HB 1138, which has already sailed through the House is scheduled a hearing before the Sentate State Affairs Committee tomorrow at 10 a.m. The bill is designed to tax roll-your-own (RYO) tobacco shops out of business, by declaring them to be cigarette manufacturers.
Not surprisingly, the bill is supported by the wholesale tobacco interests, the South Dakota Retailers Association and the South Dakota Petroleum & Propane Marketers Association (the convenience store group), all of which have a stake in selling pre-packaged cigarettes. The bill would raise the tax on a carton of cigarettes customers roll themselves from $2.39 to $15.30.
Big tobacco companies like Philip Morris, Commonwealth and Lorillard just love this bill. They actually do manufacture cigarettes and package them under names like Marlboro, Old Gold and Winston. Their products are currently subject to the $15.30 tax.
The RYO guys have a different idea. They sell empty smoke tubes and loose tobacco commonly used by pipe smokers. Their tobacco doesn't contain the chemicals big tobacco uses in their products. Customers take the tobacco and tubes and rent a machine from the RYO businesses to pack the tobacco into the smoke tubes, similar to the manner in which laundromat customers rent a washer and dryer.
To suggest that these businesses are actual cigarette manufacturers is rather like declaring that a rental operation like Time-Tool Rental is a lumber manufacturer because it rents log splitters to people splitting firewood.
There are fourteen such shops in South Dakota and all will go out of business if this legislation passes. The employees of these businesses will be out of work. The landlords will lose tenants. The state will lose sales tax revenue, as customers of these operations, will once again cross state lines to buy less expensive cigarettes once the law is passed and the businesses close.
Chief House sponsors of the legislation include Mark Kirkeby and Brian Gosch. Senate sponsors include Craig Tieszen and Bruce Rampelberg. These folks all claim to be conservatives.
Now the bill heads to the Senate State Affairs Committee, chaired by Larry Rhoden, who also claims to be a conservative. I know Sen. Rhoden, a rancher serving District 29 (Butte, Meade Counties).
Also on the committee are Majority Leader Russell Olson, a Republican from District 8 and a self-proclaimed conservative. He's the manager of the Community & Economic Development group in Wentworth. We shall see if he's willing to put successful businesses out of business. Our own Sen. Stan Adelstein is on the committee. Stan, who claims to be a conservative has never seen a tax he didn't like. And also from this neck of the woods is Sen. Craig Tieszen. Tieszen, whose background is in law enforcement, has generally been for more laws and more intrusion into citizens' private lives. More about that later.
Read more about HB 1138 here.