High cigarette taxes fuel black market, says report.

Dec.08.2022
High cigarette taxes fuel black market, says report.
High cigarette taxes create black and grey markets, with illegal sales at 53.5% in New York.

A new report from the Tax Foundation states that excessively high cigarette taxes have resulted in a significant amount of tobacco products flooding the black and gray markets of high-tax states in the US, sourced from low-tax states or foreign countries.


According to estimates, New York has the highest number of illegal inbound cigarette smuggling activities, with 53.5% of cigarettes consumed in the state in 2020 originating from smuggled sources. Following closely behind are California (44.8%), New Mexico (45.5%), Washington (41.5%), and Minnesota (34.8%).


New Hampshire has the highest net outmigration of smuggled goods among states, accounting for 52.4% of consumption. This may be due to comparatively low tax rates and its proximity to high-tax states in the northeastern United States. Following closely behind are Indiana (35.6%), Virginia (27.6%), Idaho (25.8%), Wyoming (24.4%), and North Dakota (18.6%).


In the span of 2019 to 2020, Illinois and New Mexico substantially increased their cigarette tax rates. As a result, both states have seen a significant rise in cigarette smuggling activity.


Policy makers interested in raising tax rates should be aware of the unintended consequences of high taxes," wrote the Tax Foundation on its website. "Criminal distribution networks are already well-established, and as tax rates increase, illegal trade will grow.


The author emphasizes that excessive taxation is not the only driving force behind illegal trade. They believe that measures such as spice bans and reducing nicotine content could also push tobacco sales into the illicit market.


2FIRSTS will continue to provide coverage on this topic and updates will be available on the '2FIRSTSAPP'. Scan the QR code below to download the app.



Disclaimer

This article is provided solely for professional research, industry discussion, and informational purposes. Any references to brands, companies, products, technologies, or policies are made for factual reporting and analytical purposes only, and do not constitute endorsement, recommendation, promotion, or advertising by 2Firsts.

Nicotine-containing products, including but not limited to cigarettes, e-cigarettes, heated tobacco products, and nicotine pouches, carry significant health risks. Readers are responsible for complying with all applicable laws and regulations in their respective jurisdictions, including age restrictions and access limitations.

The information contained in this article should not be regarded as investment, legal, medical, regulatory, or commercial advice. While 2Firsts strives to ensure the accuracy and reliability of its content, it does not assume liability for any direct or indirect loss arising from errors, omissions, inaccuracies, or reliance on the information contained herein.

This article is not intended for individuals below the legal age for accessing tobacco or nicotine-related information in their jurisdiction.

 

Copyright Notice

This article is either original content produced by 2Firsts or content reproduced, translated, summarized, or adapted from third-party sources with attribution where applicable. The intellectual property rights of the original content remain with 2Firsts or the respective original rights holders.

No individual or organization may copy, reproduce, distribute, republish, modify, translate, or otherwise use this content without prior authorization. Any unauthorized use may result in legal action.

For copyright-related inquiries, corrections, or removal requests, please contact: info@2firsts.com.

 

AI-Assisted Translation and Editing Notice

Portions of this article may have been translated, edited, or reviewed with the assistance of artificial intelligence tools to improve efficiency and readability. Due to the limitations of AI-assisted translation and editing, discrepancies, omissions, or inaccuracies may exist when compared with the original source.

Where applicable, readers are advised to refer to the original source for the most complete and accurate information. If you identify any errors or believe that any content infringes upon your rights, please contact us at info@2firsts.com, and we will review and address the matter promptly.

