WASHINGTON -- The U.S. House and Senate have issued a conference report regarding a transportation bill (HR 4348) that includes a provision amending the current federal definition of a "manufacturer of tobacco products" to include persons who, for business purposes, make available to consumers a machine that is capable of making cigarettes, cigars or other tobacco products, reported Thomas A. Briant, executive director of the National Association of Tobacco Outlets (NATO), in a bulletin to the group's members.
Both the House and the Senate passed transportation bills that included different provisions, including different amendment language regarding commercial roll-your-own (RYO) cigarette machines. The two versions of the transportation funding bills were assigned to a House-Senate Conference Committee to work out the differences between the two bills. The final version of the transportation bill approved by the committee includes a section on commercial RYO machine operators and amends Section 5702(d) of the Internal Revenue Code as follows (new language is italicized):
26 United States Code Section 5702(d): "Manufacturer of tobacco products" means any person who manufactures cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own tobacco, except that such term shall not include--
(1) a person who produces cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own tobacco solely for the person's own personal consumption or use, and (2) a proprietor of a customs bonded manufacturing warehouse with respect to the operation of such warehouse.
Such term 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.
In the event that the House and Senate Conference Committee version of the bill is passed and signed into law by the President, then operators of commercial RYO machines will need to comply with the applicable federal laws pertaining to cigarette manufacturers as administered and enforced by the Alcohol, Tobacco Tax & Trade Bureau (TTB) and the Internal Revenue Service. The operators would also need to comply with the Surgeon General warning label requirements for cigarettes and all applicable regulations pertaining to cigarettes as administered by the U.S. Food & Drug Administration (FDA).
Retailers that sell personal RYO machines to consumers for use at home are not considered manufacturers of tobacco products and would not be subject to the laws governing manufacturers.
The federal laws that would need to be complied with by commercial RYO machine operators include, but are not limited to, the following:
- Every person, before commencing business as a manufacturer of tobacco products, must apply to the TTB for a permit to engage in such business and file a bond. (26 United States Code Sections 5711, 5712, and 5713; and 27 Code of Federal Regulations Part 40 of the TTB regulations implementing these Internal Revenue Code provisions).
- Manufacturers of tobacco products are required to keep records, submit reports, and take inventories of tobacco products. (26 United States Code Sections 5721, 5722, and 5741; and 27 Code of Federal Regulations Part 40).
- The tobacco products that are manufactured must be put up in packages that bear required marks and labels. (26 United States Code Sections 5713, 5723, 5761, 5762, and 7606; and 27 Code of Federal Regulations Part 40).
- The federal cigarette tax of $1.01 per pack must be paid on manufactured cigarettes. (26 United States Code Section 5701).
- The Surgeon General cigarette health warnings must be affixed to cigarette packaging. (15 United States Code Sections 1333 and 1334).
- The FDA rules on cigarettes including minimum package size, the prohibition of flavored cigarettes, and cigarette sampling must be followed. (21 Code of Federal Regulations Part 1140 and 21 United States Code Section 387).
The House and Senate Conference Committee version of the transportation bill needs to be voted on by both the full House and the full Senate this week because the federal government's authority to spend funds on roads, bridges and transit systems will expire June 30 in the event the bill is not passed and sent to the President for his signature.
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