Roll-Your-Own (RYO) Cigarettes Tapped for Federal Highway Revenue

Section 100112 of the new federal highway bill may look familiar to Connecticut legislators.  Part of the $120 billion cost of the recently passed bill, known as MAP-21, will be funded by revenue from roll-your-own cigarettes.

The new law extends the federal definition of a “tobacco products manufacturer” to anyone who makes a RYO cigarette machine available for commercial purposes.  As a result, RYO shops will either have to pay federal cigarette taxes and license fees or shut down their RYO machines. The Connecticut General Assembly enacted an almost identical change as part of the 2012 budget implementation act (PA 12-1, June 12 Sp. Session, § 123).  The state provision is intended to protect the state’s cigarette tax revenue stream.

The Joint Committee on Taxation projects the provision will increase federal cigarette tax revenue by a total of $94 million over 10 years and $12 million in FFY 13, the first full fiscal year it will be in effect. The Office of Fiscal Analysis projects the state change will yield an additional $3.1 million in state revenue on an annualized basis.