InDepth 11B Licensing of tobacco sellers

Some businesses sell products or services that pose risks to the public. A government may require such businesses to obtain licenses so that it can maintain some level of oversight over the number, type and location of sellers and to facilitate compliance with any applicable laws.¹

Tobacco products are addictive and cause the premature death of more than half of long-term consumers.² More than 20,000 Australians die prematurely each year due to smoking, and tobacco use is estimated to have cost the Australian economy more than $136.9b in 2015-16.³ Tobacco licensing can help ensure that businesses that sell tobacco products are complying with all relevant laws, and can facilitate communication between health authorities and retailers.^{1, 4-6}

11B.1 Types of licences

Licencing can take one of several forms,⁶ for example:

Notification/registration: Notification/registration requires businesses to provide information about themselves to a specified agency. However, registration does not impose restrictions or conditions on the business.

Accreditation/certification: Accreditation schemes are essentially non-mandatory licences. Businesses must comply with minimum standards in order to be accredited, but lack of accreditation does not prevent them from partaking in the business activity.

Negative licensing: Negative licencing systems allow businesses to operate without a licence or permit, but they face bans if they seriously breach required standards. These systems are reactive rather than proactive, so they rely on external parties to report breaches. As no fees are paid to obtain a licence, they also do not raise money for education and monitoring programs.

Positive licensing: Positive licencing requires prior approval for conducting business activities, and adherence to minimum standards.

Public health agencies believe that positive licensing is generally the most appropriate form of licencing for those involved in sales of tobacco products.^{1, 4-6}

Governments in many parts of the world have instituted licenses of businesses involved in the tobacco trade, from tobacco farmers, commodity brokers, warehouse operators, importers, wholesalers and retailers.

11B.2 Current licensing requirements in Australia

Any business seeking to grow or deal in tobacco seed, plant or leaf or to manufacture tobacco goods in Australia would be required to hold a licence.⁷ Any business manufacturing tobacco products in Australia would be required to pay excise duty on those products—see Chapter 13, Section 13.2. To produce, manufacture or store excisable tobacco products without an appropriate licence would be an offence under the Excise Act 1901 and criminal penalties could apply.⁷ Permits are required to import cigarettes, smoking tobacco and waterpipe tobacco for sales in Australia.⁸ In some Australian states, wholesalers and retailers must also be licensed.

11B.2.1 Growers and dealers

There has been no tobacco grown in Australia since the early 2000s (see Section 10.1). As of November 2021, no-one in Australia has a licence to grow or deal in tobacco seed, plant or leaf, either for commercial sale or personal use. The Australian Taxation Office advises that such licences would be subject to strict criteria and any applications would be judged taking into account

• physical security of the premises
• protection of the revenue
• whether there's a market for the goods.⁷

11B2.2 Manufacturers

Since 2015, there has been no legal tobacco manufacturing occurring in Australia. A manufacturer licence for tobacco, were one to be granted, would authorise a business to:

• manufacture or produce the excisable tobacco goods specified in the licence
• store products that would be used in the manufacture or production of the excisable tobacco goods.⁷

11B.2.3 Importers

Importation of tobacco in Australia is strictly controlled through the issuing of permits.

Since 1 July 2019, regulation 4DA of the  Customs (Prohibited Imports) Regulations 1956  prohibits the import of certain tobacco products into Australia unless permission has been granted prior to importation or an exemption applies.

The tobacco products that require import permission include:

• cigarettes
• shisha/molasses tobacco
• loose leaf tobacco for use in pipes or roll-your-own cigarettes

Prospective importers who do not have an Australian Business Number (ABN) or an Australian Company Number (ACN) may need to apply for a Customs Client ID (CCID) either through a licenced customs broker or by completing  Form B319 Registering as a client in the Integrated Cargo System. A CCID allows the Department of Home Affairs to be able to identify importers and their electronic communications through the Integrated Cargo System (ICS). This includes import declarations.⁸ Conditions include the following:

