Tobacco.org

TN may boost tax on 'roll-your-own' cigarettes 

Dozens of Tennessee tobacco shops have taken advantage of a tax loophole that allows them to sell roll-your-own cigarettes at a deep discount, but those days may be drawing to a close.

Tennessee lawmakers this week passed a bill that would require roll-your-own retailers to pay a licensing fee and a cigarette tax on each carton they sell.

And proposals in Congress, including one sponsored by U.S. Rep. Diane Black, R-Gallatin, would stymie the growth of roll-your-own machines by designating the smoke shops that house them as manufacturers.

The loophole has cost Tennessee almost $4 million in lost tax revenue since 2009, according to a report released by the Centers for Disease Control and Prevention.

Jason Wells, manager of the Cigar Parlor and Roll Smokes and Go in Hendersonville, says state and federal legislation could shut down his business and hurt the recession-weary customers who benefit from the lower prices of the roll-your-own smokes he and others sell.

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Roll-your-own cigarette bill headed to governor  

Legislature Expands Cigarette Tax to Include ‘Roll-Your-Own’ Sellers 

• Relabeling Roll-Your-Own Tobacco as Pipe Tobacco Costing Feds, States $1.3 Billion in Lost Revenues  

Tobacco manufacturers that re-label roll-your-own cigarette tobacco as pipe tobacco are cheating federal and state authorities out of an estimated $1.3 billion in lost state and federal tax revenues, according to a report released Wednesday by the Centers for Disease Control and Prevention.

Last month, the Government Accountability Office found that cases of roll-your-own tobacco were being sold in packages labeled as pipe tobacco. The federal excise tax on loose tobacco used for roll-your-own cigarettes is $22 per pound higher than the excise tax on pipe tobacco.

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New York lost $16.9 million from tobacco tax loophole 

New York lost an estimated $16.9 million in potential tobacco tax revenue during the first 28 months following a federal excise tax increase on cigarettes, small cigars and roll-your-own tobacco.

That's the finding of a new report released Wednesday by the Centers for Disease Control and Prevention, which said states collectively lost $374 million in tobacco revenue from April 2009 to August 2011 because of a market shift to lower-priced pipe tobacco to make roll-your-own cigarettes.

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• Fiscal and Policy Implications of Selling Pipe Tobacco for Roll-Your-Own Cigarettes in the United States 

Conclusions

Marketing pipe tobacco as “dual purpose" and selling it for RYO use provides an opportunity to avoid paying higher cigarette prices. This blunts the public health impact excise tax increases would otherwise have on reducing tobacco use through higher prices. Selling pipe tobacco for RYO use decreases state and Federal revenue and also avoids regulations on flavored tobacco, banned descriptors, prohibitions on shipping, and reporting requirements.

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Tobacco tax: Florida missed $63 million in tobacco tax revenues  

RYO Tobacco and The New Age of Total Tobacco - New Market Report Now Available 

Roll-Your-Own Cigarette Machine Makers Object To Proposed Tax Hike  

• Cigarette taxes push smokers to roll their own 

Americans' smoking habits experienced "sizable market shifts" since federal tobacco taxes were increased in 2009, a new government report concludes.

Sales of pipe tobacco and large cigars, which are taxed at a lower rate, have skyrocketed as smokers have adjusted their buying habits to the new price structure.

Pipe tobacco is increasingly used to make relatively inexpensive cartons of roll-your-own cigarettes. The Fox Valley has several shops with roll-your-own machines available for customers.

Kim Schafer of Appleton Souvenir and Cigar Co. said she's noticed changing trends in tobacco use.

"Actually, a few more people are picking up pipe smoking," Schafer said.

Monthly sales of pipe tobacco increased twelve-fold

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• Report cites major shift in smoking habits since 2009 tax increase 

A new government report says Americans' smoking habits have displayed "sizable market shifts" since federal tobacco taxes were increased in 2009.

Sales of pipe tobacco and large cigars, which are taxed at a lower rate, have skyrocketed as smokers have adjusted their buying habits to the new price structure.

Monthly sales of pipe tobacco increased 12-fold, from about 240,000 pounds in January 2009 to over 3 million pounds in September 2011, the GAO found. And monthly sales of large cigars more than doubled, from 411 million pounds to more than 1 billion pounds over the same period.

Pipe tobacco is increasingly used to make relatively inexpensive cartons of roll-your-own cigarettes in machines installed in neighborhood smoke shops around the nation.

In New York, where state tobacco taxes are among the highest in the nation, the machines are in smoke shops in Depew and Lewiston in the Buffalo area; at several locations in Rochester; in New Rochelle, Nanuet and Newburgh in the Hudson Valley; in Brooklyn and Staten Island in New York City; and in Ithaca in the Southern Tier.

Congress increased taxes on both roll-your-own tobacco and packs of cigarettes in April 2009, making them equal. Lawmakers enacted a smaller tax increase for pipe tobacco, which has become a substitute for roll-your-own tobacco.

Likewise, Congress began taxing small cigars at the same rate as cigarettes. In response, manufacturers of small cigars fractionally increased the weight of many of their products so they would qualify as lower-taxed large cigars, even though they often are just slightly larger than cigarettes and often have filters. . . .

In a written response to the GAO report, Treasury officials noted that the numbers in the report "are not actual losses of revenues, but rather your estimates of the revenue increases if Congress were to change the law to eliminate the disparities."

And that's the GAO's recommendation: Congress should fix the disparities.

According to the GAO report, a woman representing one tobacco company said she knew of no difference between the roll-your-own tobacco her firm formerly produced and the pipe tobacco it switched to making -- other than the federal excise tax.

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Tennessee Senate Passes Roll-Your-Own Tobacco Bill 

Smokers able to dodge tax changes 

Washington Report: Connecticut Seeks to Classify RYO Shops as Manufacturers 

Roll-your-own cigarette bill passes Tenn. Senate