US Cross-State Cigarette Smuggling Persists, Tax Foundation Finds

According to the latest US Tax Foundation report, ‘Cigarette Taxes and Cigarette Smuggling by State, 2022 ¹’, growing cigarette tax levels and price differentials have made cigarette smuggling a persistent, national problem in the United States. But price is not the only culprit, with state bans on flavoured tobacco and nicotine products also driving up levels of cross-state smuggling.

Not all states agree with the report though, particularly New Hampshire (NH), where officials say the report uses the word ‘smuggling’ to refer to activities that are actually legal. There is also disagreement with the report’s assertion that NH, with its extremely low cigarette taxes, is the state that has most benefited from cross-border shoppers and smugglers over the past 15 years.

The report is published each year by the Tax Foundation, in partnership with the Mackinac Center for Public Policy, and provides estimated cigarette smuggling rates for each US state and the District of Columbia. The report demonstrates the strong positive relationship between state tax rates and cigarette smuggling, both in the form of increased purchases in neighbouring states and through illicit international channels.