The 95% Tax Solution: How Washington's Nicotine Pouch Law Could Be A Vaping Industry Death Sentence

An unelected agency is about to devastate an entire industry—and they're doing it by misinterpreting a law that never mentioned vaping.

Starting January 1, 2026, the Washington Department of Revenue plans to impose a steep 95% excise tax on nicotine-containing vapor products. If you're thinking, "Wait, didn't the legislature just pass a law about nicotine pouches?"—you'd be absolutely right. And that's exactly the problem.

Senate Bill 5814 was meant to address only one thing: nicotine pouches. The legislative intent was clear, the focus was sharp, and the outcome appeared simple. But somewhere between the Capitol and the Department of Revenue's offices, things went completely wrong. The DOR has decided that this law—which never mentions "vapor" or "vapor products"—somehow grants them authority to fully change how vaping products are taxed in Washington.

This isn't just bureaucratic overreach. It's a masterclass in how unelected officials can fundamentally change the business landscape without a single vote from your elected representatives.

Here's where it gets interesting. Washington has two separate tax structures: one for tobacco products and one for vapor products. They're distinct, clearly defined, and have operated independently for years. Vapor products are currently taxed per milliliter—a simple calculation that businesses understand and can plan around.

The tobacco products tax? That's a different beast entirely: 95% of the taxable sales price. It's designed for traditional tobacco, and it's punitive by design.

SB5814 amended the definition of "tobacco products" to include nicotine-containing products intended for human consumption. Fair enough—that makes sense for nicotine pouches, which was the whole point. However, the law did not touch the vapor products statute. It did not redefine what constitutes a vapor product, nor did it create any connection between these two separate tax categories.

Yet the Department of Revenue has decided that if a vapor product contains nicotine, it is now magically a tobacco product subject to the 95% tax rate. Never mind that the vapor products statute explicitly states that a product can't be both a vapor product and a tobacco product. Never mind that whether something is a vapor product has nothing to do with nicotine content—it's about the delivery mechanism, the heating elements, and the device itself.

The Statutory Gymnastics

The DOR's position demands some impressive mental gymnastics. The vapor products statute states vapor products can't also be classified as tobacco products. The tobacco products statute doesn't mention vapor products at all. There's no cross-reference, no explicit link, and no legislative language creating a pathway from one category to the other.

But the DOR has essentially decided: "Nicotine equals tobacco, therefore nicotine-containing vapor products are tobacco products, therefore 95% tax." It's circular reasoning that would make a philosophy professor weep.

What makes this particularly frustrating is the complete lack of clarity about what happens to the existing vapor products tax. Does the 95% tobacco tax replace the per-milliliter vapor tax? Does it add to it? The DOR's interpretation doesn't specify. The law certainly doesn't clarify. Businesses are left in limbo, unable to plan, price their products, or determine if their current inventory will bankrupt them come January 1st.

Follow The Money

There's another wrinkle that raises questions about motivations. Currently, 50% of vapor product tax revenue is allocated to the Andy Hill Cancer Research Endowment Fund, a dedicated funding stream for a specific purpose. Under the tobacco products tax, however, all funds go to the general fund.

The DOR's own financial forecasts predict a loss to the Andy Hill Cancer Account due to this reclassification. They openly admit that their interpretation will shift funds away from cancer research and into the state's general fund. A cynical observer might note that general fund money is much more flexible for politicians than dedicated funding streams.

The Real-World Impact

Let's be clear about what a 95% excise tax means. This isn't a 95% sales tax that consumers see at checkout. This is a tax on the wholesale price that gets compounded through every step of the supply chain. By the time a product reaches a consumer, that 95% tax could easily double or triple the final price.

For businesses, the math is brutal. Existing inventory purchased under the old tax regime suddenly becomes unsellable at competitive prices. Customers will flee to online retailers in other states or, more likely, to the black market. Small businesses operating on thin margins will simply close their doors.

And for what? A law that was supposed to address nicotine pouches has been twisted into an existential threat to an entire industry—not through legislative debate, not through democratic process, but through administrative interpretation.

The Accountability Gap

This is where the rubber meets the road on the issue of democratic governance. Legislators are elected. They face voters. They can be held accountable for their decisions. When they pass a law, there's debate, public input, and a record of who voted which way.

Bureaucrats at the Department of Revenue? They are appointed, not elected. They don't face voters. When they choose to interpret a law in a way that significantly changes an industry, there's no election to hold them accountable.

The legislature passed a law about nicotine pouches. The DOR decided it was about vapor products. That's not interpretation—that's legislation by another name. And it's being done by people who never have to answer to the public for their decisions.

What Happens Next

The good news—if you can call it that—is that this interpretation isn't final yet. Legal challenges are being prepared, and formal requests for binding tax rulings have been submitted. There's still time to push back, demand clarity, and insist that laws mean what they say, not what bureaucrats wish they said.

But time is running out. January 1st is approaching quickly, and businesses need answers. They need to understand how to price their products, manage their inventory, and determine if they will have a viable business model in two months.

The bigger question is whether we're okay with this governance model—where agencies can effectively change laws through creative interpretation, where industries can be disrupted without legislative action, and where the gap between lawmakers' intentions and what bureaucrats enforce becomes a huge divide.

Washington's vapor industry is about to learn the hard way what happens when that gap becomes unbridgeable. The rest of us should pay attention because this playbook can be used on any industry, any business, whenever an agency decides the law doesn't quite say what it needs to.

The legislature passed a law about nicotine pouches. The Department of Revenue is enforcing a law about vapor products. Those aren't the same thing—but in Olympia, apparently, that doesn't matter.