Roll-your-own cigarette stores going up in smoke

[WestVirginiaRebel]

Chicago Sun Times:

For smokers who bargained on roll-your-own cigarette stores for cheap smokes, it looks like those days are numbered.

On Friday, President Barack Obama is expected to sign into law a federal highway bill with a section that redefines tobacco manufacturers to include any business with a roll-your-own cigarette machine and taxes those products at the same rate as packaged smokes.

The move comes a month after Illinois increased taxes on such roll-your-own machine-made cigarettes.

Marcia Smith, 47, of Lake County, decided after the state tax increase that she should move her Smokes & Such tobacco shops in Skokie and Gurnee to Wisconsin, where taxes on rolled cigarettes are lower.

If Obama signs the law, she said she’ll shut her doors.

The machines, which cost about $33,000 each, allow customers to pick their own tobacco and pour it into a device that can roll the tobacco into a carton, or about 200 cigarettes, within minutes.

Since 2009, RYO stores have been selling cigarettes with far lower taxes than packaged cigarettes.

Why? In 2009, Congress more than doubled the federal excise tax on cigarettes, and, to bring RYO tobacco in line with packaged smokes, raised the tax on RYO tobacco from $1.10 a pound to $24.78 a pound. Yet it raised the tax on pipe tobacco by a far smaller amount — from $1.10 to $2.83 a pound.

And RYO stores popped up across the country.

Since the 2009 tax increases, Congress’ Government Accountability Office says RYO tobacco sales have fallen 74 percent while pipe tobacco sales have exploded, jumping from 3.2 million pounds to 30.5 million pounds a year, according to government reports.

The GAO concluded the increase was due to consumers switching to pipe tobacco for their machine rolled cigarettes and not to a sudden jump in pipe smoking.

The GAO found that a carton of RYO cigarettes cost half as much, or even less, than a carton of discount cigarettes at a store because of the lower taxes.

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In other words, the government was losing money, so they decided to enforce prohibition.