Introduction to Nicotine Pouches and Taxation
What Are Nicotine Pouches?
Nicotine pouches are small, smokeless, and tobacco-free products placed between the lip and gum. They release nicotine without combustion, smoke, or tar. Brands like Zyn, On!, and Velo have grown popular as alternatives to smoking and vaping.
Why States Regulate Nicotine Products
States impose taxes on tobacco and nicotine products to:
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Generate public revenue.
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Deter youth use by raising prices.
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Offset healthcare costs from nicotine-related illnesses.
But nicotine pouches present a challenge: they don’t contain tobacco leaf, so should they be taxed like cigarettes or exempted as substitutes?
Tennessee’s Tobacco and Nicotine Tax Laws
Current Tobacco Tax Structure in Tennessee
Tennessee applies taxes to several categories of nicotine and tobacco products:
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Cigarettes: Taxed per pack.
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Other Tobacco Products (OTP): Taxed at 6.6% of the wholesale cost.
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Vapor Products (since July 2025): Taxed at 10% of wholesale cost.
How Nicotine Pouches Are Classified Under State Law
According to the Tennessee Department of Revenue, nicotine pouches and nicotine gum are not classified as taxable tobacco products. They are considered nicotine substitutes, not “other tobacco products.”
Are Nicotine Pouches Taxed in Tennessee?
Official Guidance from Tennessee Department of Revenue
In the June 2025 Tennessee Tobacco Tax Manual, the Department explicitly states that:
✅ Nicotine pouches (oral, smokeless, tobacco-free) are not subject to tobacco tax.
✅ Nicotine gum and lozenges are also exempt.
This means consumers do not pay additional state excise tax when buying nicotine pouches.
Key Differences Between Pouches, Smokeless Tobacco, and Vapes
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Smokeless tobacco (chew, snuff) → Taxed at 6.6% wholesale.
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Vapor products (e-cigarettes, cartridges) → Now taxed at 10% wholesale.
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Nicotine pouches → ✅ Exempt.
Tobacco and Nicotine Products That Are Taxed
Cigarettes and Traditional Tobacco
Cigarettes remain heavily taxed to discourage smoking.
Other Tobacco Products (OTP)
Products like snuff, chewing tobacco, and cigars fall under Tennessee’s OTP tax at 6.6% wholesale.
Vapor Products and E-Cigarettes (New 2025 Law)
As of July 1, 2025, Tennessee expanded its definition of taxable products to include:
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Vape pens
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E-cigs
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Cartridges & liquids
These are now taxed at 10% wholesale.
Tax Rates in Tennessee (2025)
| Product Type | Tax Rate | Applies To |
|---|---|---|
| Cigarettes | Per pack excise tax | All brands |
| OTP | 6.6% wholesale | Snuff, chewing tobacco, cigars |
| Vapor products | 10% wholesale | E-cigs, liquids, cartridges |
| Nicotine pouches | ❌ Exempt | Zyn, Velo, On! |
Why Nicotine Pouches Are Exempt
Because they are tobacco-free and considered nicotine substitutes, Tennessee exempts them from excise tax.
Comparing Tennessee’s Policy with Other States
States That Tax Nicotine Pouches
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Colorado: Taxes nicotine pouches like OTP.
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Oregon & Vermont: Have included pouches in “tobacco substitutes.”
States That Exempt Nicotine Pouches
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Tennessee
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Florida
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Texas
This patchwork system means prices vary widely across the U.S.
Consumer Impact: What This Means for You
Price Differences for Nicotine Users
In Tennessee, a can of nicotine pouches will often cost less than in states that tax them as OTP.
Potential Changes in the Future
Lawmakers could revisit this exemption if nicotine pouch use continues to rise, especially among young people.
Business and Retailer Considerations
How Retailers Should Handle Nicotine Pouches
Retailers in Tennessee should:
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Collect sales tax (standard 7%) but not tobacco excise tax.
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Ensure accurate product categorization at checkout.
Compliance with State Reporting Requirements
Wholesalers and distributors must report taxable products but can exclude nicotine pouches.
Frequently Asked Questions
1. Are nicotine pouches taxed in Tennessee?
No. As of 2025, nicotine pouches are exempt from Tennessee’s tobacco tax.
2. Why are nicotine pouches exempt?
Because they don’t contain tobacco leaf, Tennessee classifies them as substitutes, not tobacco products.
3. Do I still pay sales tax on nicotine pouches?
Yes, the standard 7% sales tax applies, but no additional tobacco tax.
4. What nicotine products are taxed in Tennessee?
Cigarettes, other tobacco products (OTP), and vapor products.
5. Did the law recently change for vapes?
Yes, as of July 1, 2025, vapor products are now taxed at 10% wholesale.
6. Could nicotine pouch taxation change in the future?
Possibly. If usage grows, lawmakers may reconsider.
Conclusion – Tennessee’s Stance on Nicotine Pouch Taxation
So, does Tennessee tax nicotine pouches? The answer is no. Unlike cigarettes, smokeless tobacco, and vapes, nicotine pouches remain exempt under Tennessee law in 2025.
Consumers only pay standard sales tax, making Tennessee one of the more affordable states for pouch users. However, with rising popularity and regulatory scrutiny, future tax changes are always possible.