Roll Your Own
Dakota Digest - 07/03/2012
House Bill 1138 is one of several laws that went into effect July 1st. The bill taxes cigarette manufactures and that may put some small business owners out of business.
South Dakota Public Broadcasting's Amy Varland has today's Dakota Digest and takes a look at the cigarette rolling machines that some legislators and other cigarette distributors would like to see go up in smoke.
If you're a smoker this could be one of your favorite sounds.
This is a cigarette rolling machine. You put tobacco in one place, papers and filters in another, and out comes cigarettes. It is operated by a customer, and a carton out of this machine costs less than half of what it would out of the store.
Leland Ruzicka is a longtime Spearfish resident and the owner of the Back Porch Bar. Ruzicka also owns LT Tobacco in Spearfish and Rapid City. He has been in the controversial cigarette rolling business since September 2011.
Ruzicka fought House Bill 1138. The bill signed in to law by Governor Dauggard is forcing him to close the doors of both of his stores on July 1st, unless he agrees to pay the cigarette manufacturer tax.
"You know you could talk to any of the legislators and senators that actually voted for this. Why they would support big business, big tobacco, over a small South Dakota store I don't know," says Ruzicka.
In the State of South Dakota ‘manufacturer' is defined as any entity which manufactures or otherwise produces cigarettes or causes cigarettes to be produced or manufactured anywhere.
The definition of the word manufacturer is at the heart of this issue, but there are many gray areas. And the reasoning behind the new legislation depends on who you ask.
Ruzicka argues there's more consumer involvement at his tobacco shop and that makes his business different.
"Our company what you do is you buy the tobacco, the tubes, you operate the machine, the machine rolls you a carton of cigarettes in about ten minutes. Through this legislation deeming us a manufacturer it would raise taxes fifteen dollars and thirty cents a carton on our cigarettes - virtually putting us out of business," says Ruzicka.
But not everyone agrees.
"A single cigarette manufacturing machine can produce fifteen thousand cartons of cigarettes a year. That's one hundred and fifty thousand packs of unstamped cigarettes per year. The cigarettes created by these machines are substantially cheaper than conventional cigarettes because of the excise tax on loose cigarette and pipe tobacco. And it is often much less than the cigarette tax," says Cronin.
Republican Representative Justin Cronin is the Assistant Majority Leader in the State House. He says those like Ruzicka aren't playing by the rules.
"And make no mistake - the customer that walks into these stores walks out with manufactured cigarettes. Not cigarettes that they rolled themselves," says Cronin.
Ruzicka claims he's a threat to Big Tobacco's profit margin and they are going after him because of it. Democrat Representative Peggy Gibson agrees with him.
"So I sided with the small businesses in my district or the small business in my district because I don't see that as a conflict with the big tobacco companies - I see that just as a private enterprise - some people trying to make a living and run a business and the big tobacco companies are trying to snuff them out," says Gibson.
But others like Democrat Representative Bernie Hunhoff who is the Minority Leader in the State House say Leland Ruzicka could set a dangerous precedent.
"The bottom line is this thing is built around a false model - it's built around a tax dodge - that's the only reason these shops are in business. It's a tax dodge and if we don't stop it now they're going to prolificate across the state in small towns and in big cities up and down every street corner so please stop it now or you're going to have an even tougher decision to make a couple years down the road," says Hunhoff.
In the end lawmakers agreed that Ruzicka should pay the same taxes as others in the cigarette business.
For LT Tobacco customer Karen Case that means no more cheap smokes, and she's not happy about it.
"This is supposed to be America the free and I think they need to keep their nose out of our business," says Case.
LT Tobacco owner Leland Ruzicka says he and his team of lawyers have not given up the fight and adds that he's not going anywhere - despite the new tax that is now in effect. Ruzicka also says that he has other plans for his cigarette rolling machines - and says we haven't heard the last of him.
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