Vermont’s Tobacco Policy Overhaul Undermines Harm Reduction

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Key Points:

• Legislative Scope: Vermont Senate Bill 198 would comprehensively overhaul tobacco regulation, licensing, enforcement, and taxation while creating an expansive new category of “tobacco substitutes” that includes e-cigarettes, vapor products, nicotine pouches, and liquids.

• Core Concern: Although framed as modernization, the bill fails to recognize the continuum of risk and treats substantially less harmful alternatives like combustible cigarettes, risking misinformation and discouraging harm reduction.

• Expanded Authority: S. 198 significantly broadens the power of the Department of Liquor and Lottery, increases licensing fees and penalties, creates new tax obligations, and tightens enforcement requirements.

• Licensing Burden: All retailers would need tobacco licenses, with an added endorsement for substitutes; fees would jump from $110 to $1,000 for a tobacco license and from $50 to $1,000 for a substitute endorsement, with steep fines for noncompliance.

• Distribution Limits: The bill bans direct-to-consumer shipping, restricts sales to licensed wholesalers and retailers, mandates compliance inspections targeting a 90 percent compliance rate, and imposes broad marketing restrictions tied to perceived youth appeal.

• Tax Overhaul: S. 198 introduces cigarette-style tax stamps and a new two-tier wholesale tax on tobacco substitutes – 92 percent for products under 5 mg nicotine per gram and 100 percent for products at or above that level.

• Nicotine Pouches Hit Hard: Products currently taxed at $2.57 per ounce would be reclassified and subjected to dramatically higher percentage-based taxes, marking a major policy shift.

• Adult Trends Ignored: Vermont smoking rates are already near historic lows (10.5 percent in 2024), while vaping rose as smoking fell – evidence of successful substitution rather than a growing crisis.

• Equity Impact: Vaping is more common among lower-income and less-educated adults, meaning the bill’s higher taxes and fees would disproportionately burden populations most likely to rely on harm reduction tools.

• Youth Use Declining: Youth smoking and vaping are at historic lows, with far more adults vaping than high school students, undermining the justification for stricter controls.

• Retail Compliance Strong: Vermont retailers already exceed the bill’s compliance target, with a 93.5 percent compliance rate in FDA inspections.

• Spending Mismatch: Despite collecting $104.5 million in tobacco revenue in 2024, Vermont spent only $2.7 million on prevention and cessation – three cents per dollar collected.

• Bottom Line: S. 198 is unnecessary and misaligned with Vermont’s public health progress, overregulating harm reduction products, increasing costs for adults and small businesses, and risking setbacks in smoking reduction rather than advancing public health.

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Legislation introduced in the Green Mountain State would significantly overhaul Vermont’s regulation, licensure, enforcement, and taxation of tobacco products, while creating a newly expanded definition of “tobacco substitutes.” Although lawmakers frame the bill as modernizing state law to include tobacco harm reduction products, the approach continues to demonize substantially less harmful alternatives to combustible cigarettes. By failing to acknowledge a continuum of risk, the legislation risks reinforcing misinformation and could ultimately push adults back toward the most dangerous nicotine product of all.

S. 198 would substantially expand the authority of the Vermont Department of Liquor and Lottery, sharply increase licensing fees and penalties for manufacturers and retailers, eliminate criminal penalties for minors, create new tax obligations, and significantly raise taxes on certain nicotine-containing products.

Under the proposal, tobacco licensure would be expanded to cover the importation, distribution, wholesale, and retail sale of tobacco products, newly defined tobacco substitutes, nicotine-containing substances, and tobacco paraphernalia. Tobacco substitutes are broadly defined as products containing natural or synthetic nicotine intended for consumption by inhalation, absorption, chewing, or similar means, including e-cigarettes and vapor products, nicotine pouches, and liquids – regardless of whether they contain nicotine.

All retailers would be required to obtain a tobacco license, and those selling substitutes would need an additional endorsement. Licensing fees would increase dramatically, from $110 to $1,000 for a tobacco license and from $50 to $1,000 for a tobacco substitute endorsement. Penalties for unlicensed sales would rise to as much as $2,000 for a first offense and up to $5,000 for subsequent violations.

The bill also mandates compliance inspections to achieve a 90 percent retailer compliance rate and prohibits direct-to-consumer shipments of tobacco and tobacco substitute products. Shipments would be limited to licensed wholesale or retail dealers. Additionally, the legislation bans marketing deemed to “appeal” to minors, including products that imitate foods or candy, resemble electronics or gaming devices, or use characters or celebrities associated with youth.

Perhaps the most significant change is the imposition of cigarette-style tax stamps on tobacco substitutes and the creation of a bifurcated tax structure. Under S. 198, tobacco substitutes containing less than five milligrams of nicotine per gram would be taxed at 92 percent of the wholesale price, while products at or above five milligrams per gram would face a 100 percent wholesale tax.

This represents a major shift in how Vermont taxes nicotine pouches, which are currently taxed at $2.57 per ounce – the same rate as snuff. Under S. 198, nicotine pouches would be reclassified as tobacco substitutes and subject to the new, substantially higher percentage-based taxes.

While the bill avoids the flavor bans proposed in prior sessions, it ignores Vermont’s continued success in reducing adult smoking and youth tobacco use. According to CDC’s Behavioral Risk Factor Surveillance System data, in 2024 just 10.5 percent of Vermont adults smoked – among the lowest rates on record – while 5.9 percent reported vaping. From 2023 to 2024, adult smoking declined by 7.1 percent as adult vaping increased by 20.4 percent.

Similar to smoking patterns, vaping was more prevalent among lower-income and less-educated adults. In 2024, 9.2 percent of adults earning $25,000 or less reported current e-cigarette use, compared to 4.7 percent of adults earning $50,000 or more, making low-income adults nearly twice as likely (1.9 times) to vape. Educational disparities followed a similar trend: 5.9 percent of Vermonters without a high school diploma or G.E.D. were current e-cigarette users in 2024, compared to 2.8 percent of college graduates. Adults without a high school degree were 2.1 times more likely to vape than those with a college degree.

The legislation also disregards historic lows in youth tobacco use. CDC Youth Risk Behavior Survey data show that in 2023 only 6 percent of Vermont high school students smoked combustible cigarettes. Between 2019 and 2023, ever-use of e-cigarettes among Vermont high school students declined by 35.7 percent, while current use dropped by 39 percent. In 2023, approximately 3,912 high school students vaped, compared to more than 26,000 Vermont adults – meaning more than six adults vaped for every one high school student.

Further, federal compliance data indicate Vermont retailers are already performing well in preventing underage sales. In 2024, the FDA conducted 309 underage compliance inspections in the state, resulting in just 20 violations – a 6.5 percent failure rate, or 93.5 percent compliance. S. 198’s 90 percent compliance target is already being exceeded.

Rather than imposing new taxes and regulatory burdens on reduced-risk products, Vermont lawmakers should focus on better using existing resources for tobacco control. In 2024, the state collected $104.5 million in tobacco-related revenues but allocated only $2.7 million toward tobacco prevention and cessation – just three cents for every dollar collected.

S. 198 is unnecessary and misaligned with Vermont’s public health progress. The bill overlooks real declines in smoking and youth use, overregulates harm reduction products, and risks confusing consumers about relative risk – undermining, rather than advancing, public health goals.

Nothing in this analysis is intended to influence the passage of legislation, and it does not necessarily represent the views of Tobacco Harm Reduction 101.