Just as smoke always rises to the top, the sales of tobacco and cigars continue to climb each year. Aided by the perpetual growth of online sales, tobacco continues to triumph as a profitable billion-dollar industry. Due to the increase in Internet transactions, many states now have specific laws and regulations for sales of online tobacco and cigars, as well as the existing federal laws.
One of the main reasons the state laws have been put in place is to assist with state tax collection on Internet sales. The state laws also help with the prevention of sales to minors. With all of the regulations and laws enforced on this legal product, most banks and processors deem the tobacco industry high-risk.
Besides the numerous strict state and federal laws, sales of online tobacco and cigars are notorious for excessive chargebacks, which is another factor that causes the industry to be viewed as high-risk. Multiple chargebacks can be devasting for a business and can cause a merchant’s account to be closed and/or have the account placed on the TMF/MATCH list.
Chargebacks can occur for multiple reasons. A customer may not recognize the company name on their credit card statement and contact their bank to dispute the charge as fraudulent. If the customer is unhappy with the product or it is not received in a timely manner, the customer may once again dispute the charge instead of requesting a refund from the merchant.
These situations can usually be easily prevented. If the merchant provides clear and easy to use refund polices, detailed billing descriptions and shipping information posted on their website multiple times, many customers will reach out to the merchant instead of issuing a chargeback.
In other instances, a minor may purchase tobacco illegally by using false information and/or an adult’s credit card without the adult’s knowledge or consent. This situation most often results in a fraudulent chargeback against the merchant’s account. However, it can cause even greater issues for the merchant. In extreme situations, legal action may be taken against the merchant.
To help prevent minors from illegally purchasing tobacco online, we highly recommend all tobacco and cigar merchants use an age verification tool that confirms the customer is of legal age to purchase the product. These systems greatly reduce the chances of fraudulent purchases by minors.
With all of the obstacles involved in running a successful online tobacco business, Performance Card Service understands that obtaining a merchant account should not be one of them. We have been experts in the high-risk merchant account industry for over 20 years and have relationships with numerous processors and banks that support the tobacco industry. Since we do not work with just one processor, we may be able to make you several offers for payment processing. Contact us today so one of our experienced staff members can begin discussing all of the available payment processing solutions for your business.