New York Governor Takes Aim at Loose Tobacco

ALBANY, N.Y. -- New York Gov. Andrew Cuomo has put loose tobacco on the state's tax radar in this year's budget proposal.

As part of the new budget, released yesterday, Cuomo has proposed taxing loose tobacco at the same rate as cigarettes, which in New York State is $4.35 per pack. In the case of loose tobacco, the levy would be $4.35 per ounce, according to the Associated Press.

The move would effectively close a loophole that makes it cheaper for adult smokers to buy loose tobacco and roll-your-own (RYO) cigarettes. It remains to be seen what impact the proposed tax increase would have on RYO businesses across the state.

RYO stores have come under fire lately in several states, including New York. Just recently, New York City's legal department initiated a lawsuit against the owners of Island Smokes in Staten Island for tax evasion. According to the city's lawsuit, the store takes advantage of the tax loophole Cuomo is now trying to close.

Loose tobacco is taxed by the federal government at $2.80 per pound, compared with $25 per pound for tobacco made exclusively for cigarettes, as CSNews Online reported.

In the face of the legal challenge, the owners of Island Smokes have chosen to close its doors as of Feb. 1. Jonathan Behrins, the lawyer for Island Smokes, said the store's owners agreed to settle because they wouldn't have been able to afford a legal battle that would likely have carried a six-figure price tag.