Roll-your-own businesses in Western Pa. snuffed out by tax ruling
Steve Smith spent more than $4,000 on electronic cigarette rolling machines that he hasn't used since opening a McKees Rocks tobacco shop in September.
“The machines are just sitting around collecting dust,” said Smith, 47, of North Fayette.
Smith planned to open RYO Butts 4 Less in July, but Congress passed a law two days before the grand opening that placed businesses with rolling machines in a class with cigarette-making giants Phillip Morris and R.J. Reynolds. The change affected several dozen shops in Western Pennsylvania with machines that customers could pay to use to roll low-cost, loose tobacco into smokes. Nationally, 45 million smokers buy 14 billion packs of smokes a year.
The law requires owners to impose excise taxes on cigarettes made and sold, erasing any competitive advantage over traditional sellers of name-brand smokes. That made it unfeasible for most owners of the roll-your-own shops, many of them small storefronts in retail plazas.
Several Pittsburgh-area stores closed their doors. Some are considering alternative business ventures at shop locations such as Steeltown Tobacco in West View, which plans to become a gun shop, said employee Crystal Regan, 20, of West View.
Others, including Smith, are trying to hang on by selling bags of loose tobacco and cigarette tubes. Smith said it costs about $12 to buy enough loose tobacco and tubes from his shop to make a carton, about one-fifth the price of a carton of name-brand smokes, on average.
Smith said he's barely making money to cover rent and utilities. He can't afford to pay employees, so he works eight to nine hours a day. He estimates he invested $40,000 in the business, including money to remodel a former law office to accommodate the shop and for 10 tabletop rolling machines that could churn out a carton in about half an hour.
“It caused the (roll-your-own) industry to fall apart,” said Julie Rauzan, director of sales at RYO Machine LLC of Girard, Ohio, one of the biggest sellers of rolling machines. It had more than 2,000 machines at 1,400 shops.
RYO quickly moved to make its refrigerator-sized machines inoperable to avoid being implicated in cases where shops might ignore the new law. The machines, which sold for more than $30,000, can produce cartons of cigarettes in 10 minutes but can't run without RYO's software, Rauzan said.
Rauzan said owners could continue using machines to roll cigarettes for personal use or for nonprofit smoking clubs. But owners would need to pay RYO for rights to the software and, in the case of a smoking club, for a license to operate.
The Ohio company is pursuing charges against two unidentified companies for software piracy, she said.“I'll just keep on trying and see what goes on,” said Smith.
He plans to honor a lease on his Chartiers Avenue retail space that extends through April but might close after that if business doesn't pick up.
Tom Fontaine is a staff writer for Trib Total Media. He can be reached at 412-320-7847 or email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Rossi: Blount brings back Steelers’ swagger
- Steelers re-sign Keisel to bolster depth on defensive line
- Run game not primary focal point for Steelers
- Steelers are hoping to mirror Eagles’ full-bore, no-huddle offense
- Pitt, Penn State face competition for ticket sales
- CF McCutchen returns to lineup, but Braves blast fast-fading Pirates
- Steelers sign tackle Gilbert to $30 million deal
- Pittsburgh restaurants vie for title at Taste of the Championships
- Pitt notebook: No surprises as Panthers settle on starting O-line
- ALS ice challenge personal for Harrison patrolman
- Rural Valley man jailed on charges of breaking into house twice