees, no headaches...etc Joe

Hey, Kip. i know this is well after the initial discussion, but how has this all worked out for you, specifically with PayPal? I've been looking into a tobacco license to sell my own hand rolled cigars, but hadn't thought about there being any problems like you describe. Any info you have would be appreciated. Your cigars, BTW, were mailed out this AM. Thanks!

Well, this whole idea kind of fell by the wayside.  We're still licensed, legal and current, but it is basically on the backburner at this point, until we get the time/capital to do it right.  We worked out the stuff with Paypal, though.  Here's the deal with Paypal - they will allow you to sell tobacco and accept PPal as a form of payment if you get a lawyer to write up a legal opinion that you are following all laws concerning the sale of tobacco.  HOWEVER, Mastercard is the problem.  They don't like the idea of tobacco sales using their cards, so they make it tough.  If you want to accept Mastercard (even through Paypal), you have to pay THEIR lawyer to do the work and write the legal opinion...and pay some other fees.  Essentially, they want you to pay up to several thousand dollars just for the privilege of accepting Mastercard.  So, we opted NOT to accept it and use our own lawyer - and not pay the other fees.  

NOW - I'll throw one more thing out there.  If you're selling your own cigars, there is a whole new world of legislation to take into account.  As a retailer, you usually only have to be permitted to sell tobacco in your given state - the federal and state (wholesale, non-sales) taxes are covered by most of the folks you'd be buying from, and included in the wholesale price.  But, since you are buying whole leaf tobacco and rolling it yourself, your tobacco has not been taxed.  You will have to set yourself up as a manufacturer, and pay all the SCHIP taxes (and other federal, state, and/or local taxes as necessary).  Most states would also require you to be licensed as a wholesaler rather than simply a retailer.  It's definitely a different ballgame, and I'd recommend lots of checking and double-checking before you do.  It's quick and easy to get into a lot of trouble with the various government agencies if they think you're not paying them what they're due.....

Well... Damn. That is definitely a lot more than what I was seeing with the forms and materials which I read and/or downloaded. Thanks for the info!

I didn't mean to discourage you at all.  I just didn't want you to be surprised down the road.  The government makes a big difference between tobacco (unprocessed/whole leaf) and tobacco products.



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