U.S. Study Says E-cigarette Flavoring Ban is Spawning Black Market

According to a new study, e-cigarette(heated tobacco & vaping) flavoring bans are spawning a black market that is costing U.S. states huge amounts of tax dollars, according to a foreign report.


Flavored e-cigarettes(heat not burn tabac) and other tobacco products can be sold in states with flavored tobacco bans simply by visiting any online consumer-to-consumer website. A quick search for menthol on sites like Craigslist and OfferUp in California or Massachusetts, where flavored products are banned, will produce results for e-cigarette(herbal heatsticks manufacturer) products in every flavor from apple to vanilla. Menthol cigarettes of almost any brand can also be found on the online black market.


New York, New Jersey and Rhode Island have also banned the sale of flavored e-cigarette products. Massachusetts and California have banned all flavored tobacco products, including flavored cigars, cigarettes and e-cigarette products. The black market for flavored tobacco products in California has grown exponentially since the state’s flavored tobacco ban went into effect on Dec. 21, a week after the U.S. Supreme Court blocked RJ Reynolds Tobacco’s argument that the new state law conflicted with federal law.


StatNews reported that it visited 24 California e-cigarette stores in Oxnard, Ventura, Pasadena, El Monte, Carson and West Hollywood in January – all of which have banned the sale of flavored e-cigarettes for at least a year, and in most cases for two or more years. Seventeen stores, or 70 percent, were selling them anyway. In Oxnard, the news team visited five stores, none of which sold flavored e-cigarettes.


States bordering states that have enacted flavoring bans have the highest rates of tobacco smuggling in the country. A report by the nonpartisan Tax Foundation found that New York has the highest inbound smuggling activity, with an estimated 53.5 percent of cigarettes consumed in the state in 2020 coming from smuggled sources. New York was followed closely by California (44.8 percent).


New Hampshire had the highest level of net outbound smuggling, accounting for 52.4 percent of consumption. This is likely due to the state’s relatively low tax rate and proximity to states with strict tobacco regulations and high taxes. Initiatives to raise cigarette taxes and ban certain tobacco products in other Northeastern states have made cigarette smuggling a lucrative criminal activity, the report said.


“People will respond to incentives.” said Adam Hoffer, director of excise tax policy at the Tax Foundation. “As taxes are raised or products are banned from sale, consumers and manufacturers are looking for ways to get around these penalties and restrictions.”


Last year, JAMAInternalMedicine published a study on the impact of a ban on flavored tobacco products in Massachusetts. The study found that sales of flavored tobacco declined as the ban was implemented. However, when comparing sales in Massachusetts to sales in 27 other states, the authors found that sales in Massachusetts declined more than in the control states.


“Such results suggest that the spice ban has been successful. Unfortunately, the study left out one very important piece of information: cross-border trade. Ulrik Boesen, who also works for the Tax Foundation, said at the time. “In fact, the end result of the ban is that Massachusetts is stuck with the social costs associated with consumption, while neighboring states are raising revenue from taxes on flavored tobacco products.”


A 2022 report by the Massachusetts Multi-Agency Illicit Tobacco Task Force found that in 2021, state police and the Department of Revenue seized more than 5,000 packs of cigarettes and more than 100,000 vapor products. It also detailed multiple investigations and prosecutions, including those that resulted in six months to one year in prison. Some of these were for smuggling that predated the flavor ban, but others apparently involved it.


For example, it notes an ongoing investigation into the seizure of more than 5,000 flavored e-cigarettes and a motor vehicle stop in February 2022, “a large quantity of untaxed flavored e-cigarette products, cigars, smokeless tobacco and cigarettes representing $21,000 in unpaid taxes. As it happens, looking at New England as a whole, it can be confirmed that the flavor ban did not work as intended. Sales moved around rather than disappearing, and the ban clearly did not affect consumption,” Burson said. “Compared to the 12 months before the ban, total sales in the region were down slightly more than 1 percent in the 12 months after the ban – roughly in line with national sales trends.”