• tobacco products may only be imported through air or sea cargo and cannot be imported through international mail (post)
• tobacco products imported for personal use must not be sold, distributed, supplied or exported
• where commercial imports of tobacco products are to be sold within Australia, the sale of the tobacco products must comply with the  Tobacco Plain Packaging Act 2011

The prohibition on imports does not apply to the following goods:

• unmanufactured tobacco and tobacco refuse specified in regulation 4D of the  Customs (Prohibited Imports) Regulations 1956
• chewing tobacco and snuffs intended for oral use
• cigars
• tobacco products imported by passengers or crew of a ship or aircraft that are within the  duty-free allowance.⁸

The following tobacco products are approved for importation into Australia without the need to obtain a permit:

• above the duty-free allowance and imported by passengers or crew of a ship or aircraft arriving in Australia if the person is at least 18 years of age. The products must be declared to the Australian Border Force on entry into Australia and duty paid on importation;
• imported as part of the Unaccompanied Personal Effects (UPE) by passengers or crew of a ship or aircraft arriving in Australia if the person is at least 18 years of age. The products must be correctly declared and duty paid on entry;
• imported for the purposes of transhipment to another country. The products must be correctly documented on the relevant cargo report and must not leave customs control.⁸

11B.2.4 Excise equivalent goods warehouse

Excise equivalent goods are imported alcohol, tobacco and fuel that—had they been produced or manufactured in Australia—would have been subject to excise duty.

Businesses are required to apply to the Australian Taxation Office for customs warehouse licences if they:

• intend to store imported tobacco products in a warehouse or
• are an operator of one or more warehouses and at least one of those warehouses stores tobacco (or any other excise equivalent good).⁹

Duty free stores or warehouses exclusively used to supply tobacco products to aircrafts’ stores or ships’ stores are also subject to customs regulations^{10, 11} and may also need to be licensed.

11B.2.5 Wholesalers and retailers

In Australia, tobacco retailers require a positive licence in all states except New South Wales, Queensland, and Victoria (see Table 11B.2). Wholesalers must also be licensed in the Australian Capital Territory, the Northern Territory and Western Australia.  Some states have also included e-cigarettes in their tobacco retail licencing schemes, or introduced separate restrictions regarding the sale of e-cigarettes—for a comprehensive overview of the legal status of e-cigarettes in Australia, see Section 18B.13).

✓ = required ✗= not required

11B.3 Purpose and benefits of licensing

Licensing has several benefits, as outlined in each of the sub-sections bellow.  Requiring a license for tobacco retailers lets governments know who is selling tobacco products in their jurisdiction and allows them to communicate efficiently with those retailers.  It also enables them to enact and enforce laws that prevent retailers from promoting tobacco products in their community, particularly in ways that may make it more difficult for people trying to quit or which might trigger those who have already quit to relapse. Most importantly, it allows authorities to enforce laws that help to prevent young people from starting to use tobacco products in the first place. Licensing fees can cover the costs both of administering the licensing program and of enforcing those policies. A license scheme could potentially also assist governments to implement policies that would increase the effectiveness of tobacco control legislation through zoning or establishment of categories of retailer types. Licensing provides governments with a powerful tool for reducing illicit tobacco trade.

11B.3.1 Licensing enables effective communication with all businesses selling tobacco

Licencing provides health departments and local authorities with the names and addresses of sellers. It allows governments to provide accurate and relevant information to retailers regarding their legal obligations. Because licensing occurs every year, retailers can update their contact details and be informed of any changes in laws, and their subsequent obligations.⁶ The fees collected from retailers can be used to employ staff to make sure that every business that has been licensed pays their annual fee and updates their contact details.

A comprehensive audit of 1,739 retailers was conducted in 2013 in New South Wales, a state which requires registration of retailers but which does not require retailers to obtain a license or pay fees. The audit identified one unlisted retailer selling tobacco products for every 12.6 listed tobacco retailers.¹² Unlike the simple registration system in place in NSW, a full licensing system could collect fees to finance regular auditing of mailing lists to ensure that all operators selling tobacco are actually licensed and are subject to regular compliance monitoring.

