Nicotine case jeopardizes young Texans’ health and state tax revenues
The Texas Supreme Court is considering a lawsuit filed by a subsidiary of tobacco giant Reynolds American Inc. that could potentially cost hundreds of millions of dollars in lost state tax revenue and, more importantly, determine whether we can continue to protect Texas youth from certain nicotine products under the state Health and Safety Code. I’m hopeful the court will rule in favor of fair taxation and reasonable enforcement, as intended by the Texas Legislature.
In this legal case, RJR Vapor Co. is trying to elude state taxation of its nicotine pouches and lozenges.
Its lawsuit comes as tobacco-related companies are aggressively expanding their product lines beyond cigarettes, which are more difficult to market to new customers because of the stigma resulting from their known health risks.
Products like lozenges and pouches, which can be used discreetly, are a fastgrowing segment of the nicotine marketplace.
The company argues nicotine lozenges and pouches don’t fall under the state definition of tobacco products because they don’t contain tobacco leaf. RJR Vapor even suggested these products theoretically could be made with nicotine from plants such as tomatoes or eggplants – but of course, they aren’t.
As sources note, eggplants contain such a small amount of nicotine that a person would have to eat 20 of them to ingest the amount equal to one cigarette.
No wonder nicotine-rich tobacco is the go-to source when obtaining this addictive substance for lozenges and pouches; therefore, it’s only common sense to keep taxing these products accordingly, since the state Tax Code includes products made of tobacco. This lawsuit is bigger than RJR Vapor; if the company prevails at the Texas Supreme Court, the effect will extend far beyond this one company’s line of products, potentially draining hundreds of millions of dollars from the state in missed tax revenue and refunds.
The financial impact, however, is rather insignificant when compared to the effect this case could have on our ability to protect the health of young Texans. Because the Health and Safety Code incorporates the Tax Code’s definition of tobacco products in barring the sale of nicotine pouches and lozenges to minors, RJR Vapor’s lawsuit could prevent the state from enforcing this protection.
This is a particular concern, because the pouches and lozenges come in flavors like mint or citrus, making them even more attractive to young people. They likely aren’t aware it may interfere with their brain development, according to the U.S. Food and Drug Administration, and lead to a life-long addiction. The Legislature was certainly within its authority to ban the sale of nicotine pouches and lozenges to minors and to impose state criminal penalties that can be enforced by all Texas peace officers, along with civil penalties issued by my office. We think it’s of the utmost importance that this ban continue to be enforced.
Unfortunately, RJR Vapor already has won favorable rulings from a state district court and Texas’ Third Court of Appeals; the Texas Supreme Court is the last judicial front in this battle. My office is counting on the high court to side with state law and common sense to preserve the fair tax system intended by the Texas Legislature and to protect our kids.
Hegar is the Texas Comptroller of Public Accounts.