One of the latest developments in the sale of tobacco products is the use of roll-your-own (RYO) cigarette machines that allow smokers to produce and purchase a carton of cigarettes for a fraction of the normal price.
Earlier this month, Fox25 presented the issues surrounding these machines in a well-reported news story. The piece mentioned that Gov. Deval Patrick in his FY13 budget proposed (see Section 5) increasing the tax on loose RYO tobacco to bring the tax in line with that assessed on commercially packaged cigarettes, as well as a $25,000 annual licensing fee for each RYO machine.
WBZ also did a good job outlining the issues in a January story that mentioned ongoing litigation concerning roll-your-own shops in New Hampshire that were getting around the Granite State's cigarette tax.
Gov. Patrick is far from alone in proposing legislation to deal with RYO cigarettes; indeed, some of the most stringent legislative proposals have come from states such as Florida, Arizona, West Virginia, and Virginia. Especially in Virginia, which still produces a lot of tobacco, the growth of RYO machines is seen as weakening market share of the big tobacco manufacturers.
States are wrestling with this issue in the absence of guidance from the federal government. A lawsuit filed in Ohio in 2010 to challenge a federal Alcohol and Tobacco Tax and Trade Bureau (TTB) ruling that said RYO retail businesses should be treated as manufacturers is now on appeal. Should the TTB ruling be upheld, businesses using RYO machines would face heavy federal licensing fees that in all likelihood would make the cost of the machines prohibitive.
In Virginia, proposed legislation to make RYO shops cigarette manufacturers — which would require them to meet the same tax and regulatory requirements as major cigarette producers — has bipartisan legislative support.
In Florida, Rep. Mike Horner, a Republican from Kissimmee has proposed similar legislation, calling use of the machines "a tax dodge."
Similarly, in Arizona, Rep. Jim Weires, a Republican from Phoenix, has filed legislation to classify businesses with RYO machines as manufacturers and subject them to the same regulations and taxes as companies that produce commercial cigarettes.
In West Virginia, the Senate with but one dissent passed legislation to tax RYO cigarettes at the same rate as a pack of cigarettes, and would also classify RYO shops as manufacturers.
Many other states are watching the outcome of the federal lawsuit.
There is also the issue of fire-safe cigarettes – safe in the sense of fire safety. Cigarette manufacturers now use fire-safe papers; the RYO machines do not. This could prove to be a new front in the effort to slow down the growth of RYO cigarettes.