Low-Tax Cigarettes

Sometimes a cigar is just a cigar, as Freud supposedly said, but when is a cigarette a cigarette?
The city filed suit last week against a “roll your own” cigarette shop in Chinatown and a related one on Staten Island, where a pack of cigarettes can cost less than $5, because the stores are not collecting cigarette taxes. The stores, both called Island Smokes, do not sell packs of Marlboros and Newports. Instead, they sell loose tobacco and cigarette papers, and have machines that let customers fabricate their own cigarettes.

Such stores operate in a legal gray area, arguing that because they do not sell prepackaged cigarettes, they are subject only to taxes on loose tobacco, which are far less. But according to the city, the shops are effectively selling cigarettes and should be forced to charge the full state and city taxes — currently $5.85 per pack, which has pushed the cost of most packs in New York City to more than $10.

“By selling illegally low-priced cigarettes,” said the city’s lawsuit, filed in Federal District Court in Manhattan, “defendants not only interfere with the collection of city cigarette taxes, they also impair the city’s smoking cessation programs and impair individual efforts at smoking reduction, thereby imposing higher health care costs on the city and injuring public health.”

Jonathan Behrins, a lawyer for the companies that own the shops, said Monday that the stores were not obligated to charge cigarette taxes because “we are not producing cigarettes for resale.”
“We are selling the contents that produce the cigarette,” he said, “and it’s up to the user to make them.”
Mr. Behrins acknowledged that employees sometimes assist customers by “demonstrating” the equipment, but likened the whole process to “making your own beer.”
The city offered a much different analogy.
“When you go to a salad bar, they sell you a salad, not a salad assembly process,” said Eric Proshanksy, deputy chief of the corporation counsel’s affirmative litigation division. “When customers walk out of these stores, they have finished cigarettes and they bought them in those stores. The stores also have signage that calls them a discount cigarettes shop.”

Inside the Island Smokes on Eldridge Street in Chinatown, plastic bins contain different styles of loose tobacco — menthol, double menthol, ultra light and more. More than a dozen machines are spread out in two rooms.
On Monday an employee showed a first-time buyer how the machines work. The customer attaches an empty paper tube to the machine and punches a “load” button; after the cigarette is full, it must be placed in another machine resembling an electric pencil sharpener that seals the ends. The pack cost $6, including the small tin box that holds the finished cigarettes; a refill is $4.50.

One man entered and asked if he could buy a pack of Newports. When told that Island Smokes sold only its own tobacco and that customers had to roll their own cigarettes, the man promptly left.
Customers who were rolling cigarettes swore by the shop’s products, which are advertised as “all natural.”
“It’s such a better, cheaper alternative,” said Veronica Raccuia, 20. The store says its tobacco does not contain additives found in premade cigarettes. “You don’t taste all the chemicals,” she said.

Customers were frustrated to learn of the city’s lawsuit against the shop, saying it was simply another measure intended to regulate people’s lives.
“The government is so money-hungry they’ll do anything to get rid of whoever they’re not getting money from,” Ms. Raccuia said.
“Just leave people alone,” she added. “In this economy, no one can barely afford food, let alone a pack of $15 cigarettes.”


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