Azeem Patel, owner of J&C Bargain Stores in Leyland, and sales assistant Ian Whittle, were prosecuted after officials from Lancashire Trading Standards discovered hand rolling tobacco in a locked metal tin behind the counter.
A further 19 packs of cigarettes were also found in a cotton bag on the floor behind the counter.
Patel admitted two offences which related to three test purchases and two seizures of illicit tobacco from the store between November 2017 and September 2019.
He received two months imprisonment, suspended for two years, and must pay £814.53 costs.
Whittle, 26, of Brook Close, Leyland, admitted two offences of aiding and abetting his employer in relation to the two seizures from the shop.
He was previously given a 12 month conditional discharge, and was ordered to pay a £20 victim surcharge and £305 towards his costs.
At an earlier hearing, Claire Box, prosecuting on behalf of Lancashire Trading Standards, said three test purchases had taken place between November 2017 and January 2018.
Each time, the shop sold illicit cigarettes which was not in the required standardised packaging.
After the third, Trading Standards officers inspected the shop, with Ian Whittle present, and seized the illicit products.
Both men refused to be interviewed.
On September 6, 2018, officers returned to inspect the shop and found acardboard box in the back store room containing 10 packets of cigarettes and six packets of hand rolling tobacco, all in non-standardised packaging.
She added: “The regulations aim to make smoking less attractive to adults and children but as illicit packets tend to be found to be sold at around half the price of legitimate packets this makes the habit more accessible.
“ The lower price also makes it difficult for law abiding retailers to compete and deprives the taxman of duty and VAT of over £6 per pack of illicit cigarettes and £11 per pack of tobacco sold.”