Laws Governing the Cultivation of Tobacco
Federal law permits tobacco farming in licensed states for growers typically holding a tobacco marketing quota and price support loan agreement with the government. Individual states then regulate the tobacco industry within their boundaries, with some requiring no permits and licenses. Other states require significant oversight before allowing individuals to exceed the federal limits or engage in commercial sales of the tobacco products. However, most states require either permits to engage in the tobacco industry or licenses to operate a tobacco business. The federal Tobacco Quota Reform Legislation of 2004, introduced as the Fair and Equitable Tobacco Reform Act of 2004 and signed in 2004, ended the federal Tobacco Quota System that established limits on the number of acres of tobacco crops growers could cultivate . It replaced the longstanding system with a transitional buyout plan for traditional U.S. growers to surrender their quotas and give up the financial support that comes with them. Growers who accepted the buyouts then were given access to credit to purchase equipment and for other financial needs related to this transition. If you want to get into tobacco farming, contact your local chapter of the National Tobacco Growers Association to determine whether you qualify for free membership. Getting information directly from the federal government requires that you provide a federal employer identification number, which individual growers might not have, along with other business-oriented specifics that can be awkward at the beginning on your tobacco growing journey.
Federal Tobacco Growing Laws
The federal government maintains certain guidelines and restrictions on the growing of tobacco, its precursor plant. The U.S. Department of Licensing and the Internal Revenue Service (IRS) are the two federal entities that control the growth, distribution and sale of tobacco.
The IRS requires all tobacco producers to obtain a permit to grow tobacco. The Tobacco Enforcement Division of the IRS issues permits only to tobacco producers who present documentation demonstrating their ability to comply with the standards in Title 26, § 40.61 of the Code of Federal Regulations. Requirements for tobacco producer permits include the following:
Penalties for non-compliance with the guidelines for permits for tobacco producers per Title 26, § 40.2051 depend on the severity of the violation. They generally include fines and confiscation of goods produced by the violating party.
State Laws Governing Tobacco Cultivation
Tobacco growing regulations can vary significantly from one state to another. Regulations at the state level may differ from federal guidelines. Virginia, for example, currently has a law that prohibits new tobacco farming in only one county. In 2002, the state enacted legislation to ban the cultivation of tobacco in three counties. However, this was later amended to allow two of those counties to continue growing the plant.
Similarly, in Pennsylvania, it is illegal to plant, cultivate, harvest, or store tobacco without a license, a move they made in response to health concerns. Any unlicensed grower caught growing tobacco can be fined not more than $300 for each violation. The state, however, does allow growing up to 100 plants for personal use. Texas has a similar restriction with no more than 200 plants for personal use in a greenhouse.
In Wisconsin, it is illegal to plant more than 50 plants on property not owned by the grower. Most recently, the state placed a ban in Adams County in March 2018 after health officials stated the local economy could no longer support the struggling tobacco industry. A state official said in a press conference, "Adams County does not have distributing facilities, food processing, or any other supportive businesses where the farmers could sell their products or have them processed." Federal and state laws can differ, but these regulations in some states leave little room for legal growth.
Montana makes it illegal to plant, grow, or harvest or store plants inside or outside of a residential structure. In 2010, California passed the California Clean Indoor Air Act, which prohibits a person from planting, cultivating, or harvesting tobacco within 20 feet of a public place. North Dakota bans all outdoor growing in certain areas of the state.
Kentucky allows for the growing, planting, cultivating, and similar crops but has set strict guidelines. With Kentucky laws, growers must follow a strict protocol on seed sourcing, crop planting and harvesting, securing storage, and reporting results.
Several states bar convicted felons from obtaining farm or agriculture licenses.
Tobacco Tax Policy Effects
Another aspect that small-scale tobacco growers should be aware of is how the taxation of tobacco figures in. There are special rules that apply to small growers of tobacco. Because of the fact that many small growers do not have a stable source of income and therefore do not meet the criteria for a regular investor taxpayer status, taxpayers who grow less than 20,000 plants for commercial use are automatically considered to be "farmers" within the meaning of the Income Tax Assessment Act. This means that they are not subject to excess plant allocation and that the "other crop deduction" which applies for tobacco is replaced by applying the proper deductions which apply to farmers in calculating the amount of the allowable deductions.
There is also an obligation to obtain "specific no grow" permits from the Department of Agriculture to ensure that the specific quota is not exceeded when applying for the huge number of permits that are necessary to be able to grow tobacco. If these permits are not obtained there is a deeming provision which means that the excess plants are illegal plants. A person will not be able to sell their tobacco on the market if they have excessive illegal plants.
It is important that small growers be aware of and fully understand their tax obligations, including the possibility that the amount of taxation imposed on tobacco may eventually change.
