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.

Swedish Match Faces Broader Labeling Order After ZYN Inspection, Documents Obtained by 2Firsts Show
Swedish Match Faces Broader Labeling Order After ZYN Inspection, Documents Obtained by 2Firsts Show
Documents obtained by 2Firsts show that Sweden's Public Health Agency ordered Swedish Match to revise ingredient labels beyond the five ZYN products inspected. The dispute centers on whether flavoring ingredients must be individually disclosed, with Swedish Match citing trade-secret protection and the regulator insisting on full ingredient disclosure. The company faces a conditional penalty of SEK 2 million per month for noncompliance. As of October 22, the agency had received no appeal, despite the company's stated intention to challenge the decision.
Oct.22
From Vuse, Velo and glo to AI Consulting: Former BAT Content Lead Launches Destreza
From Vuse, Velo and glo to AI Consulting: Former BAT Content Lead Launches Destreza
Former BAT global content lead Andy Parton has left the company and launched Destreza, a London-based AI-native marketing consultancy. Parton previously worked across BAT's New Category brands Vuse, Velo and glo and had also served as Global Brand Lead for Vuse Go. Destreza says it will advise consumer businesses on AI in brand strategy, operating models, capability and agency configuration, using specialist AI agents to support research, strategy and creative development. BAT reported £3.621 billion in New Category revenue in 2025.
Sep.22
Hawaii's Largest Independent Vape Retailer and Wholesaler Volcano to Close All 13 Stores Ahead of 2027 Sales Rules
Hawaii's Largest Independent Vape Retailer and Wholesaler Volcano to Close All 13 Stores Ahead of 2027 Sales Rules
Hawaii-based vaping company Volcano eCigs plans to close all 13 physical retail stores on December 31, 2026, affecting approximately 56 employees. Volcano operates retail, wholesale, proprietary product and online sales businesses and has previously described itself in legislative testimony as Hawaii's largest independent vape retailer and wholesaler. Its operating company, Jocor Enterprises LLC, filed a formal closure notice on November 4, citing changes in the state's regulatory environment. From January 1, 2027, Hawaii will restrict the sale, acquisition and possession of vaping devices and e-liquids not listed in a state product directory, alongside separate restrictions on certain disposable devices. The closure concerns Volcano's physical retail network; the company has not announced the termination of wholesale or online operations.
Market
Nov.09
BAT Adds Former Apple General Counsel Bruce Sewell to Board as Finance, Legal, Marketing and Regional Leadership Shift
BAT Adds Former Apple General Counsel Bruce Sewell to Board as Finance, Legal, Marketing and Regional Leadership Shift
British American Tobacco has appointed former Apple Senior Vice President, General Counsel and Secretary Bruce Sewell as an independent non-executive director, effective January 1, 2027. He will also join BAT's Audit and Nominations Committees. BAT Chair Luc Jobin highlighted Sewell's experience in technology, government and regulatory affairs, public-company governance and AI-company boards. Over the past 18 months, BAT has changed or announced changes to its CFO, general counsel, CMO and APMEA regional leadership, while the main board has also seen multiple changes. The appointment comes as BAT advances Horizon 2030 and its Fit2Win transformation while expanding New Categories and reshaping parts of its digital, technology and operating structure.
Business
Oct.29
Swedish-Founded Nicotine Pouch Retailer GotPouches Shifts to U.S.-Based Operations, Reaching Over 25 States
Swedish-Founded Nicotine Pouch Retailer GotPouches Shifts to U.S.-Based Operations, Reaching Over 25 States
Swedish-founded online nicotine pouch retailer GotPouches has completed the localization of its U.S. operations under UpNorth Retail LLC, with corporate operations in Franklin, Tennessee, domestic fulfillment from Nashville and U.S.-based customer support. The company says its catalog covers more than 20 nicotine pouch brands and it currently serves customers in more than 25 U.S. states.
Sep.18
South Korea Imports 12,126 Kg of Nicotine Analogues From April to August After Bringing Synthetic Nicotine Under Tobacco Law
South Korea Imports 12,126 Kg of Nicotine Analogues From April to August After Bringing Synthetic Nicotine Under Tobacco Law
South Korea's liquid-vape market is showing changes across raw-material imports, product types and sales channels after synthetic nicotine came under the Tobacco Business Act on April 24. Customs data show nicotine-analogue imports totaled 12,126 kilograms from April through August, while synthetic-nicotine imports over the same five months totaled 231,663 kilograms, just 39.3% of the amount imported in March alone. Physical liquid-vape stores tracked in Seoul and Gyeonggi Province fell 9.9%, unmanned outlets edged higher and online sales listings increased from 27,774 to 42,437. Government testing of 105 liquid inhalation products promoted as nicotine-free separately found nicotine in 13 and 6-methylnicotine in 12.
Sep.22