11B.3.2 Licensing facilitates compliance monitoring and enforcement of public health laws relating to the sale of tobacco products

It is an offence in every state and territory in Australia to sell tobacco products or electronic cigarettes to teenagers—see Chapter 5, Section 5.21. Retailers are prohibited from all forms of tobacco advertising, including the display of tobacco products—see Chapter 11, Sections 11.9.2 and 11.9.3 Apart from products dispensed by pharmacists to customers holding a valid prescription, electronic cigarettes and vaping products containing nicotine are also not permitted to be sold in stores in Australia—See Section 18.13.

Licence fees paid by retailers can provide revenue to fund authorities to investigate complaints, to undertake inspections, and to ensure that retailers are adhering to relevant laws, such as not selling to minors.¹³ Conditions can be placed on licenses so that breaches of important laws attract not just fines, but also the revocation of authority to sell.⁶

Strong tobacco retail licensing has been demonstrated to reduce rates of initiation of both tobacco and e-cigarettes among both teenagers and young adults in the United States.¹⁴

11B.3.3 Licensing has the potential to further increase the effectiveness of public health laws discouraging tobacco use

Preventing young people from taking up smoking is a major objective of tobacco control legislation. Greater visibility¹⁵ and availability of tobacco products is associated with increased uptake by young people.¹⁶ Retail licensing laws could increase the effectiveness of legislation banning promotion and display at point of sale by imposing criteria for the granting of new licences that help to further reduce the opportunities for young people to purchase tobacco products. For instance, licensing authorities could determine that new tobacco licenses would no longer be issued to retailers wishing to start selling tobacco products if they were located close to schools or skate-parks. Similarly, licenses might not be available to operators of sporting clubs, tenpin bowling clubs or cinemas or other venues commonly frequented by young people without parental supervision.

Supporting people who want to quit smoking is the other major objective of tobacco control legislation. Tobacco smoking is highly addictive (see Chapter 6), and the majority of smokers who try to quit will fail on any single attempt (see Chapter 7, Section 7.7). Before the display of tobacco products was banned at point of sale in Australia, many people who had recently quit made unplanned purchases of cigarettes after seeing the large display walls of tobacco products that were ubiquitous in supermarkets and convenience stores.^17-19 Licence conditions could further reduce commercial inducements of smokers to keep smoking by requiring supermarkets selling tobacco products to place counters away from the main checkouts, or by prohibiting the sale of cigarettes where alcohol is served—a situation where many recent ex-smokers are known to be at particularly high risk of relapse.^20-22

The prevalence of smoking is considerably higher in more disadvantaged areas of Australia—see Chapter 9, Sections 9.1 and 9.2. Across stores in 122 postcodes in metropolitan and regional areas, study auditors in NSW found that retailers in low-socioeconomic status (SES) areas were significantly more likely than those in less disadvantaged areas to be unlisted and to breach in-store retailing laws.¹² Licensing of retailers could contribute to reducing tobacco related disparities by ensuring that retailers in disadvantaged areas comply with laws that aim to reduce smoking uptake and relapse. Helping to reduce the high levels of smoking in highly disadvantaged areas could help to reduce financial stress and the intergenerational transfer of poverty among some of Australia’s most marginalised communities.

11B.3.4 Licensing to reduce illicit tobacco sales

Increasing the taxes on tobacco products has been described by The World Bank as the single most effective tool for governments to reduce the use of tobacco products.²³ Evasion of excise duty on tobacco products therefore has the potential to seriously undermine public health. The World Health Organization’s Framework Convention on Tobacco Control to which Australia is a Party²⁴ requires Parties to the Convention to 