Commercial vs. Personal Tobacco Cultivation
The difference between growing tobacco for personal use versus commercial distribution cannot be more troublingly far apart in the United States’ legal system. A grower who sells their plants or produce, either directly or indirectly, can be found guilty of violating the Controlled Substances Act, 21 U.S.C. § 801 et seq. and criminally prosecuted accordingly. This means that the grower can be fined and/or incarcerated for the unlawful manufacturing of cigars or cigarettes, which as mere possession is not a violation. If the authorities were to show up at your house expecting to take your tomatoes, but instead find cigars or cigarettes, you could possibly find yourself behind bars because your state permits personal cultivation for your own use. Economically speaking, the delta between tomatoes and tobacco is significant enough that the government is not going to permit you to plant tobacco to avoid the local farmer’s market prices. Should any governmental authority , such as the FDA, ATF, or otherwise, decide to come snooping around to regulate your activity then your ability to grow legally comes into real question.
While the government has no qualm about regulating the distribution of a tobacco product, it would also like for the underserved elements of a population to be capable of growing their own produce under certain circumstances as long as the right regulations are put in place. The "right" regulations differ, however, state to state with no uniformity. As such, personal cultivation of tobacco varies from state to state about whether it is lawful, and in what manner, and if "seed to sale" tracking is required at any point. As federal law supersedes state law under the Supremacy Clause of the Constitution, the states can only attempt to regulate the manufacturer or distributor of a tobacco product, not the personal use of a single seed, though some states have gone outside the federal regulation.
Tobacco Farmer Permits and Licenses
The permits or licenses required to legally and lawfully grow and sell tobacco will vary from jurisdiction-to-jurisdiction. In the the United States, cultivating tobacco is subject to regulation by both the U.S. Department of Justice Alcohol and Tobacco Tax and Trade Bureau (TTB) and the Internal Revenue Service. As a household name in the tobacco industry, Philip Morris International recently published a Fact Sheet setting out the current tax system that governs U.S. domestic tobacco cultivation and production.
In short, ". . . unlike all of its similar farming counterparts, the domestic cultivation of tobacco requires a permit obtained from the TTB of the U.S. Department of Treasury and/or the Internal Revenue Service. Tobacco must be cultivated, harvested, processed, treated, stored, sold and distributed by a limited number of legal, registered entities and individuals who are licensed or otherwise authorized to engage in tobacco operations. In addition, domestic tobacco farmers must adhere to a tax collection system when they first grow and then harvest and remove their crops from their crop fields. The IRS assesses an excise tax on domestic-grown tobacco, including leaf, stem and scrap, although, over the past couple of years, legislators have taken steps to eliminate tobacco excise taxes. And after tobacco farmers pay this excise tax to federal, state and local authorities, they also become responsible for the collection and remittance of sales tax on any and all sales of their products."
Sustainability Issues in Tobacco Cultivation
The environmental impact of all crops, including tobacco, should always be considered when planning a new venture. Environmental solutions to the issue of tobacco include: maintaining environmental flow to preserve water quality; establishing buffer zones to prevent fertilizer run off; implementing bio energy projects to utilize tobacco waste; encouraging crop rotation and diverse planting; and understanding the issues and addressing them with an eye to maintaining a sustainable business model. There is an interdependence between agricultural activities that take into account the environment and agricultural production. Any new or expanding tobacco industry should take into account all related environmental issues. It should also consider the use of non-toxic pest control, the safe management of agricultural waste, using pesticides that have the least possible impact on the environment and human health, and the use of efficient energy sources and methods to minimize greenhouse gas emissions. In the interest of sustainability in the long term, incorporating waste reduction and recycling into its operations should be considered. For example, employing a program to recycle plastic and tire waste has been found to address the waste issues while creating additional jobs and income, which is an important consideration for any new venture or expansion. It is advised that before commencing any new venture, or before establishing new operations, that the environmental impact be carefully researched and considered with regard to the soil, water and air quality and also addressed in the target community to ensure compliance with legal obligations and the interests of the community.
Future of Tobacco Cultivation Laws
With the growing global concern over the health risks associated with tobacco products, more and more changes are expected at both a national and a regional level with how the tobacco industry is regulated.
Since 2005, the World Health Organization (WHO) Framework Convention on Tobacco Control 2003 (WHO FCTC) has acted as the only legally binding treaty negotiated within the WHO and sets out a principled framework that assists countries when implementing tobacco control policies. More than 180 countries are now Parties to the WHO FCTC which is being used extensively as the basis for tobacco control legislation and policy in those countries. Currently, there are 7 countries at the forefront of the Framework in Africa – Botswana, Lesotho, Malawi, Mozambique, South Africa, Swaziland and Zambia . It is expected that the number of parties in the WHO FCTC will continue to increase, considering that in many countries, tobacco growing is more common than tobacco manufacturing.
Keeping abreast of changing domestic legislation and the developments of international treaties or conventions such as the WHO FCTC is necessary for all tobacco growers and manufacturers. Regulatory changes, both at the local and international level can have both a direct impact on the manner in which a local grower engages the export market, as well as indirect effects on the value of tobacco products internationally.
It is therefore critical for tobacco growers to continue monitoring international developments and to ensure full compliance with any applicable legislation which may be put in place by importing countries.
