Roll-your-own savings could go up in smoke

For Holly and Doug Halonen, it’s not a matter of politics or taxes.

It’s simply about saving money.

About 18 months ago, they became regulars at Tobacco Joes, a shop tucked into a small strip of business along Everett Mall Way.

People are drawn to the business by the promise of savings — big savings — on cigarettes.

But customers have to be willing to take on a do-it-yourself style project: picking out the specific type of tobacco they want from a line of plastic storage bins and choosing the paper cigarette tubes into which the tobacco will be inserted.

In a matter of about 10 minutes, a nearby automated machine can produce the equivalent of a carton of cigarettes for about half the price of store-bought.

Customers are able to bypass hefty cigarette taxes by using pipe tobacco, which is taxed at lower rates. It’s triggered a debate among state lawmakers, who are considering whether this tobacco should be taxed at higher, cigarette-like rates.

The debate doesn’t involve small change. At stake is about $13 million a year in potential tax revenues, according to the state Office of Financial Management.

If the state does increase taxes on pipe tobacco, it would mean that the equivalent of a carton of cigarettes at the roll-your-own shops would cost about $67.60, nearly matching the state average of $70 a carton.

The state House approved increasing the tax before the end of the legislative session Thursday. The state Senate would need to take action in its special session that starts today for it to go into effect.

The equivalent of a carton of cigarettes can be purchased at Tobacco Joes for about $39. Discounts for multiple purchases allow customers to buy the equivalent of two cartons for about $68, a savings of as much as $50 to $60 a carton depending on brand, Holly Halonen said.

The roll-your-own shops are diverting business from the state’s small convenience stores, where a carton of cigarettes can cost about $80, said T.K. Bentler, executive director for the Washington Association of Neighborhood Stores.

Taxing the pipe tobacco at cigarette-like rates would take away the economic incentive for customers to come to his store, said Joe Baba, owner of Tobacco Joes.

That would put an estimated 250 employees out of work at the 65 Washington stores that have the $30,000 roll-your-own cigarette machines, he said.

Stores like his are still paying tobacco taxes, he said. But if the Legislature approves the new tax, “it doubles the price of the tobacco we buy.”

“The state believes our customers, by choosing pipe tobacco to make their smokes, are avoiding the cigarette excise tax,” Baba said. “Rolling your own has been around for 100 years. People have always had that choice.”

Many customers choose to buy pipe tobacco and make their own cigarettes “when it tastes good and it’s a lot cheaper,” Baba said. “In today’s economy, saving money is a huge priority for most families.”

Bentler said he thinks the machines will continue to spread across the state.

“It’s very clever,” Bentler said. “They basically buy loose tobacco, which we believe is really cigarette tobacco, where they don’t have to pay as high of a tax as the cigarette excise tax.”

Bentler said that those who think that the tobacco used in roll-your-own shops is inferior should go see for themselves what’s being offered. “They’ll ask what kind of cigarette (they want) and if they say Camel, they’ll point you to the blend that’s like that kind of cigarette,” Bentler said.

“Convenience stores are losing money,” he said. “The state’s losing money. I believe these machines will continue to grow as long as people can purchase for 50 percent less what they buy at our stores.”

Holly Halonen said she and her husband used to smoke Marlboros, and recently paid nearly $9 for a pack for the name-brand cigarettes.

They’re able to produce a pack of cigarettes at Tobacco Joes for about $3 each, she said. “After we had been smoking these for a while, they are really good,” she said.

Her husband said they both had the same reaction —“yuck” — to temporarily switching back to Marlboros after running out of their roll-your-own supply.

The store has provided petitions so that customers can let lawmakers know about their objections to the proposed new tax on pipe tobacco.

“It would run us out of business,” said Toni Haddanuff, the store manager.

Sharon Salyer: 425-339-3486; salyer@heraldnet.com.

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