SPRINGFIELD -- Mary Carney Nelson is breathing a little easier after the Illinois Senate Executive Committee on Thursday held off acting on a bill she believes would put her out of business. Senate Bill 2900 would require that stores obtain licenses for machines that allow people to roll their own cigarettes.
SPRINGFIELD -- Mary Carney Nelson is breathing a little easier after the Illinois Senate Executive Committee on Thursday held off acting on a bill she believes would put her out of business.
Senate Bill 2900 would require that stores obtain licenses for machines that allow people to roll their own cigarettes.
Nelson runs Main Street Tobacco Shop in Peoria, a store that features a roll-your-own cigarette machine. Customers come into stores like Nelson’s and buy paper tubes and tobacco. They insert the tubes and tobacco into the machine, which rolls them for the customer.
Because the customers technically are making their own cigarettes, they are exempt from state taxes and other requirements. Main Street Tobacco advertises cigarettes at $3 a pack or $27 a carton, considerably cheaper than brand-name cigarettes.
“This bill is going to essentially put me out of business,” Nelson said. “What it says is anybody who operates a machine has to have a license. If you have a license, you’re a manufacturer.”
$10.7 million lost
A Department of Revenue official testified Thursday that there are 60 RYO machines in Illinois. He estimated that, because the cigarette tax is not being paid on RYO cigarettes, the state lost out on $10.7 million in potential revenue this year.
“We feel that this product is a cigarette and should be taxed as a cigarette,” said Jim Nichelson, Revenue’s director of legislative affairs.
Senate President John Cullerton, D-Chicago, said he supported the department’s recommendation.
The bill’s sponsor, Sen. Terry Link, D-Waukegan, said the issue is about tax fairness. RYO cigarettes would be subjected to the same stamping and packaging requirements as well, he said.
“This is basically just trying to make this equal to every other type of cigarettes we sell all over the state of Illinois,” Link said.
Jeff Burd of RYO Machines disagreed with the notion that RYO cigarettes create a tax loophole. Customers pay taxes on the tobacco they purchase, Burd said, so Link’s bill would require RYO smokers to pay both taxes.
Nelson and other opponents testified couldn’t get state and federal permits needed to be a cigarette manufacturer because of a federal court ruling in Ohio.
U.S. seeks ruling
The U.S. Treasury Department was seeking to require RYO stores to get licenses similar to the one Link’s bill would require before a federal judge quashed the department’s policy. The department is appealing, and a decision is expected in April.
RYO machines and businesses also could not comply with the packaging and labeling requirements, Burd said. And because they would be considered manufacturers, he said, they would not be able to operate in retail zones that forbid manufacturing.
Sen. Dale Righter, R-Mattoon, asked Link whether he was aware that his legislation could wipe out the businesses.
“It’s a possibility, yes,” Link said.
Righter asked if it would be possible to wait until the ruling comes down so that if Link’s legislation were to pass, the stores would be able to stay open and become licensed. But Link said he doesn’t want to wait.
“The fact is we’re making everyone else comply with the law with the way it is today, and that’s the only thing I am looking at,” Link said.
David Thomas can be reached at (217) 782-6292.