Provides that a retail establishment with a roll-your-own tobacco machine shall be deemed a tobacco product manufacturer and the resulting product shall be deemed a cigarette for purposes of certain provisions of the tax law, the public health law and the executive law.
TITLE OF BILL: An act to amend the tax law, in relation to roll-yourown cigarette machines
PURPOSE OR GENERAL IDEA OF BILL: Provides that a retail establishment with a roll-your-own tobacco machine shall be deemed a tobacco product manufacturer and the resulting product, a cigarette.
SUMMARY OF SPECIFIC PROVISIONS: Section 1 would amend the tax law by adding a new section 473-c.
Section 2 sets the effective date.
JUSTIFICATION: New York State has made eradicating tobacco use a top priority in recent years. The State has gone about this in various ways, both raising the cost of the habit as well as raising awareness of the long term health risks smoking tobacco presents smokers.
This new form of Roll Your Own (RYO) cigarettes is nothing more than an attempt to skirt both State and Federal taxes placed on the exact same product sold by registered manufacturers. The tobacco used for these machines is marketed as "pipe tobacco" which is currently taxed at a dramatically lower rate than cigarette and cigar tobacco. In April 2009 Congress increased the federal excise tax on RYO tobacco to $23.68 per pound. Pipe tobacco increased at a much lower rate to $1.73 per pound. New York is losing a significant amount in cigarette taxes as consumers are paying approximately $6.64 in state excise and sales tax per carton for RYO cigarettes compared to $46.43 per carton on a regular carton-of cigarettes.
The United States Department of the Treasury and the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued a ruling, TTB Ruling No. 2010-4 that agreed that these retailers were in fact manufacturers of cigarettes and should be treated as such. That ruling has been challenged in the courts and is currently pending in the U.S. District Court for the Northern District of Ohio. In the meantime over 13 states have already dealt with this issue by regulatory changes, and/or proposed legislation to correct what is essentially a tax loophole created by this industry. The City of New York in the past year has successfully sued companies evading the City's own tax on cigarettes. This bill would correct this problem state-wide.
Furthermore, the creators of these machines and the retailers who make them available to consumers blatantly advertise that these cigarettes produced by the RYO machines do not use fire safe cigarette paper as mandated by laws.
This bill would require that retailers who make these RYO machines available to consumers, or sell cigarettes produced by a RYO machine, register as manufacturers and pay all the applicable taxes and fees that any other cigarette manufacturer is required to pay.
PRIOR LEGISLATIVE HISTORY: This is a New Bill
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: Currently the State is losing a total of $39.79 in state excise, and sales taxes per carton of Roll Your Own cigarettes sold; this bill will help the State recover this lost revenue.
EFFECTIVE DATE: On the 90th day after it shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 6476 IN SENATE February 14, 2012 ___________Introduced by Sen. LIBOUS -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Govern- ment Operations AN ACT to amend the tax law, in relation to roll-your-own cigarette machines THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The tax law is amended by adding a new section 473-c to read as follows: S 473-C. ROLL-YOUR-OWN TOBACCO MACHINES. EVERY PERSON THAT MAINTAINS A MACHINE AT A RETAIL ESTABLISHMENT THAT ENABLES ANY PERSON TO PROCESS AT THAT ESTABLISHMENT TOBACCO OR ANY PRODUCT THAT IS MADE OR DERIVED FROM TOBACCO INTO A ROLL OR TUBE SHALL BE DEEMED TO BE A TOBACCO PRODUCT MANUFACTURER AS DEFINED BY SECTION THIRTEEN HUNDRED NINETY-NINE-OO OF THE PUBLIC HEALTH LAW AND THE RESULTING PRODUCT SHALL BE DEEMED TO BE CIGARETTES SOLD TO A CONSUMER FOR PURPOSES OF THIS ARTICLE, ARTICLE THIRTEEN-G OF THE PUBLIC HEALTH LAW, AND SECTION ONE HUNDRED FIFTY-SIX-C OF THE EXECUTIVE LAW. THE COMMISSIONER SHALL PROMULGATE REGULATIONS FOR THE ENFORCEMENT OF THIS SECTION. S 2. This act shall take effect on the ninetieth day after it shall have become a law.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD14076-01-2