Massachusetts banned the sale of flavored tobacco in June. What happened next was… totally predictable
Massachusetts’ June 1 ban on the sale of flavored cigarettes is driving higher sales, and higher tax revenue, in New Hampshire, state and retailer data show.
In Massachusetts, cigarette tax stamp sales fell vs. the same month in 2019 by 17.2% in June, 23.7% in July and 29.9% in August, the New England Convenience Store and Energy Marketers Association (NECSEMA) announced this week.
In New Hampshire, cigarette tax stamp sales rose vs. the same month in 2019 by 55.8% in June, 27.3% in July and 17.2% in August, the association reported.
That’s a tax revenue gain of $16.48 million for New Hampshire and a loss of $31.88 million for Massachusetts.
Those figures are for cigarette sales only and do not include other tobacco products or electronic cigarettes.
Looking at all tobacco tax revenue, New Hampshire has seen large gains since the flavored cigarette ban took effect.
Tobacco tax revenue in May was identical to the year before. Then in June it shot up by 43.3% over the prior year. Compared to the same month the year before, tobacco tax revenue was up by 12.1% in July,18.6% in August and a tremendous 56.8% in September.
From June through September, New Hampshire tobacco tax revenue was up by $22.2 million over the same four months in 2019. The state’s new tax on electronic cigarettes does not account for this increase. The state collected a little more than $300,000 a month in e-cigarette taxes from June through September.
State Department of Revenue Administration staff attribute significant tobacco tax spikes in March and April (24.8% and 30.6%, respectively) to smokers stocking up for the coronavirus lockdowns this spring. They believe the surge starting in June is driven by the Massachusetts ban.
“We think it has to be related to the menthol ban in Massachusetts, although we don’t have the data to affirmatively prove that,” Carollynn Lear, assistant commissioner of revenue, said.
The state Department of Revenue Administration doesn’t break down cigarette tax stamp revenue by type of cigarette. But convenience stores do, and their data tell the story.
Among NECSEMA members, total cigarette sales in Massachusetts were down 24% in August but up 65% in New Hampshire and 17% in Rhode Island, the association reported this week. But flavored cigarette sales were up 91% in New Hampshire and 40% in Rhode Island in August. Flavored smokeless tobacco sales were up 175% in New Hampshire and 54% in Rhode Island in August, NECSEMA reported.
Predictably, the ban increased both cross-border sales and in-state crime. Convenience store owners in Boston said this week that street sales of now-illegal flavored cigarettes have become a nuisance.
Free-market organizations were not the only ones to predict that this would happen. Massachusetts officials predicted it too.
The Massachusetts Multi-Agency Illegal Tobacco Task Force noted in its 2020 annual report, published in February, that it was considering the need for increased enforcement this year because “the Task Force expects there will be an increase in smuggling activity and black market sales” after the flavored tobacco ban begins.
Exactly as expected, Massachusetts’ ban has ended the legal sale, but not the consumption, of flavored tobacco products in the state. As tobacco retailers and the state’s own Illegal Tobacco Task Force predicted, the ban has sent legal sales over the border and increased the criminal, black-market sale of flavored tobacco products in Massachusetts.
