Convenience Stores Applaud Enforcement Action Against Unregulated RYO Cigarette Dealers

ALBANY, NY (03/14/2012)(readMedia)-- New York convenience store operators today applauded the initiative of state and local officials to halt the expansion of "roll-your-own" cigarette shops that are circumventing laws relating to taxation, public health, and fire safety.

State Attorney General Eric Schneiderman and New York City Corporation Counsel Michael Cardozo yesterday announced they are suing two RYO shops that dodge cigarette taxes and regulations by claiming they don't technically sell cigarettes, but merely facilitate their customers' use of an on-premise, self-serve cigarette rolling machine.

"We're grateful to Mr. Schneiderman and Mr. Cardozo for confronting the RYO nuisance head-on – by putting violators out of business unless they play by the rules," said Jim Calvin, President of the New York Association of Convenience Stores. By contrast, he said, state budget negotiators are currently considering an RYO plan focused on collecting more tax revenue, without addressing the double standard on enforcing myriad regulations governing cigarette retailing.

By hiking the excise tax on all loose tobacco as much as 800 percent, that plan would inflict collateral damage on legitimate retailers of take-home pipe and leaf tobacco. "If a tax hike quadruples the price of someone's favorite brand of pipe tobacco, he's not going to quit smoking, he's just going to quit coming to his local convenience store to buy it," said Calvin. "He will quickly discover that while New York wants to charge him $27 in tax on a six-ounce bag, Pennsylvania, Internet vendors, and tribal stores charge zero tax on the same product. Consequently, tax-collecting, law-abiding New York retailers will lose those customers, and the state and counties will lose all that tax revenue. Has New York State learned nothing from the cigarette tax evasion epidemic it created over the past 12 years through hyper-taxation?"

The better solution, NYACS believes, is for the Legislature to declare on-premise RYO activity what it really is – cigarette manufacturing, making it subject to the same taxes and regulations as pre-packaged cigarettes. A bill to do that (S.6476 Libous/A.9085 Dinowitz) has been introduced and has widespread support, including that of NYACS. In addition, the U.S. Senate recently passed similar legislation, and it is pending in the House of Representatives.

While roll-your-own machine manufacturers have hired high-profile Albany lobbyists to spread misinformation and threaten lawsuits if such legislation passes at the state level, Calvin said permitting certain competitors to ignore tobacco regulations undermines law-abiding small businesses, taxpayers, and public health.

"For example, if a state inspector finds even one pack of cigarettes without a state tax stamp in a convenience store, under state law the owner is presumed guilty of tax evasion and subject to criminal arrest," Calvin pointed out. "None of the cigarettes produced at RYO shops bear tax stamps, yet those shopkeepers risk no penalty whatsoever?"

Fire safety standards, Tobacco Master Settlement Agreement provisions, product display restrictions, health warning labels, minimum package sizes, and minimum pricing requirements are among the many other federal and state cigarette laws that licensed tobacco retailers are supposed to comply with.