44
TOBACCO OUTLET BUSINESS
SEPTEMBER/OCTOBER 2012
Also unfair was the fact that on July
10
the Alcohol and Tobacco Tax and
Trade Bureau (TTB) issued a statement
on RYO cigarette machines, saying
that any newly defined “manufacturers”
are required to apply for the
aforementioned permit from TTB, but
“
because of pending litigation, TTB is
not currently processing applications.”
At the time, Haynes commented that
it “leaves people with these machines
stuck between a rock and a hard place.”
But the difficulty didn’t stop there.
On August 14, Troutman Sanders filed
a lawsuit on behalf of RYO machine
manufacturer Freedom Filler LLC and
retailer Tobacco Outlet Express LLC
against the TTB, basically challenging
the amendment to the Internal Revenue
Code of the definition of a manufacturer
of tobacco products.But this lawsuit also
amended a temporary restraining order
and a preliminary injunction that the
same plaintiffs obtained in September
2010
against the TTB.
After the preliminary injunction
was issued in 2010, the TTB appealed
the decision to the Sixth Circuit
Court of Appeals. And on August 20,
just before press time, the U.S. Sixth
Circuit Court of Appeals vacated the
preliminary injunction obtained in
2010
and upheld the TTB September
2010
rule classifying retail operators of
commercial RYO cigarette machines as
manufacturers, noting that the Federal
court, which granted the preliminary
injunction against the TTB rule, did not
have proper jurisdiction to do so and
that the recent passage of the Federal
highway funding bill,which included the
similar provision to treat RYO retailers
as manufacturers and took effect on July
6, 2012, “
mooted” the legal controversy
between the plaintiffs in the lawsuit and
the TTB, according to a report put out
by the National Association of Tobacco
Outlets (NATO). Supposedly, the TTB
should now be enforcing the rule and
processing applications.
Neither Haynes nor the plaintiffs were
immediately available for comment, but
prior to the Appeals Court decision,
Haynes told
TOB
that the best-case
scenario would be to eventually get the
law changed, and “absolutely that can
happen,” but even if it did not, there
were other positive avenues of recourse.
Avenues of Recourse
“
There are serious questions regarding
the legality of those recent amendments
and interested parties are evaluating
those questions,” Haynes stated.
“
Interested parties are also evaluating
possible
methods
of
operating
consistently with the language in the
Internal Revenue Code.”
What this might mean for the future is
operating as a “private membership club,”
according to Eric Jacobs, part owner of
Cartons for Less in Anaheim, California.
“
There are
serious
questions
regarding
the legality
of those recent
amendments
and interested
parties are
evaluating
those
questions
”
