Roll-Your-Own cigarette shops: self-service or manufacturing?

HENRICO, VA (WWBT) - Small businesses have popped up where smokers can make their own cigarettes for a lot less money than buying them in a store. But Richmond-based Philip Morris is backing a bill in the General Assembly to get these Roll-Your-Own companies to pay the same percentage of taxes that they do.

Here's the question:  Is a machine in Roll-Your Own stores a self-serve machine for making cigarettes? Or is it a manufacturing device?

Here's how it works. You put in tubes with filters, pour in tobacco, press a button, and out pop a carton's worth of cigarettes. The cost for that carton is under $25, which is much cheaper than up to $45 for a carton of cigarettes manufactured by a cigarette company.

Philip Morris' parent company Altria is urging lawmakers to declare Roll-Your-Own shops to be manufacturers and make them pay the same excise taxes as cigarette companies.

"We think that everyone who manufactures cigarettes in Virginia should be held to the same standards, make the same settlement payments, pay the same taxes to the Commonwealth," said Altria's David Sutton

But Roll-Your-Own shop owners, like Leneia Horton, say it's not manufacturing because the customer chooses the tobacco and tubes and puts them in the machine.

"They don't go up to the Marlboro factory and get them off the conveyor belt," said Horton. "The customers are 100% in charge of how their product comes out."

The Roll-Your-Own stores usually offer pipe tobacco, which is taxed at a much lower rate than cigarette tobacco.

Sutton says that results in lost federal, state, and local tax revenue. "You're talking about $8 a carton that's lost in totality," he explained. "That includes the state excise tax at $0.30 a pack, as well as an average rate for all the local excise tax that various municipalities have in Virginia."

But Horton points out they pay 5% sales tax and 10% tobacco tax. "We have to pay the Other Tobacco Products tax, the OTP tax," she countered. "That is something that when we purchase our products from distributors, we only buy from distributors who pay the OTP tax."

Altria wants Roll-Your-Own cigarettes to have to meet the same safety standards and bear the same warning labels that theirs do. But Horton says being classified a manufacturer would mean having to move to a manufacturing zone, higher production costs, and going out of business.

"I really feel this is an example of bullying," Horton said. "Lobbying to go against the little guy."

Both the state House and Senate have passed versions of the bill to classify Roll-Your-Own shops as manufacturers.

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