Are nicotine pouches, lozenges, toothpicks, and products made with synthetic nicotine subject to Louisiana tobacco excise tax?

Plain-English summary

Louisiana Revenue Ruling 22-003 subjected non-traditional oral nicotine products to Louisiana tobacco excise tax even when they contained no tobacco leaf or other plant material.

The Department gave two paths to the same result:

• nicotine extracted from tobacco remains part of the tobacco plant, so a finished pouch, lozenge, toothpick, or similar product is a product "made of tobacco"; and
• nicotine obtained from another source—or created synthetically—takes the place of tobacco nicotine, making the product a "tobacco substitute."

Louisiana's smokeless-tobacco definition covered both products made of tobacco and tobacco substitutes. The ruling therefore treated nicotine pouches, nicotine lozenges, nicotine toothpicks, and comparable products as taxable smokeless tobacco regardless of the nicotine source.

Products covered

The ruling discussed several market examples:

• nicotine pouches placed under the lip while nicotine is absorbed through the gums;
• nicotine lozenges that dissolve in the mouth; and
• nicotine toothpicks from which saliva draws out the nicotine.

The products could contain nicotine extracted from tobacco or synthetic nicotine combined with food-grade ingredients. A tobacco-derived product did not need to retain tobacco leaf, stems, or another visible plant component to be taxable.

Why tobacco-derived nicotine was taxable

La. R.S. 47:842(15) included "articles and products made of tobacco" within smokeless tobacco.

The Department reasoned that nicotine extracted from a tobacco plant is itself part of the plant. A finished product made with that extract was therefore made of tobacco, even if no other tobacco material remained in the final product.

The statute did not require the product to contain every part of the plant or any particular tobacco component.

Why synthetic and other-source nicotine was taxable

The same statute also included a "tobacco substitute." The ruling used the ordinary meaning of substitute: something that takes the place or function of another.

Nicotine from a non-tobacco source, and synthetic nicotine, performed the function of nicotine found in tobacco. The Department therefore classified those products as tobacco substitutes and taxed them as smokeless tobacco.

Exemption discussed

La. R.S. 47:855 exempted smoking and chewing tobacco purchased by or for state institutions for issue to inmates.

The ruling said Chapter 8 of Subtitle II of Title 47 provided no other exemptions. It also noted that a 2021 bill proposing to exclude nicotine-only products from smokeless tobacco failed in a Senate committee.

What this means for you

Manufacturers and distributors

Do not classify a product as nontobacco merely because its nicotine is purified, comes from another source, or is synthetic. Under this ruling, the product remained taxable as smokeless tobacco.

Retailers

Nicotine pouches, lozenges, toothpicks, and similar oral products fell within the tobacco-excise-tax system described in the ruling. Confirm registration, invoicing, and tax treatment for each product line.

Tax professionals

The Department's analysis turns on the broad statutory phrases "made of tobacco" and "tobacco substitute," not on whether the final product contains visible tobacco plant material.

Common questions

Q: Is a pouch made with tobacco-extracted nicotine taxable if it contains no tobacco leaf?

A: Yes. The ruling considered the nicotine itself part of the tobacco plant, so the pouch was made of tobacco.

Q: Does synthetic nicotine escape tobacco excise tax?

A: No. The Department treated it as a tobacco substitute because it takes the place of nicotine found in tobacco.

Q: What about nicotine from a non-tobacco natural source?

A: The same substitute analysis applied. The source did not change the product's function.

Q: Did Louisiana provide a general nicotine-only exemption?

A: No under the statutes discussed in the ruling. The document identified only the state-institution inmate exemption and noted that a proposed 2021 nicotine-only exclusion did not pass.

