Texas is one of the friendlier states for tobacco retailers, but opening your store and getting the right license (and permits) is still intimidating.
The licenses and permits you need depend on which type of tobacco store you want to open. Here are some things to keep in mind:
- Texas has no statewide smoking ban, but municipal rules vary widely.
- Cigar lounges and tobacco shops have different compliance considerations than general retailers.
- Permit fees are reasonable ($180 for new, $100 for renewal), but violations carry real consequences, including hefty fines, store closure, and even jail time.
- A recent update classifies e-cigarettes as tobacco products under Texas law.
Getting your license is relatively straightforward, but staying compliant — especially for cigar lounges allowing on-premise smoking — requires you to understand local rules and keep meticulous records.
This post covers all things related to tobacco licensing in Texas. We’ll discuss specific state regulations, how to get your license, and how to stay compliant.
Types of Texas Tobacco Permits
Historically, Texas maintained relatively few restrictions on tobacco sales for much of the 20th century, other than tax regulations.
However, recognizing tobacco’s health hazards, from cancer to cardiovascular disease, the state implemented stricter youth access prevention laws starting in the 1990s.
Texas now actively regulates tobacco retailing to discourage underage usage and addiction. And you need different permits depending on how you operate your tobacco business.
A Retailer's Tobacco Permit is what most cigar shops and lounges need. If you sell tobacco products directly to consumers, this is your permit. The cost is $180 for a new permit and $100 for renewal every two years.
A Distributor's Permit is required if you buy tobacco products directly from manufacturers or out-of-state suppliers for resale. Premium cigar shops receiving direct shipments from cigar manufacturers may need this permit in addition to their retailer permit.
A Wholesaler's Permit applies to businesses that sell tobacco products to other retailers rather than to consumers.
Selling tobacco without a valid permit is a Class C misdemeanor in Texas, carrying fines up to $500 per offense. For a busy tobacco shop, that can add up fast if an inspector catches you operating with an expired permit.
One important detail: All Texas tobacco permits expire on May 31 of even-numbered years. That means whether you got your permit in January 2024 or November 2025, your renewal deadline is the same: May 31, 2026. Miss that deadline, and you cannot legally sell tobacco until your renewal is processed.
How To Apply for a Texas Tobacco License
Before you apply, you must have a Texas Sales Tax Permit. Texas won't issue a tobacco permit to a business that isn't registered for sales tax. If you're starting a new business, apply for your sales tax permit first.
To apply for your tobacco permit:
- Go to the Texas Comptroller of Public Accounts website.
- Complete the online application (or submit Form AP-175 by mail).
- Pay the $180 permit fee.
- Wait for processing — typically two to four weeks.
- Once approved, display your permit prominently in your store.
Texas law requires you to display your tobacco permit where customers can see it. Inspectors will check for this, and failure to display your permit is a separate violation.
Plan ahead: You can’t sell any tobacco products until your permit is approved and physically displayed. If you're opening a new cigar shop, build permit processing time into your timeline.
Indoor Smoking Laws: Where Cigar Lounges Differ
As mentioned earlier, there’s no statewide smoking ban in the Lone Star State. Unlike California, New York, or most other large states, Texas leaves smoking regulations to individual cities and counties. This is good news for cigar lounges, but it means you need to know your local rules, not just state law.
Houston
Houston's smoke-free ordinance bans smoking in most enclosed workplaces and public spaces. However, cigar bars and tobacco retail establishments can qualify for an exemption if they meet specific criteria:
- At least 60% of gross revenue must come from tobacco product sales.
- The establishment must be freestanding or have a separate ventilation system.
- Proper signage must be posted.
- Employees must acknowledge in writing that they're working in a smoking environment.
If your Houston cigar lounge generates 55% of revenue from tobacco and 45% from drinks and merchandise, you don't qualify for the exemption. You'd need to either increase tobacco sales or prohibit smoking indoors.
Related Read: 5 Best Commercial Cigar Lounge Ventilation Systems
Austin
Austin's smoking ordinance similarly exempts tobacco retail establishments, but the requirements are strict. Your business must make the majority of its revenue from tobacco sales, and you must maintain documentation to prove this.
Dallas
Dallas exempts tobacco retail establishments from its smoke-free ordinance, allowing indoor smoking in cigar shops and lounges that primarily sell tobacco products. The city defines "tobacco retail establishment" as a business that makes more than 50% of its revenue from tobacco product sales.
San Antonio
San Antonio's smoke-free ordinance exempts cigar bars and tobacco retailers. To qualify, your establishment must derive a significant majority of revenue from tobacco sales and be primarily in the business of selling tobacco products.
Why This Matters for Your Business
If your cigar lounge loses its smoking exemption, you’ll be forced to shut up shop. Customers come to you to smoke premium cigars in a comfortable environment. Even if you sell the best cigars, they’ll go elsewhere to enjoy their hobby.
Record-keeping is crucial. To maintain your smoking exemption, you need to:
- Track tobacco vs. non-tobacco sales as a percentage of total revenue.
- Generate reports showing you meet the threshold (60%, 50%, or whatever your city requires).
- Document your ventilation system compliance.
- Keep employee acknowledgment forms on file.
- Have documentation ready if your exemption is ever challenged.
A municipal inspector can ask for this documentation at any time. If you can't prove your tobacco revenue percentage, you risk losing your exemption.
