Roll-Your-Own Cigarette Shops Under Fire for Undercutting Cigarette Tax

[red states rule]

Once again a basic economic principal is proven. If government wants to tax an activity they must ENCOURAGE the activity not discourage it

At some point, people will always find away to avoid paying ever increasing taxes

Also, this story proves government does not give a damn about the health of its citizens only the tax money they are not getting





There is no place in the U.S. more expensive to smoke than New York City, where the taxes alone will set you back $5.85 per pack. Yet, those who visit Island Smokes, a “roll-your-own” cigarette shop in Chinatown, can walk out with an entire 10-pack carton for under $40, thanks to a yawning tax loophole that officials in several states are now trying to close.

Now, New York City’s legal department filed a lawsuit against Island Smokes on Nov. 14, arguing that the company’s Manhattan store and another on Staten Island are engaging in blatant tax evasion.

“By selling illegally low-priced cigarettes, defendants not only interfere with the collection of city cigarette taxes, they also impair the city’s smoking cessation programs and impair individual efforts at smoking reduction, thereby imposing higher health care costs on the city and injuring public health,” the complaint said

The store is one of a growing number around the country that have come under fire over their use of high-speed cigarette rolling machines that function as miniature factories, and can package loose tobacco and rolling papers into neatly formed cigarettes, sometimes in just a few minutes.

The secret to Island’s low prices is simple: Even though patrons leave carrying cartons that look very much like the Marlboros or Newports, the store charges taxes at the rate set for loose tobacco, which is just a fraction of what is charged for a commercially made pack.
Customers select a blend of tobacco leaves, intended to mirror the flavor of their regular brand. Then they feed the tobacco and some paper tubes into the machines, and return to the counter with the finished product to ring up the purchase.

The savings come at every level. Many stores sell customers loose pipe tobacco, which is taxed by the federal government at $2.80 per pound, compared with $25 per pound for tobacco made for cigarettes. The shops don’t pay into the cigarette manufacturer trust fund, intended to reimburse government health programs for the cost of treating smoking-related illness. And the packs produced by “roll-your-own” shops are generally also being sold without local tax stamps, which in New York include a $1.50 city tax and a $4.35 state tax.

http://www.theblaze.com/stories/roll-your-own-cigarette-shops-under-fire-for-undercutting-cigarette-tax/

[CSM]

Yep. It's all about feeding the government beaucracy under the guise of concern for the citizen.

[ConHog]

I don't know it DOES seem like this shop is blatantly evading the tax.

And of course all the government cares about is collecting money. That's no newsflash.

[PostmodernProphet]

I've been cigarette tax free since January, 2010......electronic cigarettes are still for the win......

[ConHog]

I've been cigarette tax free since January, 2010......electronic cigarettes are still for the win......

I've NEVER paid a cigarette tax. Now beer tax on the other hand....................

[DragonStryk72]

Once again a basic economic principal is proven. If government wants to tax an activity they must ENCOURAGE the activity not discourage it

At some point, people will always find away to avoid paying ever increasing taxes

Also, this story proves government does not give a damn about the health of its citizens only the tax money they are not getting

Actually, my mom uses one of these places up here. They have a machine that can even roll them for you. This whole thing with NY pulling social engineering is just bullshit all around. I don't smoke and I almost want to start just to spite them. It's completely maddening.

[Gaffer]

I buy the pipe tobacco and papers to make my own cigarettes at home. I spend $37 a month for the equivalent of four plus cartons. Once the govt figures out people are getting around the taxes this way I expect them to up the taxes. The smoke shops around here are doing a booming business. And the one store that I know of that has one of those machines has a lot of customers. Some drive long distances to buy their store made cigs. If it fucks the govt out of taxes I'm all for it.

[DragonStryk72]

I don't know it DOES seem like this shop is blatantly evading the tax.

And of course all the government cares about is collecting money. That's no newsflash.

It's not evasion, actually. The individual components that make up cigs (tobacco, tubes, and filters) just aren't taxed nearly as heavily. Normally this sort of business wouldn't succeed, except that in NY, the current tax puts the price at $10 a pack for cigarettes. A carton of cigs is over a $100, vs. $30-$40 for as much tobacco as you get in a carton with filter tubes. Also, the place up here uses tobacco that has most of the really horrible crap from other cigarettes cut out, so they're not quite as unhealthy. Funny thing, having to roll their own cigarettes is doing more to cut down my mom's smoking than anything that NY state has done on this matter.

