The cost for convenience stores to offer customers a balanced backbar of tobacco and nicotine products keeps creeping up. Just take a look at this overview of taxes as of March 2024 per the Centers for Disease Control and Prevention:
- Cigarettes — Excise taxes range from 17 cents per pack (Missouri) to $5.35 per pack (New York).
- Cigars — All but two states (Florida and Pennsylvania) and the District of Columbia tax sales of cigars.
- E-cigarettes — Approximately two-thirds of states tax retail sales of e-cigarettes and basically the same number require retailers to obtain a license to sell the products.
What’s more, as of July 1, the excise tax on tobacco sales in Colorado went up 30 cents on cigarette packs and 6% more for other tobacco products (OTPs), vapor or nicotine pouches. Maryland convenience stores and tobacco customers experienced a $1.25 tax hike this summer, bringing the price up to $5 for packs containing 20 cigarettes. Taxes for OTPs in the state, minus pipe tobacco and cigars, jumped to 60% of wholesale. Mississippi enacted a $1.25 excise tax on each heated tobacco item.
Of course, flavor bans also remain a hot-button topic for c-stores. This spring, Utah’s governor signed a law that prohibits flavored e-cigarette products except tobacco and menthol, which took effect on July 1.
“The city of Columbus, Ohio, enacted a citywide flavor ban in January of this year,” commented Nathan Arnold, director of marketing for Englefield Inc. He added that more than 20 of the 117 Duchess convenience stores that the company owns and operates are located within the city, and they have been hit with dramatic decreases in tobacco and nicotine sales volumes this year. The remaining Duchess stores are located in Ohio, as well, along with West Virginia.
“There has been a lot of attention on the flavor ban in Columbus, which has prompted other cities to suggest that similar legislation may be considered in the future,” he explained. “While we hope that this does not come to fruition, it does make us analyze this category for not only current sales trends but anticipation of any future changes.”
Beyond Menthol
For the past few years, the Food & Drug Administration (FDA) has been making a lot of noise about banning menthol products. In spring, the Biden administration announced it was postponing a decision, which was positive news for c-stores. This summer, the FDA issued more welcomed news: marketing authorizations were granted for Vuse Alto devices and its Golden Tobacco and Rich Tobacco flavor pods as well as for NJOY ACE pod Menthol, NJOY Daily Menthol and NJOY Daily Extra Menthol.
The sale of unauthorized products is still an issue, however.
In June, the FDA and the Justice Department announced a new task force, including the U.S. Marshals Service, U.S. Postal Inspection Service, the Federal Trade Commission and other governmental agencies, to “identify and target illegal sales and distribution of e-cigarettes,” according to a statement by the agency. The statement added that the FDA previously sent more than 1,100 warning letters to distributors, manufacturers, importers and retailers regarding sales of unauthorized tobacco products.
“It is interesting that the task force does not include Customs and Border Protection (CBP) or its parent, Department of Homeland Security. In my view, the biggest law enforcement gap — and opportunity — lies in the bailiwick of CBP stopping illegal imports of products that FDA has placed on its red lists,” said Agustin Rodriguez, partner at Troutman Pepper.
“The multiagency task force is a hopeful sign, but it is too early to tell what impact it might have. What convenience retailers need is clarity from the FDA on which products can be on the market and which ones can’t,” said Anna Ready Blom, director of Government Relations for the National Association of Convenience Stores (NACS).
To that end, several states have mandated directories. Starting this month in Iowa, vape manufacturers must certify their products either received FDA marketing authorization or have submitted a premarket tobacco application with the agency.
Utah passed a similar law with the addition of a ban of vape products not in its directory as of Jan. 1, 2025. Also starting in 2025, Florida will require a directory of certified nicotine product manufacturers and certified nicotine products. The state of Kentucky will compile a list of retailers selling authorized vapor products as well as start a noncompliance database of stores that violate the rule.
Finally, on a separate note, the lawsuit challenging the legality of the FDA graphic warning rule for cigarette packaging remains with the District Court, which issued a stay and is awaiting further action from the plaintiffs.
