Reflecting a national trend, roll-your-own tobacco shops have been opening up all over Southwest Florida.
More than half the cost of a pack of cigarettes is in taxes. By rolling their own, smokers can beat the tax man. And, the roll-your-own tobacco emporiums help make it easy.
At CTC Tobacco in Port Charlotte the rolling machines are busy all day. Smokers are able to buy the equivalent of carton of cigarettes for about $14. The cheapest generic cigarettes sold at Wal-Mart cost $46 a carton. Blake Vantrees opened CTC Tobacco earlier this year.
"It's tough economic times and lot of people who smoke tend to be working class or poorer and so the price of cigarettes is a big impact on them and it seemed a situation where people needed inexpensive cigarettes and it seemed like a good time to do it," he said.
But, government officials are taking notice.
The federal government sharply increased the tax on cigarette tobacco and pipe tobacco in 2009 to help pay for the expansion of the Children's Health Insurance Program. Both kinds of tobacco had been taxed at $1.09 a pound. The pipe tobacco tax jumped to nearly $3 and cigarette tobacco to almost $25.
Roll your own tobacco shops are selling their customers product labeled pipe tobacco – thus the lower price. So, what's the difference between pipe and cigarette tobacco?
Congressional liaison for the Alcohol, Tobacco, Tax and Trade Bureau Tom Hogue said the feds are looking for a way to clarify that.
"Our lab has been looking into that quite a bit we have not found at this point a single silver bullet test that will let us look at two products and say definitively that this is a pipe product and this is a roll your own product. It's very hard to draw a distinction," he said.
Hogue said the feds will continue to try to define a difference and implement the law.
Customers at roll-your-own shops don't pay state taxes either. But, that could soon change in New Hampshire where Assistant Attorney General David Rienzo argued before the state Supreme Court that roll-your-own shops are subject to provisions of the Tobacco Master Settlement Agreement reached between the states and the tobacco industry in 1998.
"Among those obligations is that manufacturers who never joined the MSA have to pay into an escrow account a certain amount of money for every cigarette they manufacture in the state. We took the position that the tobacco shops that bought the machines and operate them constitute manufacturers," he said.
The New Hampshire Supreme Court agreed and the price of cigarettes produced in roll-your-own shops there could soon reflect that decision.
Meanwhile, a Federal Court in Ohio placed an injunction on enforcing a similar lower court decision there. The appeal resulting in the injunction was brought by RYO Machine Rental, which provides cigarette rolling machines to roll-your-own operations in many states. RYO's President Phil Accordino said the original decision was not fair.
"The judge agreed with us that these machines could hardly be deemed manufacturing machines – a manufacturing machine for Phillip Morris will produce 20,000 cigarettes a minute – it would take our machines two days to produce what their machine would produce in one minute," he said.
Accordino said a hearing on the appeal will be scheduled later this year. Officials in Florida declined to comment on the tax status of roll-your-own cigarettes in this state pending the decision in Ohio.