BOSTON (CBS) – A growing number of smokers have found a way to get cigarettes for a small fraction of what they used to pay because they’re not paying most of the taxes.
Is it legal?
It depends on who you ask.
A two ounce bag of tobacco that sells for $5.95 can make approximately 40 cigarettes.
And that is what many smokers doing these days.
They buy the loose tobacco at a growing number of corner stores and then head for the back of the store.
WBZ-TV’s Joe Shortsleeve reports
At those prices, smokers like Paul Nicewicz of Chelsea are all too happy to “roll their own” in small machines.
Paul: “If I was to buy my brand of choice, it would cost me $16 and change, where this is costing me $6 and change.”
Joe: “So you are saving quite a bit?”
How is the “roll your own” cigarette business these days?
“Booming,” according to Tony Marino who supplies “roll your own” machines to small stores.
He says tax laws allow smokers to forgo all the heavy taxes on cigarettes if they roll their own and don’t buy ones that are “manufactured.”
He doesn’t doubt for a second this is all legal.
Joe: “Would you agree that you are operating in a loophole?”
Tony: “I agree that there is a law on the books that a lot of people were not aware of, and that as the public becomes more aware of it, the more they are taking advantage of it.”
While Tony’s machines make one cigarette at a time, we found stores with much larger contraptions spitting out a carton’s worth of cigarettes in just minutes.
And the price is about a third of what you’d pay for traditional smokes.
That is costing the state big time.
Joe: “What is the tax liability in Massachusetts?”
Tony: “The tax liability in Massachusetts is $24.90 per carton of cigarettes manufactured.”
Tony: “I would estimate at least 500,000 cartons. So the state is missing out on $13 million and the feds are missing out on $5 million.”
State Senator James Timilty is the Chairman of the State Revenue Committee on Beacon Hill.
He says, “It’s a willful attempt to evade the tax that is in Massachusetts.”
“We should shut them down.”
“I think the Attorney General and the Department of Revenue have the tools!”
“It is a constitutional issue when it comes right down to it, taxes have to be enforced uniformly throughout the Commonwealth.”
The issue of lost tax revenue to the state is a big deal on Beacon Hill but public health experts say the consequences of cheaper cigarettes are literally deadly.
The State Department of Public Health says teenagers are the most price sensitive group and for every 10-percent increase in the price of tobacco there is a 7-percent decrease in consumption.
Health experts argue the reverse is also true.
This loophole is also an issue in other states.
Last summer the State Supreme Court in New Hampshire ruled stores with “roll your own” machines were technically manufacturers and should be subject to the higher tax rate.