In November 2019, Massachusetts became the first state in the U.S. to ban the sale of all flavored tobacco and nicotine products, including flavored electronic cigarettes and menthol cigarettes. Four additional states have since imposed flavor bans on some products and similar policies are under consideration in many other jurisdictions. Such bans are popular among legislators and anti-smoking groups, but the latest data from Massachusetts highlight the ban’s unintended consequences. The state’s experiment in prohibition has led to thriving illicit markets, challenges for law enforcement, and prosecution of sellers.
Massachusetts’ Multi-Agency Illegal Tobacco Task Force publishes an annual report providing insight into how the state’s high taxes and flavor prohibitions affect the illicit market. As opponents of the flavor ban predicted, the law has incentivized black market sales of menthol cigarettes and flavored e-cigarettes (“ENDS,” or “electronic nicotine delivery systems,” in the parlance of regulators). “The Task Force identifies the cross-border smuggling of untaxed flavored ENDS products, cigars, and menthol cigarettes as the primary challenge for tobacco enforcement in the Commonwealth,” according to the report. “Inspectors and investigators are routinely encountering or seizing menthol cigarettes, originally purchased in surrounding states, and flavored ENDS products and cigars purchased from unlicensed distributors operating both within and outside the Commonwealth.”
The Massachusetts Department of Revenue reports conducting more than 300 seizures in FY 2022, compared to 170 in 2021 and just 10 in 2020. Many of these involve substantial amounts of products and missed tax revenue. For example, a single search warrant yielded “a large quantity of untaxed ENDS products, [other tobacco products], and Newport Menthol cigarettes affixed with New Hampshire excise tax stamps” representing an estimated $940,000 in unpaid excise taxes.
Revenue officials are seizing so many illicit products, in fact, that they are running out of room to store them. The “Task Force’s increased investigative and enforcement activities during the past year have led to the seizure of large quantities of illegal tobacco products, resulting in a strain on the Task Force’s storage capacity,” says the report. But fear not, they are working on leasing additional space “that will significantly increase storage capacity and allow for continued increased enforcement.”