LEGISLATIVE FISCAL ESTIMATE
SENATE COMMITTEE SUBSTITUTE FOR
SENATE, Nos. 2667 and 299
STATE OF NEW JERSEY
220th LEGISLATURE
DATED: NOVEMBER 22, 2023
SUMMARY
Synopsis: Prohibits sale of all flavored cigarettes.
Type of Impact: Annual reduction in State revenues. Potential revenue increase to
municipalities.
Agencies Affected: Department of the Treasury. Municipal governments.
Office of Legislative Services Estimate
Fiscal Impact FY 2024 and Thereafter
State Revenue Loss Indeterminate
Potential Local Revenue Increase Indeterminate
 The Office of Legislative Services (OLS) finds that prohibiting the sale of menthol and clove
cigarettes would result in an indeterminate annual reduction in State revenues from the
cigarette tax and the sales and use tax. The precise magnitude of the bill’s impact is uncertain
since consumers of menthol and clove cigarettes may seek alternative means of tobacco
consumption that are still taxable or may choose to quit smoking.
 The OLS notes that the annual State revenue loss will depend on how many consumers of
menthol and clove cigarettes cease to purchase those products or alternative products that are
subject to taxation.
 The bill would also result in potential, likely modest, municipal revenue increases from penalty
payments received from violators of the new statutory provisions.
BILL DESCRIPTION
The bill extends the current State statutory ban on the sale of flavored cigarettes to include
menthol and clove cigarettes.
New Jersey generally banned flavored cigarettes in 2008, but included in that law exceptions
for menthol and clove cigarettes. In 2009, the federal government adopted a law banning all
flavored cigarettes, including clove, but also provided an exception for menthol cigarettes. Under
Office of Legislative Services Legislative Budget and Finance Office
State House Annex Phone (609) 847-3105
P.O. Box 068 Fax (609) 777-2442
Trenton, New Jersey 08625 www.njleg.state.nj.us
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the bill, the existing penalties for prohibited sales of flavored cigarettes will apply to sales of
menthol and clove cigarettes. The bill makes the prohibitions and penalties under the flavored
cigarette ban applicable to retailers rather than individuals.
The revision to the flavor ban means that a retailer is not to, either directly or indirectly by an
agent or employee, or by a vending machine owned by the retailer or located in the retailer’s
establishment, sell, offer for sale, distribute for commercial purpose at no cost or minimal cost or
with coupons or rebate offers, give or furnish, to a person a cigarette, or any component part
thereof, which contains a natural or artificial constituent or additive that causes the cigarette
product or any smoke emanating from the cigarette or product to have a characterizing flavor other
than tobacco. In no event is a cigarette or any component part thereof to be construed to have a
characterizing flavor based solely on the use of additives or flavorings, or the provision of an
ingredient list made available by any means.
The existing penalties under the current law concerning flavored cigarettes will continue to
apply, such that a retailer who makes a prohibited sale will be liable to a civil penalty of not less
than $250 for the first violation, not less than $500 for the second violation, and $1,000 for the
third and each subsequent violation. In addition, the retailer’s tobacco retailer license may be
suspended or revoked upon a second or subsequent violation under certain circumstances. The
licensee will also be subject to administrative charges based on a schedule issued by the Director
of the Division of Taxation, which may provide for a monetary penalty in lieu of a suspension.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS finds that prohibiting the sale of menthol and clove cigarettes would result in an
annual indeterminate reduction in State revenues from the cigarette tax and the sales and use tax.
The precise magnitude of the bill’s impact is uncertain since consumers of menthol and clove
cigarettes may seek alternative means of tobacco consumption that are still taxable or may choose
to quit smoking. The OLS notes that the annual State revenue loss will depend on how many
consumers of menthol and clove cigarettes cease to purchase those products or alternative products
that are subject to taxation.
For illustrative purposes, the OLS notes that according to the Federal Trade Commission’s
Cigarette Report for 2022, the domestic market share of menthol cigarettes was 36 percent
nationwide in 2022. For reference, in New Jersey in FY 2022, the cigarette tax, imposed at a rate
of $2.70 per pack of 20 cigarettes, generated $518.4 million in revenue for the State. However,
only a portion of this amount appears as budgeted General Fund revenue. Of the amounts collected
in FY 2022, $391.5 million supported the offbudget Health Care Subsidy Fund, $83.3 million was
used off-budget to pay debt service on cigarette tax revenue securitization bonds, and $5.7 million
was dedicated for anti-smoking initiatives. The remaining $38.0 million was accounted for on-
budget as General Fund revenue.
The OLS cannot predict the behavior of smokers who currently purchase menthol and clove
cigarettes in this State in response to a ban. Those who currently purchase menthol and clove
cigarettes could choose to smoke non-flavored cigarettes or quit smoking altogether. If those who
currently purchase menthol and clove cigarettes choose to quit smoking or pursue methods of
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acquiring menthol and clove cigarettes that are not subject to the State’s cigarette tax, State
revenues will decline.
Although actual reductions in cigarette tax and sales and use tax revenues resulting from the
bill cannot be known, the OLS assumes the effects of this bill, coupled with the long-term
decreasing trend in smoking rates, will result in some decline in tax revenues. This decline could
negatively affect statutory dedications for this revenue source, including the dedication to the
Health Care Subsidy Fund and anti-smoking initiatives. The OLS also notes that, by prohibiting
the sale of menthol and clove cigarettes, it is possible that some individuals will be diverted from
developing or continuing tobacco habits that would lead to negative health outcomes. If the
individual is enrolled in a State-funded health benefits program (e.g. Medicaid or the State Health
Benefits Program), the State may be responsible for paying for health care services related to such
health problems. A reduction in the smoking population could reduce health care related expenses
covered by the State-funded health benefits program.
The bill would also result in potential, likely modest, municipal revenue increases from penalty
payments received from violators of the new statutory provisions. Penalties recovered are required
to be paid into the treasury of the municipality in which the violation occurred for the general uses
of the municipality.
Section: Law and Public Safety
Analyst: Kristin Brunner Santos
Lead Fiscal Analyst
Approved: Thomas Koenig
Legislative Budget and Finance Officer
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the
failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).


Statutes affected:
Introduced: 2A:170-51.6