CHARLESTON, W.Va. (Legal Newsline) - The West Virginia Department of Administration has alerted Attorney General Darrell McGraw to what it calls an "apparently new phenomena" of roll-your-own cigarette machines in tobacco stores in the state.
The department, in a letter to McGraw's office dated June 24, said in these stores a customer can purchase bulk tobacco and rolling papers, and place them into a hand-cranked machine that takes the raw materials and turns them into cigarettes.
"Purchasing cigarettes in this manner allows the customer to circumvent state cigarette tax," Administration Secretary Robert Ferguson wrote.
"To the extent that this practice impacts your ability to work with the tax department to collect revenue pursuant to the Tobacco Master Settlement Agreement, it was the hope of the (Tobacco Settlement Finance Authority) that bringing it to your attention would be helpful to your office."
The state's Tobacco Settlement Finance Authority, or TSFA, is a blended component unit of the State and is governed by a five-member board, including the Secretary of Administration, the state Treasurer and three individuals appointed by the governor.
The TSFA was created to issue bonds related to the State's portion of the tobacco settlement revenue from the Master Settlement Agreement between tobacco manufacturers and the covered states.
"In general, our department issues bonds and, in terms of this transaction, we sold the rights to the income of those bonds years ago," Administration spokeswoman Diane Holley-Brown explained in an e-mail.
McGraw's office, in a response to Ferguson dated June 27, said it was already aware of the cigarette machines.
"Please be advised that not only are we are of this issue, but also we have been engaged in active litigation with respect thereto for the past six months," Managing Deputy Attorney General Barbara Allen wrote.
Numerous messages left for the Attorney General's Office were not returned.
The Charleston Gazette reported that one such shop is located in Kanawha City.
The price of the roll-your-own cigarettes, the newspaper says, is about half of what a brand-name pack of cigarettes cost. That's mostly because of the state's 55-cent tax on cigarette packs.
It is illegal to sell cigarettes that don't have the state cigarette tax stamp on them.