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Cigarette company ordered to pay taxes

September 21st, 2011 Posted in Tobacco companies Buy cheap cigarettes online Tags:

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A Kanawha judge has ordered a Moundsville cigarette company to comply with state laws and pay at least $82,500 in annual state taxes it was fighting.

Compton Point, a store in Moundsville, sells empty paper cigarette tubes and loose tobacco and allows consumers to place the materials in a machine that rolls them into a product that can be smoked. Consumers save about $7 per carton in the process.

An attorney for the state Tax Department this week said each machine, based on an output of 300 cartons per week, is subject to $82,500 in taxes. But she pointed out that it’s not known how many machines are in operation because there is no regulation to register them.

But the company contended it was exempt from paying an excise tax on the cigarettes since it sold only raw materials and was not technically the manufacturer.

State Tax Commissioner Craig Griffith disagreed and so did Judge Tod Kaufman, who filed a ruling Thursday in Kanawha Circuit Court.

In his ruling, Kaufman wrote, “this Court hereby declares that Compton Point is a manufacturer and its business scheme is an illegal manufacture of cigarettes.”

Compton Point is based in Cincinnati, Ohio, and has been in business since 1991. It filed with the Secretary of State’s Office for a business license in January and opened the store at the Moundsville Shopping Plaza.

In addition to enforcing the tax collection, Kaufman noted that the company is skirting other state laws as well.

Kaufman said the company’s paper tubes have not been tested in accord with the state’s fire safety legislation and the process does not result in a typical 20-cigarette packaged product with warnings and other indications of legitimacy.

Compton Point contended that it was not a wholesaler, either, and that the state has the authority to collect tobacco taxes only from wholesalers.

Kaufman disagreed on that point, too, saying Compton Point should be categorized as a wholesaler and a manufacturer.

The judge wrote in his decision, “The facts of this case lead to the conclusion that Compton Point is both a manufacturer of cigarettes and also, a wholesaler who is evading many stringent regulations imposed upon the legitimate sale of cigarettes.”

Kaufman’s ruling concurs with court decisions in several other states, including Alaska, Ohio and New Hampshire.

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