1. 1. monitor and collect data on cross-border trade in tobacco products, including illicit trade, and exchange information among customs, tax and other authorities, as appropriate, and in accordance with national law and relevant applicable bilateral or multilateral agreements;
   2. enact or strengthen legislation, with appropriate penalties and remedies, against illicit trade in tobacco products, including counterfeit and contraband cigarettes;
   3. take appropriate steps to ensure that all confiscated manufacturing equipment, counterfeit and contraband cigarettes and other tobacco products are destroyed, using environmentally-friendly methods where feasible, or disposed of in accordance with national law;
   4. adopt and implement measures to monitor, document and control the storage and distribution of tobacco products held or moving under suspension of taxes or duties within its jurisdiction; and
   5. adopt measures as appropriate to enable the confiscation of proceeds derived from the illicit trade in tobacco products. (Article 15, Clause 4)

Article 15, Clause 5 calls on Parties to

 “… endeavour to adopt and implement further measures including licensing, were appropriate, to control or regulate the production and distribution of tobacco products in order to prevent illicit trade.

The World Bank and the International Monetary Fund also endorse licensing as a means of reducing evasion of excise duty on tobacco.^{25, 26} Licensing is a major component of the International Protocol to Eliminate Illicit Trade in Tobacco Products which has been developed by Parties to the WHO Framework Convention on Tobacco Control.²⁷

11B.4 International precedents for licensing provisions

Many sub-national jurisdictions internationally require some form of tobacco retailer licencing. This includes the majority of states in the United States, most Canadian provinces, Scotland and Ireland, and many jurisdictions in India and Pakistan.²⁸ The nations of France, Finland, Iceland and Hungary also require tobacco retailers to be licensed.²⁸

As of June 30, 2021, 29 US states as well as the District of Columbia, the Northern Mariana Islands, Palau, and the US Virgin Islands require retailers to have a license to sell either conventional tobacco products or e-cigarettes over the counter.⁵ A further nine states and three US territories require retailers to have a license to sell cigarettes and other non-cigarette tobacco products but not e-cigarettes.⁵ All but four states that require retailers to have a license require them to pay a fee. License fees range from $5 in Montana to $800 in Connecticut.⁵

Thirty states, American Samoa, the District of Columbia, the Northern Mariana Islands and Puerto Rico allow licenses to either be suspended or revoked if a retailer violates the tobacco retailer licensing requirements; 23 states, the District of Columbia, and the Northern Mariana Islands allow licenses to be either suspended or revoked for violating the e-cigarette retailer licensing requirements; and 18 states, American Samoa, the District of Columbia, Guam, the Northern Mariana Islands, and the US Virgin Islands allow these penalties if retailers sell conventional tobacco products or e-cigarettes to youth.⁵

In January 2015, Newburgh, New York adopted a new law mandating that stores selling tobacco products will need a permit and will not be allowed to sell those items if they are within 1000 feet of a school.²⁹ The Californian city of El Cerrito also enacted a licensing program in 2015 that bans sales of flavoured tobaccos, and limits new tobacco retailers at locations within 1000 feet of existing retailers and 500 feet from schools, recreation centres, libraries and parks.^{30, 31} After six years of public advocacy by the Youth Leadership Institute to reduce disparities in tobacco retail outlet density, in 2014, San Francisco debated a proposal to cap the number of tobacco permits to 45 permits per legislative district, which would include retailers of e-cigarettes.³² San Francisco’s Tobacco Retail Density Policy came into effect on January 18, 2015.³³

Several European countries have also implemented tobacco retailer licensing schemes, with a range of objectives in mind. In Finland, changes in tobacco regulations in 2010 aimed primarily to end the use of tobacco, where less than 5% of the population use tobacco or nicotine products daily by 2030.³⁴ In Norway, points of sale tobacco products must be recorded in a national registry, in order to facilitate official oversight.³⁵

In Islamabad, the capital of Pakistan, tobacco retailers must obtain tobacco selling licences. Licensed retailers are prohibited from selling tobacco products to people under 18, from selling loose cigarettes, from advertising tobacco products, and from setting up a tobacco selling point within 50 yards of an educational institution.³⁶

References

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36. Junaidi I. Tobacco retailers have to obtain licences within a week. Dawn 2015. Available from: http://www.dawn.com/news/1218864/tobacco-retailers-have-to-obtain-licences-within-a-week