As of September 2026, 20 states and the District of Columbia have brought nicotine pouches into their tax systems, according to a new report from the Tax Foundation published this month. Minnesota and Washington impose the steepest levies at $3.80 on a standard product, while North Carolina charges just $0.10 per can. The analysis examines how states are racing to tax oral nicotine pouches—a rapidly growing alternative to traditional cigarettes—even as policymakers grapple with whether high taxes undermine public health gains by slowing the shift away from combustible tobacco.
To compare tax burdens across jurisdictions, the report calculated the levy on a sample product: one can containing 15 pouches, sold for $4 wholesale and $6 retail. Minnesota and Washington tie for the highest rate, each collecting $3.80 through a 95 percent wholesale tax. Maine comes next at $3.54 from a weight-based levy with a one-ounce floor, followed by Rhode Island at $3.20 via an 80 percent wholesale charge, and Vermont at $3.08 from a weight-based structure with a 1.2-ounce minimum. At the opposite end, North Carolina assesses just $0.005 per pouch, totaling $0.10 on a 20-pouch can. Indiana ranks second-lowest at $0.13, derived from a $0.50 per ounce tax with no minimum weight, then Oregon at $0.65 per standard can, and Louisiana and Nebraska both at $0.80 from a 20 percent wholesale rate. The past year has seen a flurry of legislative action: Illinois tripled its tobacco products levy from 15 to 45 percent wholesale starting July 2025, Indiana raised its alternative nicotine tax from $0.40 to $0.50 per ounce the same month, Maine hiked its smokeless rate from $2.02 to $3.54 per ounce in January 2026, Nebraska and Oregon introduced new pouch taxes effective January 2026, and New York extended its 20 percent wholesale charge to pouches beginning September 2026.
Most states that tax pouches have simply added them to existing levies on "Other Tobacco Products," a category typically reserved for cigars, loose leaf, and snuff. The report describes this approach as a mistake, noting that modern oral pouches usually contain no tobacco at all—they rely on synthetic or extracted nicotine instead. Because pouches are less harmful than many or all items in the Other Tobacco Products bracket, lumping them together "undermine[s] the health benefits of alternative products that satisfy the wants of consumers with substantially less danger," the authors write. The report argues that a dedicated tax rate—ideally a fixed charge per can or per ounce rather than a percentage of price—would better reflect the reduced risk profile of pouches.
States face a difficult trade-off, according to the Tax Foundation. Decades of declining cigarette use have steadily eroded the tax base that once generated lucrative revenue, creating what the report calls "a revenue crater within state budgets." Taxing alternative nicotine products can help plug that gap, but steep levies may discourage smokers from switching to far less dangerous options, thereby protecting tax income at the expense of public health. The report's framework recommends that excise taxes on pouches remain a small fraction of cigarette taxes, in proportion to their drastically lower harm—nicotine itself isn't carcinogenic, and combustion plus other chemicals in traditional cigarettes cause most damage. Moderate rates also limit smuggling and cross-border shopping: a Washington resident, for instance, could save roughly $3.15 per can by crossing into Oregon, or avoid excise taxes entirely by shopping in Idaho. Looking ahead, Iowa has already scheduled a $0.05 per can pouch tax to begin in January 2027, and the authors expect more states to follow. The report urges lawmakers to design taxes that encourage smokers to migrate to less harmful products rather than penalizing them—or, better yet, to leave pouches untaxed altogether, maximizing the price gap that drives switching and delivers the greatest public-health benefit.