U.S. District Court Judge Katherine Forrest issued a preliminary injunction this week against two New York City roll-your-own cigarette stores in a case brought by state Attorney General Eric Schneiderman and New York City. The judge said the plaintiffs had made a strong showing of a likelihood of success in proving the issue at trial. In the meantime, the stores can still sell loose tobacco and loose tubes, but they cannot make the machines available to customers.
“What is prohibited is the advertisement of very inexpensive cartons of cigarettes made possible by tax avoidance,” she wrote.
Schneiderman and New York City filed the lawsuit March 12 against BB’s Corner Inc. in Brooklyn and Nitecap Entertainment in Staten Island, charging they were violating the federal Contraband Cigarette Trafficking Act, New York’s Cigarette Marketing Standards Act and other state laws. The plaintiffs claim that roll-your-own cigarettes are not fire-safe
This was one of a series of actions the state and city have brought against roll-your-own tobacco shops. Schneiderman has also filed a lawsuit against a roll-your-own store in Onondaga County.
BB’s Corner and Nitecap Entertainment Corp. deny the allegations made by the state and New York City. They say they are not manufacturers of cigarettes. Rather, they serve a segment of the population that wants to pay a lower price for cigarettes. The stores sell pipe tobacco and cigarette tubes to customers, who operate the self-serve machines in the stores.
It is much cheaper for customers to obtain cigarettes this way because taxes are dramatically lower on pipe tobacco than for brand cigarettes. Locally, Rockland County has several roll-your-own shops.
In the legislative session that ended last week, the New York Association of Convenience Stores unsuccessfully pushed for a bill that would classify roll-your-own cigarette shops as manufacturers, meaning they would be subject to higher taxes. It essentially would have put RYO stores out of business, although the association said it was not trying to do that. The bill passed in the Assembly but died in the Senate.
The federal government hiked the excise tax on a pack of cigarettes to $1.06 three years ago and made similar increases to roll-your-own tobacco and small cigars. That prompted more smokaers to use pipe tobacco to roll cigarettes. The Centers for Disease Control and Prevention estimated New York lost $16.9 million on potential tobacco tax revenue between April 2009 and August 2011. The Government Accountability Office estimated the federal government lost between $615 million and $1.1 billion from April 2009 to September 2011.