Bill to update regulation of nicotine alternatives advanced

Lawmakers broadened a measure related to alternative nicotine products to add a 20% wholesale tax before giving the bill first-round approval March 19.

As introduced by Seward Sen. Jana Hughes, LB9 would amend the definition of alternative nicotine products to include nicotine analogues, or synthetic products that mimic the effects of nicotine.

Hughes said Nebraska currently is “playing whack-a-mole” in trying to catch up to an industry that constantly changes its products slightly to avoid regulation under the legal definition of a nicotine product. She said the bill would act as an “umbrella” to catch any “nicotine-like” product that companies release.

“Next year, when the new product comes out, we don’t have to bring back a bill to grab on to that new product,’ Hughes said. “It’ll automatically fall under our regulation.”

LB9 also would update provisions and procedures related to enforcement of the Tobacco Products Tax Act. Among other provisions, the bill would clarify that the state Department of Revenue is able to confiscate products that are not registered with the department under a vaping registry law passed last session.

A General Affairs Committee amendment, adopted 39-0, added provisions of Hughes’ LB125. Those provisions would levy a 20% wholesale tax on alternative nicotine products beginning Jan. 1, 2026. Currently, such products are subject only to the state’s 5.5-cent sales tax and any local sales taxes.

The state Department of Revenue estimates the provisions would increase revenue by $927,000 in fiscal year 2026, $2.4 million in FY27 and $2.7 million in FY28.

Hughes said the proposal is not meant to single out nicotine pouches, but simply would impose the same tax rate currently applied to tobacco alternative products. She said enacting a regulatory framework for nicotine alternatives only works if there is a taxation component to aid in enforcement.

“We felt that it was fair and equitable to tax alternative nicotine products at that same rate,” Hughes said. “We looked around at other states … and we found that Maine taxes [nicotine] pouches at 43% of the wholesale price and Minnesota taxes them at 95% of the wholesale price.”

Lincoln Sen. Jane Raybould offered an amendment that instead would tax such products by weight at the same rate as snuff, currently 44 cents per ounce. She said the 20% wholesale tax could result in a “regressive” 700% tax increase on some products.

Hughes opposed the amendment. She said tobacco pouches and nicotine pouches are fundamentally different. Tobacco weighs the same no matter how it is processed, she said, but companies could increase the level of nicotine in the powder used to make nicotine pouches to actually create a more potent end product that weighs less.

The Raybould amendment failed on a vote of 5-24. Lawmakers then voted 41-0 to advance LB9 to select file.