No new tax on roll-your-own cigarettes, judge rules
Roll-your-own cigarettes won’t be hit with a 15-cent-per-smoke tax in Washington when a new law takes effect Sunday, Franklin County Superior Court Judge Bruce Spanner ruled Monday.
The judge granted a preliminary injunction after a hearing in Pasco where plaintiffs claimed the tax violates state law. The injunction will take effect when a $200,000 bond or security is posted, Spanner said.
Seattle attorney Chris Weiss said he expects the security will be posted before July. Weiss represents Dana Henne of Pasco, a roll-your-own cigarette consumer; Gary Alexander of Sammamish, who owns 1/2 Price Smokes stores in Tacoma and Kennewick; and RYO Machine LLC.
Spanner considered the tax a violation of Initiative 1053, which was approved by voters in 2010 requiring a two-thirds majority of the Legislature for tax increases.
The roll-your-own tax legislation, House Bill 2565, passed the Senate without a two-thirds majority, and Gov. Chris Gregoire signed the bill into law. Supporters said the bill closes a loophole that allows roll-your-own cigarette users to purchase smokes at about half the cost of prepacked cigarettes from other retail stores.
Weiss said the judge made a hard but right decision, and he expects the state to appeal Spanner’s decision, possibly in connection with a high court appeal on the constitutionality of Initiative 1053. He said the injunction will remain until the legal challenges to the new law are resolved.
Spanner said he initially planned to call for a security deposit of $12 million, which would be about one year’s worth of tax revenue on roll-your-own cigarettes in the state, but Weiss’ arguments convinced him to cut it by $11.8 million.
Weiss said the new tax threatens roll-your-own businesses, which have a niche market because of the existing cigarette tax.
Weiss noted that HB2565 was in response to the Department of Revenue’s position that it didn’t have the authority to tax roll-your-own cigarettes under existing law.
State attorney David Hankins argued it wasn’t a new tax because the tax rate on cigarettes remains the same, and that prepackaged and roll-your-own cigarettes look the same. He held up examples to show the court.
Hankins said the judge had no authority to examine the procedures of the Legislature in approving the cigarette tax.
“You’re telling me a court in this state has no right to look into whether the Legislature followed the law?” Spanner asked.
“Yes, if it is a procedural issue,” Hankins replied.
Spanner said he has the right to scrutinize the Legislature’s decisions.
“It’s what we’re doing here,” the judge said.