Age Verification Requirements
Texas law requires anyone purchasing tobacco products to be at least 21 years old. This applies to all tobacco products, including cigars, cigarettes, pipe tobacco, and — as of recent regulatory updates — e-cigarettes and vaping products.
You need to verify age for every sale. Acceptable forms of identification include:
- Texas driver's license
- Texas identification card
- U.S. passport
- U.S. military ID
- Any other government-issued photo ID showing date of birth
Texas takes this seriously. “They looked old enough” is not a valid excuse. You’ll incur fines and penalties for failing to comply, including:
- First offense: Fine up to $500
- Second offense within 12 months: Fine up to $500, possible permit suspension
- Third offense within 24 months: Permit revocation
In other words, take it seriously. A single offense incurs a fine, and two offenses within two years could mean the loss of your business.
Related Read: Preventing Underage Tobacco Sales: 5 Best Practices
The Case for Logging Every ID Check
While it’s not a legal requirement to keep ID logs, it's helpful if (or when) you get caught out. Say a compliance officer conducts a sting operation in your store, and your employee sells to an underage buyer. Your strongest defense is documentation.
When you can prove that your employee followed your verification procedures and the ID appeared valid, you have a much stronger case than "we always check IDs."
Digital ID scanning creates an automatic audit trail. Every scan is logged with the transaction ID, timestamp, and employee who processed the sale. If a violation occurs, you have documentation showing your verification practices.
Pro tip: An identification scanner is your best friend. The best models integrate with your point of sale (POS) system for record keeping and alerts.
Tax Compliance
Compared to other states, Texas tobacco taxes are relatively straightforward. There are nuances, though, especially for cigar retailers.
Texas taxes cigars on a tiered basis, ranging from 1¢ to 15¢ per 10 cigars, depending on the manufacturer's list price. Even if you sell premium cigars, tax is capped at 15¢ per cigar.
This is one area where Texas is genuinely favorable to cigar retailers. Other states, like New York, charge a percentage of the wholesale price with no limit, which makes premium cigars much more expensive.
Other taxes include:
- Cigarettes: Texas taxes cigarettes at $1.41 per pack of 20. Cigarettes require tax stamps, which must be affixed before sale.
- Pipe tobacco, chewing tobacco, and snuff: These products are taxed by weight — $1.22 per ounce. The heavier the product, the more tax you pay.
Stay up to date on all things tax by checking the Texas Comptroller's Cigar and Tobacco Products Tax page regularly.
Reporting Requirements
Texas tobacco retailers must:
- File monthly reports with the Texas Comptroller.
- Pay taxes due by the 25th of the month following the reporting period.
- Keep records for at least 4 years.
Missing the 25th of the month deadline results in penalties and interest. Repeated late payments can trigger audits and additional scrutiny.
Inventory and Tax Reconciliation
For cigar shops managing hundreds or thousands of SKUs, tracking inventory against tax-paid purchases is essential. The Comptroller can audit your records going back four years. If your inventory doesn't reconcile with your purchase and sales records, you'll have problems.
How Your POS Supports Compliance
Getting your license is step one. The real challenge is staying compliant day after day, sale after sale, and audit after audit. Luckily, a tobacco-specific POS system has compliance features baked in.
Cigars POS includes features built specifically for tobacco compliance, like:
- Age verification: Prove that you check IDs. With Cigars POS, receipt records show that ID was checked for each transaction.
- Revenue tracking: Report by category to track tobacco vs. non-tobacco sales for smoking exemption documentation.
- Tax reporting: Run sales reports to support your monthly tax filings.
- Inventory management: Organize products by category and tags to track your tobacco inventory.
Generic POS systems won’t consider these as essential features. To find out more about cigar-specific POS features, check out our guide: The Complete Guide to Cigar Lounge POS Systems: 12 Must-Have Features.
Common Compliance Mistakes
Even experienced tobacco retailers get tripped up by these issues:
- Forgetting biennial renewal: Your permit expires on May 31 of even-numbered years, regardless of when you got it. Set a reminder for April.
- Not tracking the tobacco revenue percentage: If you allow indoor smoking under a municipal exemption, you need documentation. "We mostly sell tobacco" won't satisfy an inspector.
- Missing the monthly tax deadline: Tobacco taxes are due by the 25th of the following month. Late payments trigger penalties and increase audit risks.
- Incomplete age-verification documentation: You checked the ID, but can you prove it? Digital logging protects you, but memory doesn't.
- Assuming state rules are the only rules: Texas has no statewide smoking ban, but your city might. Houston rules differ from those in Dallas and San Antonio.
- Not understanding the e-cigarette classification: If you sell vapes, they're now considered tobacco products. You must verify IDs, and the same permits and compliance requirements apply.
Create a checklist for your tobacco store to help you stay compliant.
Getting Your Texas Tobacco License and Stay Compliant
Texas makes tobacco licensing straightforward. The fees are reasonable, the application process is online, and the state doesn't impose a smoking ban that would kill the cigar lounge business model.
The hard part is everything after. Municipal smoking ordinances vary city by city, tax reporting is monthly, and age verification must be consistent. And if you operate a lounge, you need to prove that you qualify for your indoor smoking exemption.
Cigars POS is built for tobacco retailers who need to get licensed and stay compliant. From age-verification logging and tax reporting to revenue tracking and humidor inventory management — it’s all in one system designed for how cigar shops and lounges actually operate.
Want to see how Cigars POS keeps you compliant in Texas? Schedule a demo today.
