Summary
The Supreme Court of Texas holds that VELO oral nicotine pouches are taxable as tobacco products under Texas Tax Code section 155.001(15)(E) because their blend of non-tobacco plant matter and nicotine functions as a substitute for tobacco in taxable pulverized-tobacco products. The court reverses the contrary judgment of the court of appeals and remands for consideration of the taxpayer’s equal-and-uniform constitutional challenge. The court declines to separately analyze the taxpayer’s vagueness challenge after concluding that the statute unambiguously applies.
Court
Supreme Court of Texas
Jurisdiction
Supreme Court of Texas
Decision date
May 8, 2026
Docket number
24-0052
Disposition
reversed_and_remanded
Questions Presented
- Whether VELO oral nicotine pouches are an article or product made of tobacco or a tobacco substitute under Texas Tax Code section 155.001(15)(E).
- Whether nicotine alone constitutes a tobacco substitute under the statute.
- Whether the court of appeals properly treated RJR's constitutional challenges as moot after holding that VELO pouches were not taxable.
- Whether RJR's void-for-vagueness challenge required separate analysis after the court held that the statute unambiguously applied to VELO pouches.
- Whether RJR's challenge under the Texas Constitution's equal-and-uniform taxation requirement should be remanded to the court of appeals for consideration in the first instance.
Holdings
- VELO pouches are made of a tobacco substitute and are taxable tobacco products under Texas Tax Code section 155.001(15)(E).
- Nicotine isolate alone is not a tobacco substitute under section 155.001(15)(E).
- The purpose for which a substitute is used does not determine taxability under the statute, and recreational nicotine use alone does not make nicotine a tobacco substitute.
- RJR's constitutional challenges were not moot merely because the court of appeals had ruled that VELO pouches were not taxable; they were alternative claims that must be considered after the Supreme Court held the pouches taxable.
- No separate vagueness analysis was necessary because the statute unambiguously applied to VELO pouches and RJR's vagueness arguments substantially overlapped with the existing pro-taxpayer ambiguity and equal-and-uniform doctrines.
- RJR's equal-and-uniform challenge must be remanded to the court of appeals for consideration in the first instance.
Court Document
Open PDFLoading document…