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Smoke shops take tax, fee hit in roll-your-own-cigarette bill

Cheap Smokes
Certain legislators are huffing and puffing about a bill, currently matriculating through the Legislature that would regulate and enforce taxes on roll-your-own cigarette retailers.

Rep. Ross Hunter (D – 48th District, Bellevue) proposed the second substitute to House Bill 2565 that was recommended out of the Ways and Means Committee on Feb. 27 with a 19-8 vote.

The measure that passed out of committee requires roll-your-own cigarette retailers to become certified and pay an annual certification fee of $100. Retailers must also purchase tax stamps to enforce the collection of taxes on tobacco products. The stamps would be affixed to containers of roll-your-own cigarettes and the bill requires customers to carry their cigarettes in those containers.

The substitute bill also stipulates that retailers can only sell tobacco products that comply with the certification requirements under the master settlement agreement between the state and tobacco companies, and roll-your-own machines must be equipped with metering devices to count the number of cigarettes made.

The master settlement agreement was established in 1998. Tobacco companies in the United States reached an agreement with 46 states, including Washington, in which the states give up their claims that the companies violated consumer protection and antitrust laws. In return, the tobacco companies would pay the states to compensate taxpayer money that is used to care for patients with smoking related diseases.

Washington State receives $4.5 billion spread over 25 years in compensation money.
The agreement also created new limitations on big tobacco, including the prohibition of advertising to minors as well as advertising and marketing restrictions. It also helps fund anti-tobacco education.

Customers who use roll-your-own machines typically purchase tobacco from the retailer. The tax rate on tobacco in Washington is currently 95 percent of the taxable sales price, while the tax rate for a carton of cigarettes is $30.25, nearly one-third the total cost. A carton includes 200 cigarettes. Customers who choose to roll their own cigarettes pay nearly half for their tobacco than those who purchase cigarettes.

The legislation would ultimately require roll-your-own customers to pay more.
Representative Bill Hinkle (R – 13th District, Cle Elum) is a staunch opponent of the measure. “I want to kill the bill,” said Hinkle. “It’s bad legislation.”

Hinkle believes that Democrats are attempting to make money and as a result would force roll-your-own cigarette stores out of business.

“It’s a classic example of Olympia picking winners and losers,” said Hinkle.

Officials at the Washington State Department of Health believe the bill addresses a public health issue.

“One of the ways that you prevent cigarette smoking is to charge higher tax on cigarettes,” said Tim Church, director of communications at the department of health. Church believes that roll-your-own cigarettes should be taxed as well.
“In general, our feeling is a cigarette is a cigarette is a cigarette,” he said. “Whatever you call it, it’s gonna kill you.”

Officials at the attorney general’s office had concerns with the mechanics of the original bill. According to Robert Fallis, assistant attorney general, the original measure didn’t ensure that the requirements of the master settlement agreement would be met. However, Hunter’s substitute bill is more in line with the agreement.

Officials at the attorney general’s office don’t have an opinion on whether roll-your-own machines should exist, but they are concerned with how the Legislature decides to deal with the issue, said Fallis.

According to Hunter, the substitute bill has the same effect as the original bill, but resolves the potential issues the original bill would have created with the tobacco settlement.

Roll-your-own tobacco users would pay the equivalent to what regular cigarette purchasers pay, said Hunter.
Hunter believes that do-it-yourself smoke shops are created to avoid cigarette taxes and that legislators shouldn’t make the argument that they should stay in business.

“I recognize that doesn’t sound sympathetic, but sorry,” said Hunter. “I just think everyone should pay the same taxes on cigarettes.”

The legislation would add close to $13 million in revenue per year, he said.
Steve Castle is the manager of Cheap Smokes in Seattle and serves about 500 customers who roll their own cigarettes.
Patrons come into the store, buy empty cigarette tubes, loose tobacco and rent the machine. They end up paying about $40 a visit, Castle noted.

Castle is opposed to the legislation. “It upsets me completely,” he said. “They’ll put me out of business.”
He believes that if the bill passes, it would close all of the do-it-yourself smoke shops in Washington.
Castle has been calling and emailing his legislators, as well as gathering signatures for a petition to block the measure. His shop employs two workers.

Castle believes that the proponents of the bill are helping the big tobacco companies while shuttering small, entrepreneurial businesses.

The measure has to pass through both chambers of the Legislature by March 8 and the governor must sign it before it becomes law.

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