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Wednesday, June 15,2011

That's how they roll

A new tobacco shop in Lansing offers a speedy way to roll your own that is drawing the state’s attention. Is it manufacturing cigarettes? The state Treasury Department says yes — and wants a bite.

by Andy Balaskovitz

Rob Bitz stands next to two $32,500,
790-pound cigarette rolling machines in his Frandor tobacco shop. He
shows where customers pour eight ounces of tobacco into the complicated
machine run on an air compressor. Then he shows how to load the empty
rolling tubes. Then he shows what buttons to push.


Eight minutes later, 200 uniformly rolled cigarettes are dispensed — the same amount found in a carton at stores.


Bitz opened That’s How We Roll tobacco
shop at 3000 Vine St. near Frandor Shopping Center on April 20, which
charges $29 for machine rental, pipe tobacco and rolling tubes that in
eight minutes produces 200 cigarettes. Machine usage makes up about 30
percent of his business. He calls the machine the “Rolls Royce of
rolling cigarettes.”


A pound of tobacco and 200 rolling tubes
cost about $23 at a local tobacco shop. Cartons of cigarettes at the
store cost around $60, depending on the brand.


“Obviously it’s cheaper to roll (your
own) at home, but who has time to roll 200 cigarettes at home?” Bitz
asked. “I look at it as we’re stimulating the economy one smoker at a
time.”


Bitz said he’s providing the tools for tobacco smokers to roll their own cigarettes in a cheap and efficient way. 


But the state Treasury Department calls
him a cigarette manufacturer and wants him to get rid of the machines or
pay a $20 per carton manufacturing tax.


In March, the state sent hundreds of
other tobacco retailers letters saying these machines are illegal and
would be seized if owners aren’t paying tobacco manufacturing taxes on
them. RYO Machine Rental LLC, based in Girard, Ohio, has sold machines
throughout Michigan and the world. Some tobacco shop owners took the
March letter as the law.


RYO had a different response: It filed suit against the Treasury Department in Ingham Circuit Court.


At issue are the two RYO “filling
stations” at Bitz’s business. He has machines at stores in Owosso and
Flint also, but he said nothing will happen to them as long as the
injunction continues. All three shops are owned by Great Lakes Amigos
LLC. Bitz said the members besides him are Patrick Brazil and Roberto
Larrivey.


“People aren’t coming here and we sell
them (200 cigarettes),” Bitz said. “They’re coming here and rolling
(cigarettes) themselves. The state would like to think we’re
manufacturing. However, I’m not rolling anyone’s cigarettes for them.”


Bitz does “demonstrate” and “aid” customers, “But we can’t actually say: ‘Here, let me roll those for you.’”


In a sort of prepared statement, Bitz
read a message from his cell phone: “Our stores allow customers to roll
their own cigarettes. All of the state excise tobacco taxes are paid on
every ounce of tobacco we sell. We are confident that Michigan and
federal law allows customers to roll their own cigarettes not only in
their homes but also in our stores.”


On June 2, Ingham County Circuit Court
Judge Clinton Canady III granted RYO a preliminary injunction against
the state seizing the machines. At the end of June, RYO will move for a
permanent injunction. 


Bitz said his business hinges on the
outcome of the court case, he said. It’s not viable if he has to charge
an additional $20 per carton, he claimed.


A May 31 brief filed by the Michigan
Distributors and Vendors Association against the injunction says an
operation like Bitz’s “clearly fits within the definition of a
‘manufacturer’ under Michigan law.”


The brief goes on to read: “Plaintiff’s
commercial enterprise is simply a carefully-devised scheme to use a
nominal amount of consumer assistance to create new cigarettes so that
payment of mandatory state and federal tobacco taxes can be avoided” and
that those businesses “create an uneven playing field for the sale of
cigarettes in relation to retail stores that must pay the required state
and federal taxes … .”


The state Attorney General’s Office,
which is representing the Treasury Department, said those seeking the
judgment go “to great lengths to play the role of David in the epic
battle against Goliath. Plaintiffs’ historical account of
‘roll-your-own’ cigarettes practically ignores the quantum jump from
consumers making their own cigarettes at their kitchen table to the use
of Plaintiffs’ highly sophisticated machine located in a commercial
establishment.”


In a May 10  story
in the Warren, Ohio, Tribune Chronicle, RYO president Phil Accordino
likened his machine to coffee grinders at a grocery store that grind
whole coffee beans. Accordino told The Detroit News in a May 9 article
that large-scale cigarette manufacturers roll 20,000 cigarettes in a
minute while his machine rolls about 20.


The owner of Downtown Smoke Shop at 406
S. Washington Square took the state’s letter at its word. When asked if
he thinks Bitz’s business is considered a manufacturer, he said, “Yeah.”


“You’ve got to abide by the laws and be
in compliance,” he said. At the smoking club, you can buy small personal
rollers (from $10.99 to $49.99), bags of tobacco and rolling tubes, but
the owner won’t let you roll them there.


He said the roll-your-own market is
growing and makes about up about 35 percent of the “cigarette market.
That’s why I started carrying them (tubes, rollers and tobacco).”


Bitz, 31, said he has no particular
affinity for tobacco — he doesn’t smoke it. After his Flint store “took
off” last summer, he said the rolling machines just make good business
sense. He grew up in Detroit and lives in Flushing. He said last year’s
cigarette ban in bars and restaurants affected the marketability of his
business, but “people are still gonna smoke.”


A Lansing woman who asked not to be
identified for fear that her elderly mother would be upset if she knew
she was in a tobacco shop, was at That’s How We Roll for her second time
recently.


She smokes a pack a day and was in a week
before. Due to the Memorial Day holiday — increasing the number of
“moochers” — her 200 cigarettes went fast. She packed Gambler full
flavor tubes with “medium” strength tobacco. Prior to rolling her own,
she smoked Misty Light non-menthols and paid twice as much a week.


“I thought it was great. It was less than half of what I spend in a week’s time,” she said.


She said she’ll be back, if only for the economics and efficiency of it all.


“I can’t believe how fast this is,” she said. “I’m not gonna sit there and roll my own all day long.”

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