[fj1200]

It's not evasion, actually. The individual components that make up cigs (tobacco, tubes, and filters) just aren't taxed nearly as heavily.

Just a little tax based arbitrage; nothing wrong with that. :salute:

[ConHog]

It's not evasion, actually. The individual components that make up cigs (tobacco, tubes, and filters) just aren't taxed nearly as heavily. Normally this sort of business wouldn't succeed, except that in NY, the current tax puts the price at $10 a pack for cigarettes. A carton of cigs is over a $100, vs. $30-$40 for as much tobacco as you get in a carton with filter tubes. Also, the place up here uses tobacco that has most of the really horrible crap from other cigarettes cut out, so they're not quite as unhealthy. Funny thing, having to roll their own cigarettes is doing more to cut down my mom's smoking than anything that NY state has done on this matter.

My grandfather rolled his own for years, and by years I mean 20 plus, mostly because it was cheaper So I realize what the companies are trying to do, but they are at best skirting the tax law. Who in their right mind gives the IRS or state tax revenue departments , reason to notice them? LOL

[red states rule]

I buy the pipe tobacco and papers to make my own cigarettes at home. I spend $37 a month for the equivalent of four plus cartons. Once the govt figures out people are getting around the taxes this way I expect them to up the taxes. The smoke shops around here are doing a booming business. And the one store that I know of that has one of those machines has a lot of customers. Some drive long distances to buy their store made cigs. If it fucks the govt out of taxes I'm all for it.

I may have to travel to WVA and check out of those shope. I currently buy my cigs online and pay about $30/carton (free shipping)

Te retail price here for the same cigs is about $75/carton. Easy to see how much in taxes the government is taking in and why they are so pissed people are looking for other ways to get around paying the insane taxes

[DragonStryk72]

My grandfather rolled his own for years, and by years I mean 20 plus, mostly because it was cheaper So I realize what the companies are trying to do, but they are at best skirting the tax law. Who in their right mind gives the IRS or state tax revenue departments , reason to notice them? LOL

And if the taxes were not more than the cost of the cigarettes weren't more than the cigs themselves, there would be no need of these businesses. Imagine if there were a 100% tax on Fast food. Does that mean the grocery stores and restaurants are "skirting the tax"?

[red states rule]

And if the taxes were not more than the cost of the cigarettes weren't more than the cigs themselves, there would be no need of these businesses. Imagine if there were a 100% tax on Fast food. Does that mean the grocery stores and restaurants are "skirting the tax"?

The same goes for gasoline. the government makes more off the sale of a gallon of gas than the oil companiies do

Yet who always get blamed for price gouging?

[ConHog]

And if the taxes were not more than the cost of the cigarettes weren't more than the cigs themselves, there would be no need of these businesses. Imagine if there were a 100% tax on Fast food. Does that mean the grocery stores and restaurants are "skirting the tax"?

Certainly if there were a tax on fast food and a store was advertising build your own Big Mac it would skirting the law.

[jimnyc]

Yep, NY sucks, $5.75 in taxes alone for a pack! It's $10-11 by me and I'm sure it's much higher in the City then. I was a bit lazy and still bought some packs before I quit, otherwise I ordered by the pound online. You get loose tobacco by the pound and "cartons" of tubes. The little machine will insert the tobacco into the tubes one at a time. Sounds like a lot of work, and it was, but it saved like $60 a carton! I've seen the larger and speedier machines online but never in person. Had I known back then that there was a place I could go here in NY, and "speed roll" them in a bigger machine, I certainly would have went there. NY has the highest taxes on tobacco in the nation. Hell, some people will travel down south to buy a hundred cartons at a time to save the money. Yes, there are limitations, but ways around that!

If I can buy loose tobacco, and tubes, and roll my own, they took no issue with it. Now someone simply figured out a way to roll them faster AND offer their services and/or technology to the public - and the dirtbags in the government have to intervene and demand a higher chunk. They have NO desire to help smokers quit here, only make more money. Like gas, they raise the prices as they know the majority will still pay it with little alternative. I know, bad analogy, but best I could think of!

