Pocono Smoke Shops

The two cigarette-making machines incessantly click and clank as they crank out a nicotine addict's dream: A carton of smokes for $24.99 plus tax.

The operators of Tobacco King and Smokes 2 Go have two machines in each of the shops here, and are planning to open two more stores in the community by the end of the year, with as many as six more machines. The rapid expansion and investment — each machine costs $35,000 — have been fed by an inundation of customers eager to save a buck.

The machine debuted in Matamoras in late June, a year after the company installed one in Honesdale. The manufacturer, RYO Machine Rental LLC of Ohio, has distributed more than 1,000 machines in 35 states.

It's not unusual, said Derrick Gordon, sales manager, for customers to line up for waits of two hours on weekends. Two more machines are to be installed today at the Smokes 2 Go store in East Stroudsburg.

The reason for the popularity is dollars and cents.

The cheapest cartons in New York state can be $80. Cartons go for around $70 in Pennsylvania.

Pennsylvania does not tax loose tobacco, unlike packaged products. The only package that the machine-made cigs come in is a clear plastic freezer bag, into which the finished smokes shoot from the bottom of the contraption. Patrons can buy colorful plastic cigarette cases for $2.

"It's the price," Bill Gilmore of Middletown, N.Y., a retired MTA bus operator, said of what prompted his 20-mile Monday morning jaunt. "Even if they didn't have the machine, I'd come here. Taxes on gas, taxes on cigarettes, taxes on everything are less in Pennsylvania. I love Pennsylvania. I just happen to live in New York."

Rosalie Scioscio and Cynthia Everson, both of Milford and co-workers at a healthcare facility, were also stocking up.

"Maybe go on a vacation, or a better vacation," Everson said of her savings.

The machines are fed loose cigarettes online and paper through openings on top and at the front. Customers load them and click three buttons to start the process. Gordon, the sales manager, shows the customers what to do, and then stands back.

"Employees can't make the cigarettes, or else they'd be manufacturers," said Eddie Miles, the marketing director. "The customers make the cigarettes."

It's a distinction that has been disputed by federal authorities who want retailers to pay manufacturing taxes. The machine-maker and an Ohio retail store sued last year after the government sought to close stores hosting the machines. The case is ongoing.

New York has no problem with its citizens journeying to the Keystone State for tobacco. If they buy no more than two cartons, a use tax would not apply, said Ed Walsh, spokesman for the Department of Taxation and Finance.

States like Pennsylvania are waiting for the outcome of the federal lawsuit before making any decisions about the machines, said Elizabeth Brassell, spokeswoman for the Department of Revenue. She said there were more than 100 machines in the state as of January.

"In New York state, a carton sells for $100, and we can't afford to smoke cigarettes at those prices," Betty Wilchek of Chester, N.Y., said as she waited to make two cartons. "Me and my neighbors, we all come here. It's worth the 29 miles."

Wilchek said she enjoys smoking cigarettes, and that the machine "makes it harder to stop. We haven't seen these prices in eight years."

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Roll-your-own Cigarette Shops Popping Up In Region

Tom Maier smoked Winston online cigarettes for 40 years.

Now in his 60s, he has decided to start rolling his own cheap cigarettes at Cheap Smokes in White Center to save money. He said he didn't think he'd like the taste. But, it "turns out I like these better."

Maier sits on a stool catching his smokes in a plastic tub as they fly out of a slot at the bottom of the 600-pound maroon machine that hums and bangs like a beat-up washing machine.

He comes in once a week, adds loose tobacco to the top of the machine, adds 200 empty, filtered tubes and pushes a button. Eight minutes later, he has a carton of discount cigarette online at about half the cost he used to pay at a gas station.

"They're smoother and have no additives," Maier said. "Besides, the machine does it for me."

Health officials are concerned that the cheap cigarettes store make smoking cigarettes more available to those who usually would not be able to afford it. And the federal government is questioning the legality of the shops by arguing they are manufacturers.

But health concerns and a federal-court case aren't keeping the customers away. More than 30 shops with roll-your-own (RYO) machines have opened in the greater Seattle area in the last year, local shop owner Joe Baba said.

Shops popping up

The machines took a couple of years to gain popularity in Washington. Phil Accordino, president of RYO Machine Rental, said the Ohio company has 1,000 machines in 35 states.

"Retailers have been putting electric machines in their stores since the '90s for customers to use for a fee," Accordino said. His company started making the machines, which cost $32,500, in 2008. "Our machine is still very, very slow. If we've replaced the horse and buggy, we've replaced it with a Model T, not a Ferrari."

RYO shops made it to Washington when Baba was looking to buy a business in the spring of last year. He came across the machines online and decided to give it a shot. He opened Washington's first RYO store, Tobacco Joes, a year ago in Everett. He now has more than 400 repeat customers and two RYO machines.

Clint Hedin, owner of Cheap Smokes, did his own research and saw Baba's success. A nonsmoker, Hedin still saw the business potential. He's the only employee right now, but he said he has seen a steady increase in business and wants to hire five employees eventually.

