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Business and Economy NewsTracker Tax and Budget

RYO Shop Operators Claim Victimization by Gov’t, Big Tobacco

Tennessee tobacco farmers will see taxes on their products rise because of legislation passed this year by the General Assembly, mirrored by a provision in the federal highway bill passed in July.

Although the highway bill has been touted by Washington politicians as supporting or creating around a million jobs, the provision taxing roll-your-own tobacco shops as manufacturers could put an end to an entire industry.

“It’s definitely a major body blow, a knockout punch if you will,” said Mark Griffey, one of the proprietors of Smokes-4-Less in the Knoxville area. Griffey says he shut down two of his three stores and laid off nine of his 10 employees after the federal bill was signed. “So, for all intents and purposes, if we don’t get some kind of injunction or antitrust suit, or something, we’re dead.”

The federal bill raises taxes on pipe tobacco to the same rates as cigarette tobacco and requires that roll-your-own shops be licensed as manufacturers in order to run the machines, which cost over $30,000 apiece — an investment businesses say now looks to be a money loser.

The state legislation sought to “level the playing field” by requiring the roll-your-own shops to register with the state to ensure that they were using the proper tobacco, paying the proper taxes on the tobacco, and paying into the Master Settlement fund, said Senate bill sponsor Jack Johnson, R-Franklin. The fund was set up after a 1998 settlement between the top four cigarette companies and the states, which required payments from the companies over a 25-year period.

“As I understand it, the federal law is pretty much going to put them out of business,” said Johnson, who, in the interest of full disclosure, admitted during the legislative session that his wife operates a convenience store. “That was not our intention with what we passed at the state level, but we did feel like it was necessary to level the playing field a little bit.”

Voting against the measure was Rep. Frank Niceley, R-Knoxville, who says it will work a hardship on farmers.

“It was just a tax on Tennessee farmers, and I‘ve never voted to tax Tennessee farmers,” said Niceley. “And I’m probably not going to be starting.”

Business owners like Griffey say the bills are a thinly-veiled effort by government and big business to butt roll-your-own operations out of the market. Although the state measure would have been crippling enough, it at least allowed them time to adapt, Griffey said. But the enaction of the federal bill was instantaneous.

“They started talking about it at the end of June, and then July 5th or 6th, Obama signed the thing, and it’s instant,” said Griffey.

Nationwide, there are about 1,000 stores with roll-your-own machines from RYO Machines, a leading manufacturer, RYO told the Huffington Post in July.

Griffey said he feels that much of the pressure on legislators to level the playing field seems to have come from lobbyists for larger tobacco companies and convenience stores, industries which were negatively affected by the roll-your-own shops’ ability to sell tobacco at a lower tax rate. This sentiment is one that Niceley shares.

“They call these machines manufacturers, they can make 200 in about 10-12 minutes, with the customer doing it themselves,” Griffey said. “The way they make them, they make 20,000 in a minute. It’s just the big guy snuffing out the little guy.”

Tennessee Republican Congresswoman Diane Black also sponsored a measure to raise the tax rates on roll-your-own shops, though it was not her measure that ultimately passed.

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Press Releases

Tennessee Youngsters ‘Kick Butts’ To Fight Tobacco Use

Press Release from the Tennessee Department of Health, March 19, 2010:

National Kick Butts Day is March 24

NASHVILLE, Tenn. – Thousands of youngsters throughout Tennessee will join peers across the country to celebrate Kick Butts Day on March 24, 2010. This nationwide day of youth activism against tobacco is designed to raise awareness of the risks and concerns associated with children and tobacco use.

“Young people are a powerful part of the solution to reducing youth tobacco use,” said Health Commissioner Susan R. Cooper, MSN, RN. “Tennessee youngsters are sending two important messages: they want the tobacco industry to stop targeting them with advertising and they want elected leaders at all levels to do more to protect them from tobacco. I applaud the efforts of all Tennessee kids who are taking part in Kick Butts Day to share this lifesaving message with their peers.”

Every day, more than 3,500 American children try their first cigarettes, the Substance Abuse and Mental Health Services Administration reports. Another 1,000 juveniles every day become new regular daily smokers, according to the Centers for Disease Control and Prevention. Statistics show how deadly this daily habit can be: smoking accounts for approximately 9,400 deaths in Tennessee every year, according to the CDC, with nearly half of those due to lung cancer.

Nationwide, CDC reports smoking is responsible for almost one in five deaths. Secondhand smoke is another serious problem. In Tennessee, the Campaign for Tobacco-free Kids reports 488,000 children are exposed to secondhand smoke in their homes. CDC estimates secondhand smoke is responsible for 35,000 deaths nationwide each year from heart disease in non-smokers who live with smokers, as well as lung cancer deaths, lung infections and asthma attacks.

The Tennessee Tobacco QuitLine, 1-800-QUIT-NOW, can help by offering personalized support for Tennessee teen and adult residents who want to quit smoking by connecting them with trained quit coaches to guide them through the quitting process. Callers receive ongoing professional coaching via individually scheduled calls with a quit coach personally assigned to them. QuitLine callers also have complimentary access to relapse prevention techniques, printed resource materials, information on nicotine replacement therapies and other services to help in the quitting process.

This convenient and confidential service is free and available to Tennessee residents in both English and Spanish. The service is also available for the deaf and hard of hearing at TTY: 1-877-559-3816. The Tennessee Department of Health’s county health clinics also offer smoking cessation services to help both teenage and adult smokers kick the habit. Contact your local health department for details.

A list of Tennessee’s health department locations can be found online at http://health.state.tn.us/localdepartments.htm.

The benefits of quitting smoking are significant and almost immediate. Within 20 minutes of giving up tobacco, elevated blood pressure and pulse decrease; in two days, nerve endings regenerate; in two weeks, circulation improves; in one to nine months, fatigue and shortness of breath decrease; and in one year, the risk of a heart attack is cut in half.

The Tennessee Tobacco QuitLine, 1-800-QUIT-NOW (1-800-800-784-8669), is a statewide, free tobacco cessation treatment program made possible through the Department of Health. There is no charge to callers for services, and callers have unlimited access to a quit coach through the QuitLine. Hours are Monday through Friday, 7 a.m. to 10 p.m.; Saturday 9 a.m. to 6 p.m. and Sunday 10 a.m. to 4 p.m. Central time. Call to learn more about the QuitLine or visit the Web site at http://health.state.tn.us/tobaccoquitline.htm.

Kick Butts Day is a national effort led by the Campaign forTobacco-Free Kids. To learn more and find a list of Tennessee events, go to http://kickbuttsday.org/.