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Ways & Means reviews H135 changes to nicotine product tax language to cover synthetic nicotine and new smokeless products
Summary
Abby Shepherd, executive policy advisor at the Vermont Department of Taxes, told the Ways & Means Committee that H135 would clarify statutory definitions so nicotine pouches and synthetically derived nicotine remain clearly taxable under the state’s tobacco-products tax.
Abby Shepherd, executive policy advisor at the Department of Taxes, told the Ways & Means Committee that H135 would amend definitions in the tobacco-products tax statute to capture changing products on the market, including nicotine pouches and synthetically derived nicotine.
Shepherd said the department’s concern is administrative clarity rather than making a policy judgment about taxation. “Our intent is really to make it clear so that we know how to actually administer the tax,” she told the committee.
Department staff said Vermont’s current statutory language creates a presumption of taxability, but recent litigation in other states showed manufacturers could challenge tax applicability on narrow definitional grounds. Shepherd described the proposed changes as a fix to reduce the risk of litigation and to avoid a technical definitional loophole where manufacturers might slightly alter a product to shift it out of a taxed category.
Committee members asked technical questions about which statutory category would apply to novel products (the bill’s language distinguishes “new smokeless tobacco” with weight- or package-based taxes from a catchall “other tobacco products” category). Shepherd said most small-package nicotine pouches would be taxed under the new-smokeless category and noted a common per-package tax of about $3.08 on the small packages; if a product does not meet the specific moisture-content or single-dose criteria, it could be taxed under the broader catchall.
Shepherd provided revenue trends to illustrate the policy stakes: tax receipts attributed to new-smokeless tobacco rose sharply from roughly $170,000 in fiscal 2018 to about $2,340,000 in fiscal 2024 — an almost 13-fold increase — while the number of wholesale filers remained roughly stable. Department staff said the tax is generally collected at wholesale; a retailer only remits the tax if they are holding untaxed product.
Committee members asked about public-health inputs; Shepherd said the Department of Health declined to testify and recommended that the committee invite relevant health or attorney-general staff for technical questions about carcinogenicity or regulatory jurisdiction. Members also asked about companion technical provisions in the same bill: a proposed clarification to make Vermont filing status follow federal filing status in most cases, with a narrow commissioner discretion for nonresident-spouse situations.
The committee did not take a vote on H135 at the hearing. Department staff said they would share written revenue data and the committee indicated it planned further review and potentially more testimony from public-health or legal experts.
Ending: The Ways & Means Committee asked staff to provide written revenue detail and signaled it would consider additional testimony; no formal action was recorded in the segment of the hearing captured here.
