Agents with the Kansas Department of Revenue have shut down the operations of about 20 businesses across the state that offer “roll your own cigarette” services, after state regulators determined the sites were operating as unlicensed manufacturers of tobacco products.
Two Lawrence businesses — UCF Half Price Smokes at 2540 Iowa and also at 601 Kasold — have closed after regulators said the businesses could face up to a $10,000 per day fine if they continued to allow customers to use an in-store machine that rolls up to 200 cigarettes in about eight minutes. Operators in Wichita, Salina, Manhattan and several other Kansas cities also were ordered to shut down the machines.
“Our problem is we don’t know what is coming out of those machines,” said Seth Valerius, general counsel for the Kansas State Fire Marshal’s Office. “We don’t know if unsafe cigarettes are coming out of them.”
Specifically, the fire marshal’s office is concerned the cigarettes are being made with a rolling paper that does not meet safety standards designed to ensure a cigarette will extinguish itself if left unsmoked for an extended period. State law requires cigarettes sold in the state to use such paper to cut down on the amount of smoking-related fires.
But there is another twist to the issue. People who use the in-store machines to roll their own cigarettes pay significantly less in state cigarette taxes than do people who buy cigarettes from a traditional retailer. The state charges about $8 in cigarette taxes for a carton of 200 cigarettes. Customers who use the machine, do not pay the cigarette tax because they are not technically purchasing cigarettes. Instead, the businesses argue, customers are purchasing loose leaf tobacco, rolling papers and are renting the services of the machine. Store employees don’t do any of the rolling of the cigarettes. Customers are required to operate the machine on their own.
But Valerius said the state’s crackdown on the roll-your-own operators was motivated by fire safety issues, not tax issues. The Kansas Department of Revenue and the office of the Kansas Attorney General, however, also were involved in the decision to take action against the businesses.
But RYO Machines — the Ohio based company that makes the in-store rolling machines — isn’t convinced fire safety is the only issue at play. That’s because the state is making no effort to stop individuals from using smaller home-based machines to roll their own cigarettes. Those home-rolled cigarettes have the same fire safety issues as the cigarettes produced by the in-store machines.
“If these machines are shut down, there is still a very clear market of folks who will roll their own cigarettes at home,” said Bea Gonzalez, a spokeswoman for RYO Machines. “If fire safety is the concern, what’s the difference if they are rolled at home or at a store.”
Bob Peckinpaugh, owner of the two Lawrence stores, said he’s simply been left dazed by the whole matter. He said he spent $30,000 apiece for the two machines — which are computerized and about the size of a vending machine. Unlike some other owners of the machines in the state, his entire business was built around the roll-your-own concept. Some other owners had machines in convenience stores or in their broader tobacco shops.
“I thought the state was trying to create small businesses,” said Peckinpaugh. “It doesn’t look like they try very hard to support them once they’re created.”
Valerius insists the state is not trying to run the companies out of business. He said the machines can continue to be used if the owners receive a cigarette manufacturing license, and submit the various varieties of cigarettes produced by the machine to an industry-approved testing group.
Gonzalez said the state’s actions, however, amounts to a de facto ban on use of the machines in the state. That’s because the specialty-rolling paper the state is insisting upon isn’t available for purchase. The major tobacco companies hold patents on the specialized paper. Gonzalez said she hopes the state can be persuaded to give the company up to two years to find a manufacturer who could supply the paper for commercial sale.
But she said the requirement that each business be licensed as a manufacturer of cigarettes is problematic. That would require a federal permit, but currently there is a moratorium on such permits. The manufacturer’s license also would require the retailers to start charging the state’s cigarette tax, which likely would cut into the businesses’ appeal.
“People like the product, but they really like the price,” said Peckinpaugh, who said his customers were able to roll a carton of 200 cigarettes for about $26.
Valerius said he wasn’t aware of potential hurdles for the businesses to obtain a manufacturer’s license, but he said he thinks the public safety issue involved with the roll-your-own movement is significant.
“Back in the old days, a cigarette would keep burning even after you stopped puffing on it,” Valerius said. “Basically, people would fall asleep smoking, burn their house down and often die in the process. That is what we’re trying to prevent.”