Congress rules on roll-your-own cigarettes

State case: Washington has been debating how to tax smokes

alexis.krell@thenewstribune.comJune 30, 2012 

Two events Friday made the future of Washington’s roll-your-own tobacco shops increasingly uncertain and might have taken the issue out of the hands of the state.

Congress passed a transportation package that included a provision that defines the shops as cigarette manufacturers. Then, just a few hours later, the state Supreme Court issued a decision that temporarily requires the stores to collect the same taxes applied to retail cigarettes, starting Monday.

Roll-your-own stores let customers use a machine that rolls loose-leaf tobacco into cartons of cigarettes for about half the cost of retail smokes.

Part of the package passed Friday by Congress would classify these stores as cigarette manufacturers – an amendment that takes effect with the president’s signature. Opponents say that imposes requirements that the machines and stores won’t be able to meet. It would also increase the taxes they pay or collect from customers with the proceeds funding some of the programs contained in the transportation law.

“To comply with that definition you have to seal, you have to package, you have to have environmental permits, you have to list ingredients,” said Bea Gonzalez, spokeswoman for RYO Machine, the Ohio-based manufacturer with about 2,000 of the machines nationwide. “It would effectively shut down all the machines.”

Washington state’s law takes a similar approach. It would tax roll-your-own smokes the same as retail cigarettes, which would make the costs of both about even. That would end the roll-your-own stores’ price advantage, which they say would put them out of business.

A Franklin County judge granted an injunction Monday to keep those taxes from going into effect Sunday while the plaintiffs await an official ruling on whether the law should have required a two-thirds vote in the state Legislature. Initiative 1053, passed by voters in 2010, requires a supermajority to raise taxes.

According to The Associated Press, Washington’s Supreme Court issued a temporary stay Friday night that allows the state to start collecting cigarette taxes for roll-your-own machine smokes until July 10, when the court will issue a more permanent ruling.

RYO Machine is a plaintiff in the Washington state suit.

That case could still be significant, even if the roll-your-own stores go out of business. Some say it could provide standing that would force the state Supreme Court to rule on the two-thirds requirement.

The goal of both the state and federal measures is the same. Supporters want to close what they say is a tax loophole that makes the roll-your-own product cheaper, and they say that there’s no difference between those cigarettes and a retail pack.

Gonzalez says her company’s machines, which make 200 cigarettes in about 10 minutes, shouldn’t be compared with those used by manufacturers.

“These are individual folks who have been rolling at home previously, who will just go back to rolling at home,” Gonzalez said about customers who use RYO Machine’s product.

Some have painted the roll-your-own debate as a war between Big Tobacco and Little Tobacco playing out at national and state levels.

“Big Tobacco was able to beat us by going around the system,” Gonzalez said about the federal measure, adding that RYO Machine would have liked to make its case before Congress.

Philip Morris USA, the maker of Marlboro cigarettes, supports the federal measure to reclassify roll-your-own shops.

“They are cigarette manufacturers and should make tax payments, be regulated by the FDA, and make state settlement payments just like other cigarette manufacturers,” said David Sutton, spokesperson for Altria, the parent company of Philip Morris USA. 253-597-8268

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