Thursday, June 2, 2011

Erie Cigarettes Store Helps Smokers Roll Their Own

Richard Lockwood sat at one of Tightwad Tobacco's wooden tables and stacked nearly 200 freshly rolled discount cigarettes into a thin, cardboard box.

It has become a money-saving routine for the 31-year-old Erie man.

"Coming here saves me about 60 percent on cigarette costs, that's about $15 a week," Lockwood said as he grabbed several filtered cigarettes out of a plastic bag and stacked them into the box. "I used to smoke cigarettes Newports, but these taste just like them, maybe a little better, and they cost a lot less."

Local smokers have been streaming into the Liberty Plaza cigarettes store since it opened in August. Some of them buy cigars from its humidor or packs of Marlboros and Camels.

But more than 90 percent of the customers, like Lockwood, are drawn to four large machines near the back of the store. They look like industrial dishwashers, but they create cheap cigarettes from loose tobacco and empty paper tubes.

"We have customers waiting outside our door every morning when we open," store manager Kathy Hart said. "Sundays are our busiest days."

A carton of cheap cigarettes bought in Pennsylvania costs from $35 to $60, depending on the brand and where you buy it. Various state and federal taxes account for more than half of that cost.

But Tightwad Tobacco, with five stores in Pennsylvania and one in Florida, has found a money-saving loophole in the federal laws. That loophole allows its customers to receive nearly a carton of online cigarettes for about $25.

It doesn't sell customers cigarettes. Instead, it sells the ingredients needed to make them: loose tobacco and empty, filtered cigarette tubes.

"We rent them time on our machines, and they make their own cigarettes," said Josh Cable, Tightwad Tobacco's area manager. "Our employees will guide them through the process, but we are not permitted to do it for them."

That's because the federal government years ago approved a personal-use exemption for people who rolled their own cigarettes. The loose tobacco and cigarette tubes are still taxed, but at a much lower rate than manufactured cigarettes.

But Tightwad Tobacco and its customers must follow strict rules, Cable said.

"By law, we have to ask them every time if the buy cigarettes are for personal use," Cable said. "If a customer says they are for their husband or wife, we can't sell the tobacco to them."

Here's how it works: A customer is guided to a table near the hulking machines, where loose pipe tobacco is stored in plastic bins.

It's pipe tobacco in name only. It tastes and burns just like cigarette tobacco but is cut differently and, more importantly, taxed at about one-ninth the rate of cigarette tobacco.

"We can match 96 percent of the manufactured cigarettes online on the market," Cable said.

Store employees tell customers to measure 8 ounces of tobacco on a nearby scale and place a stack of empty cigarette tubes into a metal canister.

The tobacco is dumped into the top of a machine, while the canister slides into the front. It takes the machine about eight minutes to spit out 190 to 199 cheap cigarettes into a plastic bag.

Customers can roll only up to 199 cigarettes at a time. An old Pennsylvania law requires anyone in possession of 200 or more cigarettes to write a check to the governor to cover the tax, said Lisa Fleck, Tightwad Tobacco's chief marketing officer and brand manager.

"Will the government come after someone rolling cigarettes in their home for this? I highly doubt it," Fleck said. "But it would be easy for them to target us, so we don't take the chance."

Federal laws concerning tobacco taxes are enforced by the Alcohol and Tobacco Tax and Trade Bureau, part of the U.S. Department of Treasury.

Tightwad Tobacco's sister company, Tobacco Outlet Express, filed a lawsuit against the Treasury Department after it ruled in September that the personal-use exemption does not extend to the use of commercial cigarette-making machines like the ones at Tightwad Tobacco.

A TTB spokesman said he could not comment on the matter because it is being litigated.

"We got a preliminary injunction from a federal judge, and we expect a hearing in October or November," Fleck said. "We are extremely confident in our arguments."

Until then at least, customers like Lockwood will continue to visit Tightwad Tobacco and pay less than half the price for cigarettes that they used to.

"I used to go to (the New York state Native American reservations at) Salamanca and Silver Creek to buy them at the price I pay here," Lockwood said. "Plus, I save money on gas."

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