In 1998 the average retail price for a pack of cigarettes was $2.18. Prior to the MSA (Master Settlement Agreement) in November of 1998, the federal tax was $0.24 and the average state tax was $0.39 per pack. To cover the anticipated costs of the MSA, the major cigarette companies immediately raised their wholesale cigarette prices $0.45 per pack, then raised prices in August of '99 another $0.18 per pack. (The initial payments into the MSA fund were estimated to be about $4 per carton, with a total cost to the major tobacco companies of approx. $209 Billion over 25 years). The federal tax jumped 10 cents to $0.34 per pack on January 1, 1999, while the average state tax was still relatively low at $0.42 per pack that year. After three more price hikes in 2000, the cumulative wholesale price increases totaled nearly $1 per pack since the signing of the MSA.

The U.S. average cost of a pack was $3.12 in 2000. Since then, 43 of the 50 states have increased their cigarette tax rates a combined totoal of 70 times, and the federal tax on cigarettes increased from $0.34 to $0.39 per pack on Jan 1, 2002. Wholesale prices reached nearly double their 1998 pre-MSA levels in 2003 after yearly increases from the major manufacturers. Currently, residents in Arizona, Alaska, Maine, Michigan, New Jersey, Rhode Island and Washington are paying $2.00 or more in state taxes per pack! Combined state and local taxes in Chicago and Evanston, IL as well as Anchorage, AK and New York City are now over $3 per pack! Hawaii and other states have scheduled price increases for 2008 and beyond. Although these state excise tax increases were originally claimed to be solely for children's welfare, education and anti-smoking campaigns, most states are putting the majority of their cigarette tax revenues and MSA payments into their general funds to balance their budgets.

A pack of cigarettes in 2007 cost an average $4.63 in the U.S.

To reduce costs, many smokers turned to generic brand cigarettes, three discount brands are now in the top ten in U.S. sales. Doral from R.J. Reynolds reached 3rd place, displacing their Camel brand. Basic from Philip Morris is in 5th place and GPC (a brand made under contract by B&W, now a part of RJR) is in 7th position. Even more striking has been the surge of sub-discount brands (by Non-MSA-Participating Manufacturers) from less than one-half percent to over 8% of the market by 2004. Other smokers have attempted to stay loyal to their brands, yet reduce their costs, by turning to internet merchants or by traveling great distances to purchase cigarettes from out-of-state dealers or Native American run smoke-shops.

But the states have been fighting hard to make sure consumers pay these recently imposed 'sin taxes' no matter where they purchase their smokes. Authorities in Oregon and New York helped convince the major credit card companies to stop processing online cigarette sales in 2005. DHL, FedEx and UPS have all stopped making deliveries of cigarettes to individuals, due to mounting pressure from government agencies.

While some states continue to search for the 'holy grail' in this age of increased consumer spending online, (by trying to find the means to force out-of-state retailers to pay sales and excise taxes to them directly) 13 states are known to have been compiling lists of all online cigarette purchases. Under the 'Jenkins Act' customers of online cigarette retailers are receiving back-tax bills with the threat of severe penalties for non-payment.

Online retailers known to have provided the requested order history information include eSmokes.com, BuyCheapCigarettes.com, CheapCigsUSA.com, DirtCheapCigs.com, Mycigarettes.com and others. Some states have even subpoenaed shipping records from UPS to determine who purchased cigarettes out-of-state in cases where the online retailers failed to respond. In short, if you have bought, or are planning to buy cigarettes online, your state will likely find out and surprise you with a big tax bill.

So, why have I told you all this, am I trying to get you to quit smoking?
No! My goal is to simply inform and educate, and to Save You Big Bucks.

Keep reading to find out how to Save 50% or More on the cost of cigarettes!