Wellington Combined Taxis is investigating after high-profile entrepreneur Sam Morgan alleged he saw a driver smoking in their vehicle.
Mr Morgan tweeted on Saturday night he had seen a driver smoking in their car just before he entered the taxi.
"Dear Wellington Combined Taxis. Cab 272 is a driver who smokes in their car. I'd like to provide a 2 star rating. Thanks," he tweeted.
Wellington Combined Taxis chief executive Erik Westergaard said the company was investigating.
"It's a clear breach of our rules," he said.
Mr Westergaard said as a non-smoker himself he had "zero tolerance for smokers".
"We take this matter very seriously."
The driver could face a penalty of removal from the company's dispatch, leaving them unable to work.
But Mr Westergaard said it was more likely they would receive fines and demerit points.
If a driver receives too many demerit points they are asked to leave the company.
Mr Westergaard said it was not unreasonable for Mr Morgan to have publicly tweeted his complaint to his more than 26,000 followers.
"He obviously felt aggrieved about what happened and he reacted in a manner that he thought was appropriate."
He said customers could contact Combined Taxis through a number of channels if they had complaints, including ringing him directly.
"By all means, contact me directly and ask to speak to the chief executive."
It is illegal for either passengers or drivers to smoke in taxis in New Zealand.
By ONE News Reporter Anna Harcourt