ST. CLAIRSVILLE - President Barack Obama signed legislation Friday that allows more than $100B to go toward highway, mass transit and other transportation spending.
The move aids in maintaining transportation-related jobs and projects that would have expired.
However, a small sub-section of American business owners are being put in a tough-spot because of its passage.
Part of the legislation is Senate Amendment 1825, the Baucus Amendment, named for chief sponsor Sen. Max Baucus (D-Mont.). It's main purpose is to reauthorize for one year the Secure Rural Schools and Community Self-Determination Act of 2000.
Tucked into the near 6,000 word amendment is a small passage that reclassifies small tobacco shops that utilize roll-you-own cigarette machines as tobacco manufacturers.
What that means is the RYO shops, like Bob's Cheap Smokes in St. Clairsville, will be forced to apply for manufacturer permits and be subject to significantly higher tax rates - the same tax rates companies like Philip Morris, the maker of Marlboro-brand cigarettes, pay.
Keep in mind, the majority of these shops are zoned for retail use. These shops likely won't be able to conform with the new mandate and will be forced to close.
The news blindsided Robert Grimmett, a Bridgeport resident and owner of Bob's.
He returned Friday from a trip to southern West Virginia and was still trying to figure out where his business stood and what his next move has to be.
"As of right now, I can't really say what we're going to do," Grimmet said, not wanting to speculate further until he gained a greater understanding of the legislation. "I just learned about this a little while ago and I have to read more into it."
Prior to Friday's legislation, smoke shops like Bob's were able to take advantage of an unintended tax loophole created in 2009 that taxed ready-made cigarettes, like Marlboros, at a significantly higher rate than loose-leaf tobacco.
By selling loose leaf tobacco and "renting" the rolling machines to customers, carton-size quantities of cigarettes could be purchased at a fraction of the price of the national brands.
Friday's legislation now puts the smaller, mom-and-pop style smoke shops on the same footing as the big companies in terms of tax rates and permits.
A manufacturer permit won't be easy to obtain. It won't be cheap either. Plus, the higher tax rate will force prices to go up, possibly to the point of pricing the smaller shops out of business.
According to RYO Machines president Phil Acordino, that's the idea.
Acordino said in an interview earlier this week that "This law is not designed for people to comply with. It's designed to put these people out of business. They couldn't get a manufacturer's permit if they wanted to."
RYO Machines is a manufacturer of roll-you-own cigarette machines.
Some tobacco shops and convenience stores, like the Martins Ferry Carryout, only offer the roll-you-own cigarettes as part of their business. The easiest solution will be to stop selling the products.
That move will likely cut a sizable chunk out of their profits but it shouldn't outright close the shops.
But for people like Grimmett, whose entire business model is built around selling the discount-priced cigarettes, the final bell may be sounding.
Hughes may be reached at mhughes@timesleaderonline.com
