Roll your own (RYO) cigarette retailers have been opening at an alarming rate throughout the state of Washington. These stores advertise cheap smokes but end up costing average mom-and-pop retailers, grocery stores and the state a lot of money. This is why a large coalition of retailers are supporting House Bill 2565.
HB 2565 defines a finished roll your own (RYO) cigarette as a “cigarette,” which is subject to the same excise tax levied on these products in average convenience and grocery stores. The tobacco used in RYO machines is loose-leaf cigarette tobacco, which has been mislabeled as pipe tobacco to take advantage of a gaping loophole in the application of federal excise taxes.
The RYO phenomenon started in 2009, right after Congress passed the State Children’s Health Insurance Program. To fund the program, the feds increased all tobacco taxes. Pipe tobacco taxes were increased, but at a much lower rate than cigarettes or loose-leaf cigarette tobacco.
Pipe tobacco purchases have increased from 3.17 million pounds in 2008 to 33.8 million pounds in 2011. This is how the RYO retailers have been evading the high tax rates. Mom-and-pop retailers and larger grocery stores are losing sales to these RYO stores, and the state is losing anywhere from $12 million to $20 million a year.
The RYO stores are based on tax evasion and deception; 2SHB 2565 aims to remedy that deception.
(Bentler is executive director of the Washington State Association of Neighborhood Stores.)