Roll-your-own smokes could face higher taxes

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PIERRE — State taxes on cigarettes produced from rolling machines at tobacco shops in South Dakota would increase more than six-fold, rising to the same rate as commercial cigarettes, under changes approved Friday by the state House of Representatives.

House members, after a 25-minute debate, voted 47-20 in favor of designating shops with roll-your-own machines as cigarette manufacturers.

That would make them subject to the same taxes as cigarettes purchased over the counter.

The legislation, House Bill 1138, crosses to the Senate for consideration next.

The changes would take effect July 1 of this year, with one exception. Requiring the use of slow-burning cigarette papers on roll-your-own cigarettes would be delayed until 2014. Rep. Justin Cronin, R-Gettysburg, said a single rolling machine can produce 15,000 cigarettes annually. He is the legislation’s prime sponsor. He said the taxes on the materials are “always much less” than the taxes on commercial cigarettes: $2.39 vs. $15.33, per carton. “There’s no denying this is a growing practice in South Dakota,” Cronin said. There are a dozen or so shops that have the rolling machines in South Dakota.

“These are entrepreneurs who figured out how to make money,” Rep. Mike Verchio, R-Hill City, said, urging defeat of the legislation.

Rep. Nick Moser, R-Yankton, said there is a state law that prohibits manufacturing cigarettes that don’t carry the state’s tax stamp.

He said the law should be enforced if the smoke shops are rolling cigarettes for customers, rather than designating them as manufacturers solely because they offer use of a rolling machine.

He said the first offense is a misdemeanor and subsequent offenses are a felony.

Rep. Tona Rozum, R-Mitchell, suggested the higher taxes shouldn’t take effect until July 1, 2014, so that business owners have time to recover the price of the machines, which she said run about $35,000.

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