Washington Report: Roll-Your-Own Language Becomes Law

President Obama signed the Transportation Bill, which includes a NACS-supported amendment that clarifies the regulatory responsibilities for all tobacco retailers.

July 09, 2012

WASHINGTON - President Obama on Friday signed a two-year transportation funding bill, ensuring that NACS-supported language to clarify the regulatory responsibilities for all tobacco retailers becomes law.

Effective immediately, all retailers who possess a roll-your-own machine to make cigarettes that are sold to the general public will be treated as tobacco manufacturers. These retailers will have to, among other things, remit all applicable federal and state excise taxes, use fire-safe tubes and register with the Food & Drug Administration.

NACS had advocated for RYO stores to abide by the same rules and pay the same taxes as all other tobacco retailers. Since 2009, RYO stores had been able to sell cigarettes with far lower taxes than packaged cigarettes. This disparity was brought on by tax increases that were part of the Children??s Health Insurance Program Reauthorization Act of 2009 (SCHIP). At the time, Congress increased the federal excise tax on cigarettes from 39 cents to $1.01 per pack and increased the tax on RYO tobacco from $1.10 a pound to $24.78 a pound. However, pipe tobacco taxes were only increased from $1.10 to $2.83 a pound. RYO stores exploited this tax disparity by rolling tobacco classified as pipe tobacco into cigarettes, using large machines that were sold for more than $30,000 per unit.

Some RYO stores closed their operations even before the law took effect, and RYO Machine LLC, which provides the RYO Filling Station Machines, has already told customers that it has shut down the automatic reload option and will not issue any refunds for reload fees, nor will it buy back machines.

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