Wyoming has the highest U.S. rate of outbound cigarette smuggling, the Tax Foundation reports.

The group released a study last week, announcing that 49.2% of Wyoming’s cigarette consumption goes to smugglers taking the product outside the state, based on 2022 data.

That’s the highest percentage of outbound smuggling for any U.S. state, based on each state’s cigarette consumption, meaning that Wyoming doesn’t have the highest volume of smuggled-out cigarettes, but that its sales have the highest chance of landing in black or grey markets in other states.  

The study consists of estimates comparing states’ tax data to U.S. Census Bureau consumption surveys.

Adam Hoffer, director of excise tax policy at the Tax Foundation, told Cowboy State Daily on Friday that it’s worth noting how small Wyoming’s market is.

“Wyoming is a relatively small consumer of cigarettes, compared to somewhere like California,” he said. “So, small changes in consumption patterns can really swing that smuggling estimate.”

Hoffer, who wrote the Tax Foundation’s recent report, said that the group’s analysts have been “a little intrigued by Wyoming for several years.”

The state’s high smuggling rate is also augmented by the nearness of “more restrictive states,” like Utah and Colorado.

Utah’s 2022 inbound smuggling estimate is 20.46%, the report says — meaning about one-fifth of the cigarettes consumed in Utah were smuggled into it. It taxes cigarettes at $1.70 per pack.

Colorado’s inbound smuggling rate is similar, 19.86%. It taxes cigarettes at $1.94 per pack.

The Tax Foundation noticed an uptick in inbound smuggling in Colorado, plus an increase in outbound smuggling in nearby Wyoming, after Colorado doubled its per-pack tax rate in 2021.

In 2020 when Colorado’s cigarette tax was 84 cents per pack, its inbound smuggling comprised 7.96% of the state’s consumption, the group reported in 2022.

Wyoming’s outbound smuggling at that time comprised 24.35% of its own sales, and the state did not show the highest percentage in that area as it does in the more recent study.

Wyoming considered nearly doubling its cigarette tax rate in 2022, but the House Revenue Committee shut down that effort in 2023, by voting down a bill the joint version of that same committee had advanced before the lawmaking session.

Some Other Smuggler Favorites

Delaware sits in second place after Wyoming with 34.43% of its cigarette consumption going to out-of-state smuggling. New Hampshire is third, at 31.43%.

At 60 cents per pack, Wyoming doesn’t have the lowest cigarette taxation rate in the nation.

Of the 15 states besides Wyoming that show outbound cigarette smuggling, five of them have a lower tax rate per-pack than Wyoming, though all of them have indicated less outbound smuggling than the Cowboy State, according to the study.

For example, Missouri, which is No. 7 for outbound smuggling at 14.67%, only taxes cigarettes at 17 cents per pack.

But again, Hoffer noted, Missouri’s overall market is much larger than Wyoming’s so none of these figures undermine Missouri’s potentially large outbound smuggling volume.

“(Missouri) borders so many states that it is the hub of outbound cigarette smuggling for that region of the country,” said Hoffer. In other words, Missouri feeds its region with cigarettes.

“Probably (Missouri has) more net outbound smuggling than Wyoming, but it’s a smaller percentage of what’s consumed (there),” added Hoffer.

Idaho, the fifth-place state for outbound cigarette smuggling at 27.01%, taxes the product at 57 cents per pack, the study says.

North Dakota only taxes cigarettes at 44 cents a pack, yet ranks ninth for outbound smuggling at 13.83%.

Georgia taxes the product at 37 cents a pack, yet has an outbound smuggling rate of 3.14%, says the study. In the case of Georgia, outbound smuggling doesn’t make as much sense as in other areas, said Hoffer.

“Georgia borders North Carolina and is not far from Virginia,” Hoffer said. “If you’re going to smuggle form Georgia you’re probably only going to do so into Florida.”

North Carolina’s cigarettes are taxed at 45 cents per pack, and Virgina’s at 60 cents per pack, both low figures on the scale. Florida taxes them at $1.34 per pack.

Incoming

New York has the highest rate of inbound smuggling, the study says, with an estimated 54.3% of cigarettes consumed in the state coming from smuggled sources in 2022. The state taxes cigarettes at $4.35 per pack.

Next are California (46.7% smuggled of total consumed), New Mexico (41.2%), Massachusetts (39.7%) and Washington 36.8%).

Those four states tax cigarette packs at $2.87, $2, $3.51 and $3.03, respectively.

The Tax Foundation’s study also discusses other factors in the smuggling world, like flavor bans.

Massachusetts banned menthol cigarettes in June 2020. In the following year, its sales dropped by almost 24% compared to the year preceding the ban, says the study.

“This decline translates to $135 million less in cigarette tax revenue for Massachusetts,” the study notes.

Clair McFarland can be reached at clair@cowboystatedaily.com.