WOOD DALE, IL - Several U.S. tobacco retailers are selling deeply discounted roll-your-own-cigarettes, taking advantage of a federal tax loophole, the Wall Street Journal reports, a practice that has attracted scrutiny from regulators and tobacco companies.

Roughly 150 tobacco outlets across 20 states have deployed high-speed roll-your-own machines that produce a carton of cigarettes in just eight minutes, a cost that is in many cases half that of a carton of premium smokes. However, some regulators maintain the stores may be violating U.S. and state laws regarding cigarette manufacturing.

"These machines raise a number of questions," said David Rienzo, an assistant attorney general in New Hampshire, which has sued several roll-your-own retailers alleging they are acting as cigarette manufacturers and should therefore pay applicable fees.

The retailers are exploiting the tax loophole, using tobacco labeled "pipe tobacco." Such a designation presents (for now) a substantial cost savings, as the federal excise tax on pipe tobacco is $2.83 a pound, compared with $24.78 a pound for rolling tobacco.

Tobacco manufacturers, too, are crying foul at the loophole that has created low-priced competition. "We are complying with the law, but some companies are not doing so in order to gain an unfair advantage," said Ron Bernstein, chief executive of Liggett Vector Brands Inc., a unit of Vector Group Ltd. that is the fifth-largest U.S. cigarette maker by sales.

Since the tax on rolling tobacco increased 14 months ago, the volume of pipe tobacco sold in the U.S. has more than tripled to roughly 21 million pounds, according to the U.S. Treasury's Alcohol and Tobacco Tax and Trade Bureau. During the same time, rolling tobacco sales volume has dropped about 60 percent.

Meanwhile, the Treasury??s tobacco-tax bureau is working on clarifying the distinction between pipe tobacco and rolling tobacco, a process that is expected to take months.