The State Tax Department is supporting a bill that would require commercial roll-your-own cigarette machine owners to register their equipment and pay the same taxes as name-brand packaged smokes.
State Tax Department attorney Daniel Rouse told the Senate Finance and Taxation Committee on Wednesday that the commercial roll-your-own machines are becoming popular across the country and are beginning to appear in North Dakota as the cost of cigarettes increase.
The machines, which are about the size of "a jukebox or an old IBM mainframe computer," cost about $35,000 and can crank out a carton of cigarettes in about eight minutes, Rouse said. In other states, they typically are found in smoke shops.
"These aren't the small table-top machines that your grandfather might have used to roll his own cigarettes," Rouse said.
The loose pipe tobacco used by the machines is taxed by the state at just one-tenth the rate of cigarettes. A pack of cigarettes is taxed by the state at 44 cents a pack at present ranking North Dakota 46th among states, state and federal data show. New York charges the most state excise tax in the nation at $4.35.
"At this point, the state has no ability to regulate these machines," Rouse said. "The product needs to be recognized for what it is."
The proposed law would redefine cigarettes and list businesses that use the commercial rolling machines as tobacco manufacturers.
The "huge disparity" in cost has led to "some creative solutions by those who want to smoke cigarettes but don't want to pay the higher rate of taxes imposed on cigarettes," Rouse said in his testimony.
Rouse said the Tax Department believes only a handful of the commercial machines are in North Dakota. "We don't quite have a full handle on how many there are," he said.
One machine at a smoke shop in Mandan is no longer in use because the business closed after its owners were convicted last year for conspiring to sell synthetic marijuana, Rouse said.
Mike Rud, president of the North Dakota Retail Association, said that while many businesses that belong to his group sell tobacco products, the membership supports the proposed legislation.
"It's a good bill," Rud told lawmakers.
Rud said the group also was concerned about the fire danger posed by roll-your-own smokes. The proposed law would require commercial roll-your-own makers to use only "fire-safe" paper that makes a lit cigarette more likely to go out if left unattended.
No one spoke in opposition of the bill on Wednesday.
Rouse said the proposed legislation would allow the commercial rolling machines for personal use, though he said the user would have to be a heavy smoker who had room for the big machine.
"About the only place you can smoke is in a garage," said Sen. Dwight Cook, R-Mandan, chairman of the Finance and Taxation Committee.
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