Now, there are shops in Port Orchard, Bellingham, Mount Vernon, Fife, Graham, Arlington, Monroe and Renton, and the list goes on. Baba licensed the name "Tobacco Joes" to other stores, but he owns only the one in Everett.

The tobacco and tubes for 200 smokes and machine rental costs about $34. The state tax for pre-manufactured cigarettes online was increased by a dollar to $3.025 last year, making a store-bought pack of 20 cigarettes cost around $8 and a carton around $70.

The machine presses the tobacco into a round log. A rod pushes that log of tobacco into a paper tube. The smokes are the same length as buy cigarettes but a little wider.

Hedin said his average customer is a 42-year-old male. Baba said his customers are usually 40 or older and blue-collar workers.

"This service that is provided by this machine and the stores that own them is catering to current smokers," Baba said. "I don't know of any customers in my store after a full year that started smoking cigarettes because of the machines."

Health concerns

The state health department doesn't see it that way. Tim Church, the department's spokesman, says offering buy cigarette online at a cheaper price lets more people buy them. He said people with lower incomes and less education smoke cigarettes nearly twice as much as the rest of the population in Washington.

"I'd always be concerned if anyone is seeing roll-your-own cigarettes as some sort of a good alternative," Church said. "You might save a tiny bit of money along the line, but the cost to your health could be tremendous."

And just because rolling cigarettes allows consumers to avoid the additives placed in pre-manufactured cigarettes, Church said, it doesn't make them healthier.

"It's like claiming this is a healthier kind of poison," he said.

RYO shops aren't just fighting health officials. They're also locked in a federal-court case with the Department of Treasury. The department says the stores are manufacturers, making a profit by producing cigarettes. It's arguing that the stores should be responsible for all cigarette taxes and for holding a manufacturing permit. That's why store owners call their products "smokes," not cigarettes, and publicize that the process is done completely by the customer.

Accordino sued the department to block its ability to enforce manufacturing laws on RYO businesses. A federal judge in Ohio issued an injunction. The Treasury filed for an appeal. For now, it's a waiting game.

"An actual cigarette-manufacturing machine will make 20,000 cigarettes a minute," he said. "Ours make 20 to 25 a minute. There's no confusing the two."

Baba agreed. "There is a business structure for brewing on premise," Baba said. "Customers can make their own beer on premises just like they can make their own smokes on premises. You can't punish smokers and reward drinkers."

Cheaper tax rate

Mike Gowrylow, spokesman for the state Department of Revenue, said federal tax collection is affected by the stores, which may be a reason the government is challenging their existence.

Gowrylow said RYO retailers buy pipe tobacco because the federal tax is about a tenth as much as it is for cigarette tobacco.

But state tax collection isn't affected because the tax rate is the same on pipe tobacco and cigarette tobacco.

Washington's smoking cigarettes rate increased this year from 14.9 percent to 15.2 percent, which is approximately 780,000 adults. Before 2010, the rate consistently had been decreasing for seven years, according to the state health department's website. The average legal smoker pays about $1,170 in state and local taxes annually, Gowrylow said.

"There's nothing illegal going on," Gowrylow said. "If people want to go to the trouble to roll their own cigarettes because it'll be cheaper because of the lower federal tax, it's not an issue for us."

Baba just hopes the lower prices give smokers a break.

"With a product that's addictive, people are forced to use the product even with increased taxes," he said. "This allows smokers in Washington to spend the money on food, gas, tuition. The money still goes back in the economy."

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Cigarette Machines Rolls

The price of smokes just got lower in Portland, and the number of smokers, particularly teenagers, is sure to rise.



The Hollywood Liquor Store in Northeast Portland installed Oregon’s first RYO Filling Station machine on Tuesday, an automated cigarette-rolling device that enables the store to offer cigarettes at half the normal price.



Customers buy sacks of loose pipe tobacco and cigarette tubes with filters. They place the tubes inside the $30,000-plus RYO Filling Station, about the size of a squat vending machine, then drop tobacco into a chute at the top.



The machine blows the tobacco into the tubes, then rolled cigarettes tumble out the bottom about once every two seconds, or a full carton in eight minutes.



The state-licensed liquor store has an introductory price of $29.95 for the roll-your-own cigarettes, but expects to sell them eventually for $34.95 a carton.



“This is going to take off,” says store owner Dan Miner. “The equivalent cigarette I’m selling for $6.25 a pack, or $62.50” for a carton.



A pack-a-day smoker could save $83 a month.



Miner hopes to buy several more machines and then open six to eight discount cigarette stores in Portland within six months. The machines also are spreading quickly in other states.



But the exciting news for smokers is not so welcome for those concerned about peoples’ health and government services.



Cigarettes made via the RYO Filling Stations are so cheap because pipe tobacco is taxed at a much lower rate than regular cigarettes. Critics and federal regulators say the proprietors are taking advantage of a loophole in federal law, and the issue is now in court.

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