Roll-your-own cigarettes win NY state tax fight

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ALBANY, N.Y. (AP) — A new and savvy player dealing in loose tobacco rolled and packaged in retail stores but taxed far less than cigarettes has beaten New York’s governor and Legislature again as well as an unlikely alliance of cigarette makers and

ALBANY, N.Y. (AP) — A new and savvy player dealing in loose tobacco rolled and packaged in retail stores but taxed far less than cigarettes has beaten New York’s governor and Legislature again as well as an unlikely alliance of cigarette makers and the American Cancer Society.

A bill to tax loose tobacco rolled in stores at the same level as cigarettes passed the Democrat-led Assembly in the regular session that ended Thursday but never made it to the floor of the Republican-led Senate. Customers are supposed to use the large machines the size of a dryer at a self-service laundry to roll their own while at the store, avoiding the taxes manufacturers pay if they rolled the cigarettes.

"It’s impossible for us to know everything that happened, but apparently one company with a $10,000-a-month lobbyist was able to block a bill that would stop tax evasion, prevent residential fires and encourage smokers to quit," said Russ Sciandra, state director of advocacy for the American Cancer Society.

State records show that lobbyist was former Republican Sen. Alfonse D’Amato.

D’Amato’s Park Strategies firm was hired by the biggest player, RYO Filling Station — also known as Roll Your Own Machine of Girard, Ohio — at a fee of $10,000 a month. D’Amato met privately with Governor Andrew Cuomo on Feb. 20, according to Cuomo’s public schedule.

The bill to make these roll-your-own cigarettes at stores subject to cigarette taxes died in a Senate committee. But the company is still lobbying because the bill might come up in a special session in November.

"We’re breathing a little easier but by no means is the fight over," said Bea Gonzalez, spokeswoman for the RYO company.

The Legislature often returns to session in the fall for some bills or, like this year, after the elections to act on bills.

"We had been working diligently with the governor’s office," she said Friday. "We hired Park early. We have been trying to educate legislators … they have just been extremely effective."

A Park Strategies spokeswoman declined to comment.

The state Senate’s Republican majority has opposed the measure as a tax increase. Senate majority spokesman Scott Reif had no immediate comment on this measure.

So far this year, more than two dozen states have introduced bills to restrict the machines by reclassifying the stores as manufacturers or by otherwise increasing tax revenue from the growing industry.

For the Liu family, immigrants from China over a decade ago, their store is their livelihood and they’re about to open another.

"We’re doing a pretty business," said Renia Liu, who works at her father’s store, Tobacco Roll in Clifton Park, in upstate New York. It opened in February. "Here, customers save like half. And we have returning customers a lot. Business is going well."

The clean, airy storefront in a small retail mall with a hair and nail salon and a soccer store has two machines to roll cigarettes. Upholstered desk chairs provide customers a place to relax as they await their smokes and watch sports on a big-screen TV.

On the counter sits a thick wad of papers, the second volume for the store, in which customers sign a petition stating: "We are customers, not manufacturers."

The U.S. Government Accountability Offices traces the trend to the 2009 Children’s Health Insurance Program Reauthorization Act. That federal law increased taxes on traditional cigarettes to combat smoking by young people but left loose tobacco used in at-home rolling devices and pipe tobacco at lower rates.

That prompted the tobacco industry to shift production to lower taxed items, such as loose tobacco for rolling and pipe tobacco. The difference is $20 per pound in federal taxes alone.

The machines can churn out 200 cigarettes in eight minutes as the customer waits, compared to the nearly three hours it takes in small roll-your-own devices used at home.

The customer walks out with a box of 200 cigarettes at a cost of $37.99, compared to a carton that could cost $108 at a gas station across the street or $125 in New York City. The state and city have the nation’s highest cigarette taxes.

"This is a very significant growing subset of the industry," said David Sutton, senior manager of media affairs at Altria Client Services based in Virginia, parent company for Philip Morris USA. He opposes what he calls mini-factories.

"This is clearly a loophole that’s being exploited," he said.

Copyright 2012 The Associated Press.

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