40
TOBACCO BUSINESS
SEPTEMBER/OCTOBER 2013
once considered. “We were looking at it,
but we never pulled the trigger,” relays
Frank Armstrong, president of North
Carolina-based Blue RidgeTobacco.
“We were close, really close—we were
days within putting money down on the
machines and then the news came out,”
addsMikeGripp,vice president at Iowa-
based Smokin’ Joe’s Tobacco & Liquor
(formerly Cigarette Outlet).
Many of those retailers in the
tobacco channel who did venture into
rolling machines took a hit when the
law changed. “We were doing well in
the business but were forced out by
government regulations,” says Billy
Grantz, owner of Kentucky-based
Cox’s Smokers Outlet.
Cheap Tobacco in Ohio
and Smokers Outlet/Wild
Bills Tobacco in Michigan
also reported doing big
RYO machine business in
some stores before the strict
regulations hit.
But no matter the good, bad
or indifferent emotion attached
to the big roller business, none
of the retailers queried by
Tobacco
Business
in an industry survey late last
year believed it was ever coming back—
at least not in its previous form. Some
even ventured to speculate on why the
concept was squashed.
As one put it, “It’s highly unlikely
we will see rolling machine businesses
again—RJR spent enough to keep that
from happening.”
But Bryan Haynes, a partner in the
law firm Troutman Sanders, which
represents all segments of the tobacco
industry, tells
Tobacco Business
, “It is
not a dead industry.” He adds, “It is my
understanding, and there’s a level of
common knowledge out there,that there
are individuals who have been using the
machines for ‘non-commercial’ purposes
and for their own personal use, and so,
in that sense, there is still some level of
interest in using the machines.”
Gone Clubbing
The street terminology for these
businesses is “private membership clubs,”
and when pressed further,Haynes agrees
that “yes, I believe there are clubs out
there whereby individuals are using the
machines [non-commercially].”
Tobacco Roll in Clifton Park, New
York is one retailer making membership
available to its customers. Before the
harsh law went into effect last summer,
Tobacco Roll was operating quite
profitably as a big RYOmachine retailer.
Even after the blow came, it still kept
its doors open—it was one of the few
places that decided to go for what some
call the “club loophole”. Those who do
so essentially bypass the law imposed on
retailers that own the machines (thereby
making them cigarette manufacturers),
by instead allowing customers to buy
tobacco from the retail side of the
business and fostering a “club” that rents
the machine. Since these retailers no
longer own the machine(s), they cannot
be considered manufacturers.
It is important to note that in its
guidance document datedOctober 2012,
the federal Alcohol, Tobacco Tax and
Trade Bureau (TTB) references these
clubs and puts forth that it is “extremely
unlikely” that these non-profit
organizations are exempt from excise
tax liability and associated Internal
Revenue Code obligations (see
sidebar,
RYO Machines According
toTTB
).
Nevertheless, customers of
Tobacco Roll are currently
buying tubes and tobacco from
the store and,with a $15 annual
membership to Freedom Club,
renting out the big machines and
rolling a carton of cigarettes for
$40.65, according to an employee
at the store. The store also sells cigars,
pipes and other tobacco.
It was reported in the area’s local
Times Union
paper last October that to
solidify the non-profit aspect of the club,
Tobacco Roll planned on donating the
relatively lowproceeds fromthemachine
rentals to local schools or charities. But
when
Tobacco Business
tried to confirm
this with the store owner, he would not
come to the phone.
Beyond finding out about clubs
through retailers, consumers can also go
to websites touting roll-your-own clubs
such as theMYOSmokers Club and the
ROLLED
But
NOT
Gone
