How tax increases could impact e-cigarette sales

E-cigarette sales at convenience stores in Minneapolis increased significantly after Minnesota increased taxes on tobacco products in 2013, followed by a decline in sales 4 months later, according to new research published in Tobacco Regulatory Science.

“Many governments are starting to tax e-cigarettes, but there isn’t a lot of data to help policy makers understand what the impact of those taxes will be,” said Michael Amato, the lead author who is now a researcher at the Schroeder Institute® for Tobacco Research and Policy Studies at Truth Initiative.

The study looked at sales patterns for e-cigarettes in convenience stores in Minneapolis. Sales in Minneapolis were compared to St. Louis, a similarly sized Midwestern cities where no tax change occurred.

During the first four-week period after the Minnesota tax increases on cigarettes and e-cigarettes went into effect, e-cigarette sales at convenience stores increased by 36 percent over what would have been expected. However, four months later, sales had fallen to 40 percent belowwhat was expected.

“The cigarette tax motivated many smokers to try to cut down or quit. The brief increase in e-cigarette sales may have been due to some smokers buying the disposable types of e-cigarettes that are available in convenience stores to help them quit smoking, but those higher sales didn’t continue very long,” Amato said. “After a few months, e-cigarette sales were below their expected values, as we would expect following a price increase.”

In 2010, Minnesota changed its definition of tobacco to include e-cigarettes, making the state an important case study into the question of how sales are impacted when taxes are increased on cigarettes and e-cigarettes at the same time. This is the first study to directly examine the effect of an e-cigarette tax on sales.