Citations and references

• La. R.S. 47:841 — tobacco excise tax on sale, use, consumption, handling, or distribution
• La. R.S. 47:842(15) — smokeless tobacco, products made of tobacco, and tobacco substitutes
• La. R.S. 47:855 — state-institution inmate exemption discussed
• LAC 61:III.101(C) — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 22-003

Original ruling text

Revenue Ruling No. 22-003
November 17, 2022
Tobacco Tax
Non-Traditional Tobacco and Nicotine Products
Purpose
The purpose of this ruling is to clarify the taxability of non-traditional tobacco and nicotine
products.
Law
In Louisiana, tobacco excise tax is levied “upon the sale, use, consumption, handling or
distribution of all cigars, cigarettes, smoking and smokeless tobacco, and vapor products and
electronic cigarettes.”1
LA R.S. 47:842 defines smokeless tobacco as:
(15) "Smokeless tobacco" means all smokeless tobacco including but not
limited to fine cut, long cut, packed in pouches, snuff, snuff flower, chewing
tobacco, cavendish, plugs, twists, shorts, refuse and other scraps, clippings and
sweepings of tobacco, and other forms of loose tobacco, articles and products
made of tobacco, or a tobacco substitute.
(Emphasis added.)
Facts and Analysis
There are several non-traditional tobacco and nicotine products on the market, including but
not limited to nicotine pouches, nicotine toothpicks and nicotine lozenges. These products
are manufactured with nicotine which is extracted from tobacco or synthetic nicotine which
is combined with other food-grade ingredients. Products using the nicotine extract do not
contain any other tobacco plant material in the final product. Nicotine pouches are typically
placed under the lip and held there for up to sixty minutes. During this time, the nicotine is
absorbed through the gums. Nicotine lozenges are placed in the mouth and dissolve over
approximately ten minutes. Toothpicks are placed in the mouth and the nicotine is drawn
out by the user’s saliva.
As outlined above, Louisiana tobacco excise tax is imposed on “the sale, use, consumption,
handling or distribution of all cigars, cigarettes, smoking and smokeless tobacco, and vapor
1 LA R.S. 47:841.

A Revenue Ruling is issued under the authority of LAC 61III.101 (C). A Revenue Ruling is written to provide
guidance to the public and to Department of Revenue employees. It is a written statement issued to apply
principles of law to a specific set of facts. A Revenue Ruling does not have the force and effect of law and is not
binding on the public. It is a statement of the department's position and is binding on the department until
superseded or modified by a subsequent change in statute, regulation, declaratory ruling, or court decision.

Revenue Ruling 22-003
November 17, 2022
Page 2 of 2

products and electronic cigarettes.”2 Smokeless tobacco is defined to include “products made
of tobacco, or a tobacco substitute.”3 A substitute is a “thing that takes the place or function
of another”.4 The products made with nicotine extracted from tobacco plants fall within the
definition of smokeless tobacco, because the nicotine extract is derived from the tobacco
plant, and thus, the product is made of tobacco. The nicotine is part of the plant. There is no
requirement that the product contain all or even specific parts of the plant. Further, even if
the nicotine used in these products was not made of tobacco, the products still fall within the
definition of smokeless tobacco as a tobacco substitute. Likewise, products made with
nicotine extracted from other sources and synthetic nicotine constitute tobacco substitutes,
because the nicotine takes the place of the nicotine found in tobacco, and therefore, is subject
to tobacco excise tax as smokeless tobacco.
LA R.S. 47:855 exempts from tobacco tax, “smoking and chewing tobacco purchased by or
for state institutions for issue to the inmates”. There are no other exemptions provided in
Chapter 8 of Subtitle II of Title 47 of the Louisiana Revised Statutes of 1950, as amended5.
Ruling:
Any product made of nicotine extracted from tobacco is considered to be made of tobacco
and is subject to Louisiana tobacco excise tax. Additionally, products made with nicotine
extract, regardless of the source, or synthetic nicotine are considered tobacco substitutes,
and are therefore subject to Louisiana tobacco excise tax imposed on smokeless tobacco.
Kevin J. Richard, CPA
Secretary of Revenue

2 LA R.S. 47:841.

3 LA R.S. 47:842(15).
4 See Merriam-Webster definition.
5

House Bill 525 of the 2021 Regular Session proposed to exclude from the definition of smokeless tobacco products
containing nicotine but no other substance considered to be smokeless tobacco. The measure failed in the Senate
Committee on Revenue and Fiscal Affairs.
A Revenue Ruling is issued under the authority of LAC 61III.101 (C). A Revenue Ruling is written to provide
guidance to the public and to Department of Revenue employees. It is a written statement issued to apply
principles of law to a specific set of facts. A Revenue Ruling does not have the force and effect of law and is not
binding on the public. It is a statement of the department's position and is binding on the department until
superseded or modified by a subsequent change in statute, regulation, declaratory ruling, or court decision.