Cigarette smuggling cost US states four billion dollars in tax revenue

The Tax Foundation reported that forgone revenue from smuggled cigarettes totaled more than 4.6 billion dollars across United States jurisdictions in 2024. Higher tax rates incentivize tax avoidance by consumers and suppliers who search for ways around those costs in cigarette markets. [1]

According to the Tax Foundation, California lost nearly 1.4 billion dollars in cigarette excise tax collections in 2024. New York missed out on more than 1.2 billion dollars in tax revenue during the same period. [1]

The Financial Action Task Force defines the illicit cigarette trade as the production, import, export, purchase, sale, or possession of tobacco goods that fail to comply with legislation. Illegal trade falls into three categories, which are contraband smuggled from abroad, counterfeit products made without authorization, and illicit whites manufactured legitimately in one country but smuggled into another. [3]

Tobacco smoking began as early as 5000 to 3000 BC in Mesoamerica and South America before European colonists introduced tobacco to Eurasia in the 17th century. The practice became widespread after the introduction of automated cigarette-rolling apparatus. [2]