[ConHog]

Yep, NY sucks, $5.75 in taxes alone for a pack! It's $10-11 by me and I'm sure it's much higher in the City then. I was a bit lazy and still bought some packs before I quit, otherwise I ordered by the pound online. You get loose tobacco by the pound and "cartons" of tubes. The little machine will insert the tobacco into the tubes one at a time. Sounds like a lot of work, and it was, but it saved like $60 a carton! I've seen the larger and speedier machines online but never in person. Had I known back then that there was a place I could go here in NY, and "speed roll" them in a bigger machine, I certainly would have went there. NY has the highest taxes on tobacco in the nation. Hell, some people will travel down south to buy a hundred cartons at a time to save the money. Yes, there are limitations, but ways around that!

If I can buy loose tobacco, and tubes, and roll my own, they took no issue with it. Now someone simply figured out a way to roll them faster AND offer their services and/or technology to the public - and the dirtbags in the government have to intervene and demand a higher chunk. They have NO desire to help smokers quit here, only make more money. Like gas, they raise the prices as they know the majority will still pay it with little alternative. I know, bad analogy, but best I could think of!

I would think $10 a pack would make anyone quit. Jesus Christ.

[logroller]

I don't know it DOES seem like this shop is blatantly evading the tax.

And of course all the government cares about is collecting money. That's no newsflash.


Certainly if there were a tax on fast food and a store was advertising build your own Big Mac it would skirting the law.

That would depend on what the law described as 'fast food'? Building my own bigmac wouldn't be 'fast', just food-- so that would be fine-- Hardly skirting the law. What about a salad bar which charges by the pound; should that be taxed at its equivalent prepackaged taxable value? Say a prepackaged salad weighs 3 OZ, costs $3, taxed @8% nets 24 cents in tax. Whereas a self-prepared 15 oz salad cost $8 dollars in loose material and nets a tax of only 64 cents. Should they have to pay $1.20 in tax instead, because that is what you'd have to pay for a pre-packaged equivalent?

You have to draw the line somewhere, but it seems a bit disingenuous to move the line because people aren't crossing it. That'd be like raising the fines for freeway speeding, because it led to less people speeding on the surface streets.

[DragonStryk72]

Certainly if there were a tax on fast food and a store was advertising build your own Big Mac it would skirting the law.

Actually, that state of affairs already exists. You buy some shredded onions, hamburger patties and buns, diced onions american cheese and some ketchup mustard, and mayonnaise (for secret sauce). That's it, I used to flip those burgers for a living. Here in NY, there's also a "luxury" foods tax, meaning fast/restaurant food gets for for about 10% here, while the ingredients for the food only get taxed 3.5%. You may notice a distinct sort of "tax as much as possible" vibe in all of this, any yeah, that's pretty much NY at this point. And the anti-smoking propaganda is everywhere. Literally, they measure out stick-on anti-cigs posters for the ceilings of all the buses in Albany.

A few years ago, they passed a law that you couldn't smoke in any public building. It made papers up here when the local cigar club got hit with enormous fines by the cops because they were smoking, you guessed it, cigars at their cigar club meeting.

[red states rule]

Maryland is a blue high tax state and they are also whining over the lost tax money




Cigarettes smuggled across state lines are costing the state of Maryland big bucks. Now officials are cracking down.
Meghan McCorkell has more on the growing problem.

The U.S. Justice Department estimates states are losing $5 billion a year due to smuggling cigarettes. The crime is now more lucrative than smuggling cocaine or heroin.

Surveillance video has been released of ATF agents patrolling the Maryland/Virginia border, the new smuggling ground for black market cigarettes. Criminals are going south to low cigarette tax states and loading up. Then they illegally sell them in high tax states, like Maryland.

“The amount of money is phenomenal. It’s tens of thousands of dollars in any particular run that someone may make,” said Jeff Kelly, Maryland Field Enforcement.

Virginia has the lowest cigarette tax, at just 30 cents. Maryland charges $2 a pack, New Jersey is $2.70 and New York has the highest rate, at $4.35 a pack.

Maryland Comptroller Peter Franchot is tackling the problem head on

“Be careful because our officers are blanketing the borders,” he said.

Prince George’s County has already busted nine people last month for cigarette smuggling.
Franchot says they’re hurting people who legally sell cigarettes.

“We’re protecting Maryland businesses that are paying their taxes and doing the right thing,” he said.

Every pack of cigarettes has a stamp marking where it was sold. Just one carload smuggled in could rake in $30,000 in illegal profits.

“It’s a felony to bring more than two packs of cigarettes into the state of Maryland without a Maryland stamp on it,” said Franchot.

And it could net you two years behind bars.

http://baltimore.cbslocal.com/2011/10/18/police-crack-down-on-cigarette-smuggling/