By Timothy S. Donahue
Top Takeaways:
- Tax expansion: New York will apply its existing 75% wholesale tobacco tax to nicotine pouches and other alternative nicotine products.
- Revenue boost: State officials expect the change to generate an additional $50 million annually for the Health Care Reform Act.
- Industry opposition: Philip Morris International’s U.S. business says the tax could increase illicit-market activity.
New York is bringing nicotine pouches into its tobacco tax framework.
Gov. Kathy Hochul signed the state’s $268 billion budget into law last week, extending New York’s existing 75% tax on wholesale tobacco products to nicotine pouches and other alternative nicotine products, including nicotine lozenges. The move means many next-generation nicotine products will now be taxed similarly to traditional tobacco products, even though they contain no tobacco leaf.
State officials estimate the change will generate an additional $50 million annually starting in fiscal year 2028, with the revenue directed to the Health Care Reform Act fund. The measure reflects a growing trend among states to capture tax revenue from emerging nicotine categories as cigarette consumption continues to decline.
New York State Budget Director Blake Washington has described nicotine pouches as a public health concern and previously characterized cigarettes and nicotine pouches as “a distinction without a difference.”
Supporters of the policy argue that consistently taxing all nicotine products helps discourage addiction while limiting youth access to nicotine products. The decision drew immediate criticism from the nicotine industry.
In a statement issued after the budget was signed, PMI U.S., the U.S. business of Philip Morris International, said it was disappointed with the decision and argued that lawmakers rejected alternative tax structures that would have generated more revenue while minimizing impacts on retailers and consumers.
“We are disappointed by Gov. Hochul’s decision not only to impose an excessive 75% wholesale tax on nicotine pouches, but to disregard a more fiscally responsible alternative that would have raised more revenue for the state with fewer unintended consequences for small businesses,” the company said.
PMI also argued that the policy could undermine tobacco harm-reduction efforts by making smoke-free alternatives less affordable for adult smokers. “A steep wholesale tax moves in the wrong direction for affordability and public health: it will raise costs and discourage adult smokers from switching to better alternatives, keeping more people on cigarettes, which carry the greatest health risks,” the company said.
The company further warned that the tax could contribute to illicit-market activity by widening price gaps between legal and unauthorized products. “It will also fuel illicit trade, shifting demand to unregulated markets where safeguards and age verification don’t exist, undermining the governor’s stated goal of preventing youth access,” PMI said.
The tax debate comes as nicotine pouches continue to grow rapidly across the United States. According to Grand View Research, the global nicotine pouch market size was estimated at US$6.9 billion in 2025 and is projected to reach US$42.48 billion in 2033, growing at a CAGR of 24.7% from 2026 to 2033.
The category, led by brands such as ZYN, On!, VELO, ALP, Rogue, CLEW, and Zone, has become one of the fastest-growing segments in the nicotine market as adult consumers increasingly seek smoke-free alternatives to cigarettes and to smokeless tobacco.