Product | KT&G Brings LOOP Nicotine Pouches to South Africa, Supporting ASF’s Expansion Across Africa
Product | KT&G Brings LOOP Nicotine Pouches to South Africa, Supporting ASF’s Expansion Across Africa
KT&G has introduced nicotine pouch brand LOOP in South Africa, expanding its modern oral nicotine portfolio. Developed by Swedish company Another Snus Factory (ASF), LOOP is a tobacco-free nicotine pouch brand. KT&G and U.S. tobacco company Altria previously participated in ASF’s strategic development, and the South Africa launch represents a further step in LOOP’s international expansion.
Aug.06
BP, Marathon and Valero Warn U.S. Gas-Station Stores: Illegal Vape Sales Could Bring Heavy Fines and Card-Processing Limits
BP, Marathon and Valero Warn U.S. Gas-Station Stores: Illegal Vape Sales Could Bring Heavy Fines and Card-Processing Limits
Fiserv and service station operators including BP, Marathon Petroleum and Valero have warned U.S. partners and gas-station convenience-store owners that selling illegal vapes could lead to heavy fines, breach brand agreements and even put stores’ card-processing access at risk, according to Reuters.
Regulations
Jul.07 by 2Firsts Perspectives
JTI Research Finds 31% of UK Respondents Offered Illicit Tobacco, While 63% of Ennis Packs Lack Duty Marks
JTI Research Finds 31% of UK Respondents Offered Illicit Tobacco, While 63% of Ennis Packs Lack Duty Marks
Multiple JTI-backed studies in the UK and Ireland indicate that illicit tobacco remains visible across consumer interactions and local markets. In the UK, JTI research found that 31% of respondents said they had been offered illicit tobacco products. In Ireland’s Ennis area, a JTI-commissioned empty pack survey found that 63% of sampled cigarette packs did not carry Irish duty-paid markings. The findings come from industry research rather than official government estimates of illicit tobacco market size, but highlight continued concerns among regulators, legitimate retailers and tobacco companies over illicit trade.
Aug.19
PMI Expands Colorado Investment to $1.2 Billion to Boost ZYN Nicotine Pouch Production
PMI Expands Colorado Investment to $1.2 Billion to Boost ZYN Nicotine Pouch Production
Philip Morris International (PMI) is expanding its investment in its Golden, Colorado campus, bringing total investment to approximately $1.2 billion to support its smoke-free products business. The investment will strengthen PMI’s research, production and innovation capabilities in smoke-free products. As one of the world’s largest tobacco companies, PMI has continued advancing its “Smoke-Free Future” strategy through heated tobacco, oral nicotine and other reduced-risk product categories.
PMI
Jul.28
Australia’s Daily Smoking Rate Falls to Record Low of 5.8% as Nicotine Use Patterns Shift
Australia’s Daily Smoking Rate Falls to Record Low of 5.8% as Nicotine Use Patterns Shift
According to the Australian Institute of Health and Welfare’s National Drug Strategy Household Survey, daily smoking among Australians aged 18 and over fell to a record low of 5.8% in 2025. Health Minister Mark Butler said Australia now has around 500,000 fewer daily smokers than three years ago and credited the government’s vaping reforms as part of broader progress. Among people aged 14 and over, daily smoking declined from 8.3% in 2022-23 to 5.6% in 2025. Daily vaping rates stabilised at 3.6%, while the government also moved to further restrict access to nicotine pouches through unapproved therapeutic import pathways.
Jul.21
UK HMRC Plans 30,000 Retail Enforcement Actions as Illegal Tobacco and Vape Sellers Face Tougher Crackdown
UK HMRC Plans 30,000 Retail Enforcement Actions as Illegal Tobacco and Vape Sellers Face Tougher Crackdown
The UK government has announced that HM Revenue & Customs (HMRC) will carry out more than 30,000 interventions targeting businesses and retail premises during the 2026-2027 financial year. The actions will focus on tax fraud, illegal goods sales and businesses involved in unlawful activities through retail channels. The government said illegal tobacco and illegal vape sales remain areas of concern. The move shows that UK enforcement against illegal nicotine products is expanding from import and supply channels toward retail-level oversight, alongside the upcoming introduction of the Vaping Products Duty.
Jul.24