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Legisalture calls" roll your own" cigarette machines a tax dodge

Rolling your own could go up in smoke if a proposal moving through the legislature becomes law.  James Call reports the House Finance and Tax committee Wednesday voted to tax cigarettes rolled automatically at a convenience store at the same rate as those sold by major manufacturers like Phillip Morris and the RJ Reynolds Tobacco Company.

Kissimmee Representative Mike Horner is sponsoring the bill. It closes a loophole which tobacco shops use to escape some state and federal taxes. Currently a consumer pays about $20 dollars less in taxes on a carton of cigarettes at a roll your own shop than he does when buying name brands.  A phalanx of store owners, employees and lobbyists followed Horner out of the committee room after his proposal received a unanimous vote.

"I’m not dealing with that. That’s not what you told the board.  Do you want, hey wait, I’m not going to, and I’ll walk away."

Jay Goldberg is with Let It Roll, which operates five shops throughout central Florida. He disputed Horner’s testimony before the committee.

"Do you believe the rhetoric you are saying? Because obviously this was told to you."

Goldberg and others challenge Horner’s facts on just about everything. Horner contends the roll your own industry exists because the state imposed higher taxes on cigarettes a couple years ago. He also says by acquiring up to 2 percent of the market share the roll your own store fronts have cannibalize jobs.

"I genuinely believe everything I’m saying.  I believe you exist. My opinion is this didn’t exist prior to these taxes going into effect. The reason why your customers come to you is because it is much less expensive to buy from you than to buy from a typical retailer."

Customers willing to spend time making their own cigarettes using the stores automated rolling machines reduce by more than two thirds the amount of tax they pay at checkout.    The rolling machines and cheaper smokes have ignited debates across the country. Legislatures in Indiana and Virginia considered similar bills this month. The Associated Press reports roll your own stores in New York have closed amist a variety of concerns.

Frank Mayernick told the committee that is unfair to subject store front entrepreneurs to the same regulations as those imposed on major manufacturers who produce iconic brands like Winston and Marlboro. He says people have been using machines to roll cigarettes since at least the 1930s.

"Their renting these machines like going into a laundermat. They’re renting the machines, they’re doing it themselves. They walk in they are picking out their pipe tobacco, they’re picking out their papers, they’re pushing a button they are rolling their own cigarettes in a store now and doing it a little more efficiently.

The automated rollers can produce up to 20 cigarettes a minute. One store employee estimated his shop produces up to 60 cartons a day. And Let it Roll’s Jay Goldberg says his stores pay a lot of taxes.

"We have a tax OTP tax, other tobacco product tax we pay 60 percent at wholesale plus a 25 percent surcharge, which if you average that out $100  of product cost me $175 . Other states around us, Ohio 17 percent with no surcharge, PA zero, Tennessee 6 point 6 percent, GA 10 percent,  LA with 33 percent and no surcharge."

There are about 110 tobacco shops in the state with automated rolling machines.  And although the machines, collectively, can produce tens of thousands of cartons of cigarettes a day, industry spokespeople say they are not manufacturers. They say the stores simply rent the juke-box-size rolling machines to consumers who like to roll their own. Horner sees things differently.

"This isn’t entrepreneurship and somebody came up with a better mouse trap. A better way to make tobacco we heard testimony that the cigarettes stink. So it’s not a better product it is a tax dodge."

"The mouse trap was we are going to come up with a way of gaming the system. This didn’t exist until the state decided to create an exorbitant sin tax and now these folks came up with a way to game the system. It only exists for one reason to escape your tax liability."

The committee agreed with Horner and passed the bill. It has one more committee stop. A similar senate bill has yet to be heard in committee.