By Timothy S. Donahue

Top Takeaways:

• Tax clarification: Indiana has ruled that smokeable products containing neither tobacco nor nicotine are not subject to the state’s cigarette or other tobacco product taxes.
• Statutory interpretation: The Department of Revenue stated that Indiana’s tax laws apply only to products containing tobacco or nicotine, leaving tobacco-free and nicotine-free products outside their scope.
• Industry impact: The ruling provides tax certainty for manufacturers and retailers of emerging smokeable alternatives that contain neither ingredient.

The Indiana Department of Revenue has ruled that smokeable products containing no tobacco or nicotine are not subject to the state’s cigarette tax or other tobacco product tax, offering new guidance on how Indiana’s tobacco tax laws apply to emerging smoking alternatives.

In Revenue Ruling No. 2026-01-OTP, issued on July 1, the department concluded that products lacking both tobacco and nicotine fall outside the statutory definitions in Indiana’s tobacco tax code and therefore are not taxable under those provisions.

According to the ruling, Indiana law defines cigarettes, tobacco products, and alternative nicotine products as requiring the presence of either tobacco or nicotine. Because the products at issue contain neither, they do not qualify for taxation under Indiana Code 6-7.

The ruling addresses a growing category of smokeable products marketed as tobacco- and nicotine-free alternatives. Although these products may resemble traditional smoking products in form or use, the Department of Revenue said the statutory language—not the method of consumption—determines whether they are subject to excise taxes.

For manufacturers, distributors, and retailers, the decision provides additional certainty in determining tax obligations in Indiana. It also highlights that state tobacco tax laws, many of which were written before newer nicotine-free products entered the market, may not automatically encompass emerging product categories.

The ruling applies specifically to Indiana’s existing statutes and does not alter state law. Any effort to tax tobacco-free, nicotine-free smokeable products would require legislative action to expand the statutory definitions that govern cigarette and tobacco product taxation.