Rib Mountain tobacco store sues state over permit law

The owner of a Rib Mountain tobacco store is suing the state in an attempt to stop the Department of Revenue from treating him as a cigarette manufacturer.

The Department of Revenue last month informed store owners who operate roll-your-own cigarette machines that they need manufacturing and distribution permits to sell the machines' finished products. The state's intent was to crack down on customers who are dodging cigarette taxes.

The suit filed Tuesday in Dane County Circuit Court requests a temporary injunction that would allow stores to continue operating the machines. The plaintiffs -- including Robert Petersen, owner of Rib Mountain Tobacco and Liquor -- argue that state law doesn't prevent customers from rolling their own cigarettes. That's exactly what customers who buy loose tobacco and use the machines are doing, the suit said.

A spokeswoman for the Department of Revenue defended the state's action as an enforcement of existing laws, which require manufacturers and distributors of cigarettes to apply for separate licenses.

"Citizens expect that the businesses operating in Wisconsin are following the laws and regulations," spokeswoman Stephanie Marquis said. "These are not new laws and regulations, and this situation is no different -- the (roll-your-own) retailers are expected to comply with state and federal law. Other tobacco retailers across the state follow the laws and regulations, and we must administer the law fairly and equitably. We have asked the RYO retailers to voluntarily comply with the law."

Roll-your-own customers typically purchase loose tobacco and wrappers from a store, then pay a fee to use roll-your-own machines. The raw
materials are placed into the machine, which then produces cigarettes.

But customers who use the machines aren't charged state or federal taxes that apply to packaged cigarettes -- a loophole that state regulators are trying to close. Retailers would have to pay those taxes under the state's rules.

Petersen said the Department of Revenue's explanation is illogical. Store owners still pay a tax on the loose tobacco and hand the raw materials for cigarettes over to the customer, he said.