Washington state's tax on cigarettes -- more than $3 a pack -- is the fifth highest in the nation. The federal government then adds a little more than $1 in tax to a pack.
Given that, it's not surprising smokers are willing to look beyond the usual retail outlets to purchase their cigarettes for less than the usual $7 (or more) per pack.
The high cigarette tax has fueled the roll-your-own cigarette business, where folks can put loose tobacco in machines that quickly roll into cigarettes. Nearly 100 roll-your-own machines are operating in Washington state.
Clearly, roll-your-own has become a successful tax dodge -- and not just in Washington state. There are about 2,000 machines operating nationwide, and all serve to provide smokes for far less.
Washington state and the federal government aren't letting the roll-your-own shops or their customers slide.
Congress passed a transportation package that included a provision that defines the shops as cigarette manufacturers and thus allows the product to be taxed. And the state Supreme Court recently issued a decision that temporarily requires the shops to collect the same taxes applied to retail cigarettes.
Appeals have been filed. It is being argued the Washington state tax is illegal as it was not approved by a two-thirds majority of the Legislature as required by a voter-approved initiative.
At this point, it is uncertain whether the taxing authority on roll-your-own will be allowed to stand this summer.
But given the enormous amount of money at stake -- up to $55 million a year in the state -- and society's strong anti-smoking sentiment, it's a good bet the state and federal government will eventually find a way to tax roll-your-own outlets. And when you factor in Big Tobacco's interest to knock out of business the roll-your-own outlets, the chances of a high tax imposed on cigarettes from roll-your-own machines are near certain.
Bea Gonzalez, spokeswoman for the Ohio-based RYO Machine, argues that her company's machines -- which crank out 200 cigarettes in about 10 minutes -- should not be compared with the products of huge cigarette manufacturers.
"These are individual folks who have been rolling at home previously, who will just go back to rolling at home," Gonzalez said.
Good for them. It's legal and, since it is being done by an individual, it should be subject only to the tax on loose tobacco.
The state and federal government are not concerned -- nor should they be -- with the little guy hand-rolling cigarettes. However, using professional-grade machines to make and sell cigarettes at a rapid pace is a government concern. The cigarettes are no different than those made by Big Tobacco.
This is about enforcing tax policy fairly and closing a loop hole being used to avoid paying taxes.