Ohio Manufactured Homes

Tax loophole stokes handmade cigarettes

Every day in a dozen or so Metro Detroit smoke shops from Westland to Waterford, tax-weary, recession-wracked smokers create their own cartons of cigarettes for half the $60 they'd pay for manufactured name brand smokes.

Thanks to a $30,000 automated roll-your-own machine from an Ohio manufacturer and a bargain tax rate on pipe tobacco created by Congress, smokers can take a box of pre-made cigarette tubes, 8 ounces of tobacco and 15 minutes to produce a carton of freshly rolled cigarettes for under $30 — less than just the federal and state tobacco taxes they would pay for a pre-made carton.

Although the machines have been around for years, state and federal tax officials now are trying to stub out the controversial RYO Filling Machine that automates the cigarette rolling process.

In March, the Michigan Department of the Treasury warned 300 smoke shop owners that using the machine on their premises constitutes the illegal manufacture of cigarettes. That follows a similar federal ruling, which has been stayed by a restraining order filed by the machine manufacturer, RYO Machine Rental LLC of Girard, Ohio.

Even if the RYO machines are banned, the low tax rate on pipe tobacco means plenty of smokers will continue to light up on the cheap. Metro Detroit smokers who skip the RYO machines and roll their own cigarettes at home already are saving even more — assembling a carton of cigarettes for as little as $13.

"The people that come here are basically the people that are trying to save money," said Kyle Mio, owner of Dirt Cheap Tobacco in Sylvan Lake. The store opened in February and, even though he doesn't use the RYO Filling Station, business is good enough that he and his father opened a location in Waterford.

Rhett Berry is a Dirt Cheap customer who can put together a pack of cigarettes at home with a small tabletop rolling machine in about five minutes.

"I found it was an awful lot cheaper to do it that way," said the 56-year-old Keego Harbor property manager. "Two packs of pre-made cigarettes are the same price as a carton for me. I pay about 12 to 13 bucks a carton."

Kyle's father, Norman Mio, worked in wholesale tobacco and saw an opportunity when Congress hiked the excise tax on roll-your-own cigarette tobacco to $24.78 a pound. The tax on pipe tobacco, however, is a mere $2.38 a pound. What's more, industry experts say, the official definition of pipe tobacco is loose enough that anything labeled pipe tobacco gets the lower tax rate.

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