WASHINGTON -- Late Friday, President Obama signed H.R. 4348, the Moving Ahead for Progress in the 21st Century Act, which primarily maintains jobs on highway transportation projects and prevents interest rate increases on new loans to college students. The bill, which allocates more than $100 billion to be spent on highway, mass transit and other transportation programs, includes a rider designating roll-your-own (RYO) tobacco shops "manufacturers" for tax purposes.
In full, the amendment reads:
SEC. 100122. ROLL-YOUR-OWN CIGARETTE MACHINES.
(a) IN GENERAL.—Subsection (d) of section 5702 of the Internal Revenue Code of 1986 is amended by adding at the end the following new flush sentence: "Such term [cigarette manufacturer] shall include any person who for commercial purposes makes available for consumer use (including such consumer's personal consumption or use under paragraph (1)) a machine capable of making cigarettes, cigars, or other tobacco products. A person making such a machine available for consumer use shall be deemed the person making the removal as defined by subsection (j) with respect to any tobacco products manufactured by such machine. A person who sells a machine directly to a consumer at retail for a consumer's personal home use is not making a machine available for commercial purposes if such machine is not used at a retail premises and is designed to produce tobacco products only in personal use quantities."
Click here to view the full text of H.R. 4348, the Moving Ahead for Progress in the 21st Century Act.
RYO machine shop operators and supporters say the designation is unfair and will put many of the shops out of business and send customers back to purchasing cigarettes at convenience stores or other retail outlets at higher prices, reported The Erie Times-News.
Newspapers nationwide are reporting such shop closures.
Ned Overton, the owner of a RYO store in Lebanon, Tenn., said he sees the passage of the bill as the death knell for his store. He blamed "Big Tobacco" for the rule changes that will make it impossible for him to stay in business.
"Philip Morris bought their politicians and they passed the Transportation Bill and made us manufacturers," he told The Lebanon Democrat.
Corey Fitze, who represents NACS, told the newspaper that it isn't "Big Tobacco" that is being hurt by the RYO machines, but smaller convenience and fuel stores who are forced to charge higher prices for cigarettes as manufacturers raise prices to cover state and federal fees, putting them at a disadvantage with RYO stores.
"Reporters keep on either claiming that NACS is a pawn of Big Tobacco or that this is Big Tobacco's legislation. Neither are true," Fitze said.
Overton said he believes that large tobacco companies are benefiting from the new law and RYO stores are just out of luck. He also noted that he had paid $70,000 for his two RYO machines, money that he has no hope of recouping since no one will want the machines in light of the new law. He explained that a customer could roll 190 to 200 cigarettes with a RYO machine for a total cost of $24, as opposed to a carton of cigarettes in a traditional store for $40 to $50.
He said the costs associated with the new law would make the price of cigarettes at his store virtually the same as at convenience and discount tobacco stores and his customers would have no reason to patronize his store.
Overton explained that in order to comply with the law, he would have to apply for a trademark on his product and pay higher taxes which would make the cost of RYO cigarettes too high for his customers.
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