I know of a daycare provider in my area that has her husband watch the kids at points through the day ~ the parents are very much aware of it too.
I'm not a smoker but I also don't see this as a reason to get upset and or report her. She might have looked embarassed as you might have shot her a look not realizing as your feeling strong enough to post if you should report her.
She may have hand sanitizer?? Also, you don't know if she smokes around the kids if her husband isn't there.
I wouldn't think the worse