MacIver News Service | September 29, 2011[Madison, Wisc…] The Wisconsin Department of Revenue says it did not shut down Roll Your Own (RYO) tobacco stores across the state this week, but store owners and their machine distributor contest that claim.
RYO tobacco stores sell loose tobacco to customers, who then are able to rent time on a machine that rolls it into cigarettes. Customers say they can save up to 50 dollars per cartoon by making their own cigarettes after purchasing tobacco on their own.
On Thursday, DOR sent a notice to RYO stores warning them to apply for additional permits, certification, and submit to additional taxes.
On Monday, many RYO stores closed their doors after visits by DOR agents.
“We have not been shutting them down, but we have been going on site to make sure they have the materials we sent out,” said Stephanie Marquis, DOR spokesperson. “We haven’t been going out and actually shutting them down.”
However, Paul Carne, who is the authorized distributor of RYO machines in Wisconsin, clarified that point.
“They shut down the machines [not necessarily the stores]” he said.
Some stores that offer RYO also sell other products and were able to remain open. Many others had no other option but to shut their doors. Carne said stores that remain open were told to come into compliance or remove the machines within 30 days.
According to the DOR State law requires RYO retailers to:
State law requires RYO retailers to:
- Obtain both manufacturer and distributor permits from the Wisconsin Department of Revenue. A retailer needs the cigarette manufacturer permit because its business involves producing cigarettes with loose tobacco, as well as a distributor permit to ensure that all cigarette packages the customer leaves the retail premises with are affixed with the appropriate Wisconsin cigarette tax stamps.
- Sell more than 50% of the RYO cigarettes wholesale to other retailers or vending machine operators, and retailers cannot own, control or operate these other entities. This is necessary only if retailers wish to continue selling RYO cigarettes directly to customers.
- Obtain certification from the Wisconsin Department of Justice to be placed on its approved directory of cigarettes for sale in Wisconsin in order to comply with state law and regulations.
- Obtain certification from the Wisconsin Department of Safety and Professional Services that these cigarettes meet the fire safety performance standards.
“Under state law, if a retailer or the retailer’s customer operates a RYO machine on the retailer’s premises to make cigarettes with loose tobacco, the retailer is both a cigarette manufacturer and distributor,” DOR told store owners. “Retailers who fail to meet the above requirements could face fines, penalties, permit revocation, imprisonment, and/or seizure of the tobacco and other personal property used in this activity.”
Josh Winrich, owner of Holy Smokes Stores in La Crosse, Eau Claire and Tomah, told the MacIver News Service this came as a surprise. He believed the RYO industry’s lobbyist had sat down with government officials earlier this month and came to an agreement.
“They actually said we were clear and if we followed a set of rules, they would leave us alone,” Winrich said. “Obviously that wasn’t the case.”
Winrich said the DOR had not visited his stores at that time, but he was taking precautionary action.
“We’re open because we sell other products as well,” he said. “I decided just going to voluntarily shut down my machines today, so they don’t completely shut me down.”
Winrich said in trying to get more tax revenue from operations like his, the state risks losing thousands of dollars it currently collects.
“I paid the state close to three thousand dollars in sales tax last month,” he said. “And the state’s not going to get that money once they shut us down.”
Winrich also said his business keeps more money in the local economy, than if customers just bought pre-manufactured cigarettes.
“We employ 7-8 people, who spend their money here in town, and our customers have more money to spend too,” Winrich said.
On Friday Smoke Free Wisconsin applauded the state’s decision to go after RYO stores.
“Wisconsin must stand by the health of our citizens and no longer allow these products to be sold at the current, cheap price,” said Maureen Busalacchi, executive director of Smoke Free Wisconsin. “We applaud Governor Walker’s administration and the Department of Revenue for addressing this issue and making the right move for Wisconsin.”
Carne said RYO lawyers are meeting with state officials hoping to resolve the situation.
“I’m optimistic they will be open again soon,” he said. “But I’m sure there are folks on the other side that are optimistic they’ll stay shut down.”
According to DOR there were 50-100 RYO stores in Wisconsin before enforcement actions began this week.