Customers of Tobacco Mizer in Glendale save $30 on the equivalent of a carton of cheap cigarettes by buying loose cigarettes online and hollow tubes and then renting a machine that rolls their cigarettes.

The finished cigarettes come cheap because they aren't subject to the same state and federal taxes as those from companies considered manufacturers under Arizona law.

Bob Mizer, the store's co-owner, says this setup allows his operation and others similar to it to compete with buy cigarettes stores on American Indian reservations, where customers pay less in excise taxes.

That's why Mizer and other roll-your-own shop owners say a bill advancing in the Legislature - headed to the House floor - would be a death blow.

HB 2717, authored by Rep. Jim Weiers, R-Phoenix, would classify businesses with cigarette rolling machines as manufacturers and subject them to the same regulations and taxes as companies that produce finished cigarettes.

Weiers said the issue boils down to making sure no business has an unfair advantage when it comes to taxes.

John Mangum, an attorney representing Altria Group Inc., formerly known as Philip Morris Cos. Inc., which manufactures cheap cigarette online under brands including Marlboro, told an Arizona House committee that without a law customers will migrate to stores such as Mizer's. That will cut into revenue from the $1.01 per pack federal manufacturer's tax and $2 per pack state manufacturer's tax, he said.

Portions of both taxes go toward anti-smoking cigarettes programs.

"The issue here is an unclear tax advantage," Mangum said. "What we are trying to do is restore what we would call a level playing field."

Mizer, however, said losing a tax advantage would be only part of the problem should the bill become law.

If he were classified as a manufacturer, he would be required to obtain a state manufacturing license. However, those seeking a state license must first obtain a federal manufacturing license, and with that comes a prohibition against selling directly to customers in the area where they manufacture cigarettes.

Mizer said he'd have no option other than giving up his three rolling machines, which together cost him about $100,000. And because his business relies heavily on them, he said he'd have to close and put his 13 employees out of work.

"It's like a Catch-22," Mizer said. "You say we're manufacturers, but we can't get a license."

The taxes
14.5 cents
State tax on .0325 ounces of loose tobacco, enough to be rolled into 20 cigarettes.
$2
State tax on a pack of manufactured cigarettes, which typically come in packs of 20.




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