New Law May Force RYO Shops to Close

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New Law May Force RYO Shops to Close


WASHINGTON, D.C. -- The roll-your-own amendment included in the recently approved Transportation Bill will get rid of the tax disparity that currently exists between traditional cigarettes and the cost of rolling your own. But it could also force hundreds of RYO retailers -- mostly small tobacco shops -- to close their doors.

Once President Obama signs the full law -- which is expected to happen any day -- RYO businesses will be required to pay the same taxes as major cigarette and tobacco companies. In essence, the Transportation Bill expands the definition of a tobacco manufacturer to include businesses operating RYO machines and makes them responsible for federal excise taxes, according to the Wall Street Journal.

The report added, according to the U.S. Government Accountability Office estimates, changes in the market for RYO cigarettes reduced federal revenue by as much as $492 million between April 2009 and September 2011.

The issue has drawn a line between major tobacco companies and industry associations like NACS, the Association for Convenience and Fuels Retailing, and RYO retailers. This past spring, a coalition of more than 80 national and state associations and retail stores successfully lobbied Sen. Max Baucus (D-Mont.) to place RYO language in the Senate Transportation Bill, as CSNews Online previously reported.

However, owners of RYO businesses argue that they should not be treated the same as major cigarette companies because those companies manufacture more cigarettes at a faster rate -- roughly 1,000 times faster, according to WSJ. Also, RYO businesses are located in areas zoned for retail, not manufacturers.

As business owners brace for federal legislation, RYO retailers in Washington State are getting a reprieve. Earlier this year, legislators in the Pacific Northwest state approved House Bill 2565 that would begin taxing RYO cigarettes like all others. However, in early June proponents of RYO filed a lawsuit arguing that since the legislation raises taxes, it should have required a two-thirds vote to pass the legislature. It passed 27-19 in the Senate, as CSNews Online previously reported.

The new law was set to go into effect July 1 but RYO retailers have not started collecting the new tax yet. So far, only one business has purchased tax stamps for the machines, according to NWCN. The Washington Supreme Court is expected to consider a permanent resolution next week. It had issued a stay last week, blocking a lower court ruling that prohibited the state from collecting the tax, the news report added.