Much at stake in roll-your-own suit

Customers from near and far line up daily at the Route 13 smoke shop with the roll-your-own cigarette machines that can spit out 200 cigarettes in 10 minutes. They buy by the carton, for less than half the price of many name brands.

But state officials say the machines are making an end run around the landmark 1998 settlement with major tobacco companies, which were required to pay yearly contributions to the states. In a lawsuit filed last week, New Hampshire’s attorney general contends Tobacco Haven’s cigarette machines violate terms of the agreement and could jeopardize the $50 million in settlement money New Hampshire receives each year.

“At $50 million a year, we have a rather inescapable incentive here,’’ said David Rienzo, an assistant attorney general.

Rienzo, along with smoking industry specialists and antismoking groups, say that higher cigarette taxes have spurred a burgeoning roll-your-own market. But until now, it has been largely confined to individuals who buy small, hand-operated rolling machines for personal use. The machines at Tobacco Haven, by contrast, are more akin to high-powered vending machines that spit out cartons of cigarettes in a matter of minutes. Such machines have cropped up across the country, and in New Hampshire prosecutors worried that they could emerge as powerful competitors to commercial cigarettes.

New Hampshire’s suit, believed to be the first of its kind, argues that Tobacco Haven is essentially manufacturing cigarettes and therefore should be making contributions to the state. Tobacco Haven counters that they are strictly a retail outfit and that customers are paying to use the machines for personal use.

State officials say that by allowing a shop to make cigarettes without contributing some proceeds, they risk lawsuits from competing manufacturers angry over unequal treatment.

“At face value, this tobacco shop is in the business of making cigarettes,’’ Rienzo said. “It’s roughly a pack a minute, so it’s not an insignificant number of cigarettes, and it really could cause us some heartburn.’’

Under state law, Tobacco Haven would have to contribute about 2 cents for each cigarette sold to a set-aside fund, he said.

This week, the state ordered the shop to shut down the machines, but the two machines rolled on as usual on a recent morning, with a lengthy line of smokers from New Hampshire, and Massachusetts.

A lawyer for the store, which installed the machines earlier this year, staunchly defended the practice. “These machines are nothing in comparison to the volume of a commercial machine,’’ said Jeffrey Burd, a Cincinnati attorney who also represents an Ohio company that sells rolling machines.

Tobacco Haven customers, some of whom save several hundred dollars a month by using the service, were disgruntled by the state’s action. Many wondered why the state had to butt in, especially when jobs are scarce.

“It’s such a great deal,’’ said Dave Surprenant, 43, a pack-a-day smoker from Brookline. “Times are tough, and people are just trying to get by, anyway they can.’’

Still Surprenant, and other smokers, admitted that the low cost would only hurt their halting attempts to kick their habits.

Joy Whitcomb, 46, from Pepperell, Mass., bought two cartons of roll-your-owns, one for her and one for her husband. She was not in love with the taste, she said, but the price sure was right. Compared to convenience stores in Massachusetts, where taxes are more than 70 cents a pack higher, she was saving around $200 a month.

“The word is really going around that it’s such a great deal,’’ she said. “I figured it wouldn’t last too long. The government doesn’t really want us to smoke.’’

But others had another take. Just as smokers are hooked on cigarettes, they said, governments are hooked on cigarette taxes. Tobacco Haven had found a loophole, they said, and the state didn’t like it.

“Bottom line, right there,’’ Mike George,29, from Lunenberg, Mass., said outside the shop. “They aren’t getting their cut.’’

State officials learned of the machines from a competing convenience store, Rienzo said.

“They said, ‘If this isn’t illegal, I want in on it,’ ’’ he said.

Edward L. Sweda, senior attorney for the Tobacco Products Liability Project at Northeastern University in Boston, agreed that the shop had crossed the line between retailer and manufacturer.

“If they make cigarettes, that means they are making cigarettes, even if it’s a fraction of Philip Morris and the like,’’ he said. “If you can make a carton in 10 minutes, that’s something of an operation.’’

Sweda had never heard of a similar lawsuit, but Burd said there are plenty of other shops that have machines like Tobacco Haven’s.

Doug Kennedy, editor of Roll Your Own Magazine, which caters to custom-made cigarette smokers, said the publication has “aggressively recommended shops to walk away from making cigarettes for their customers.’’

“You make a cigarette for someone, then sell it to them, you are a tobacco manufacturer,’’ he said.

Kevin O’Flaherty, director of advocacy in the Northeast for the Campaign for Tobacco-Free Kids, said many states are fueling the growth of roll-your-own cigarettes by taxing loose tobacco at a lower rate than store-bought cigarettes.

“There’s often a large disparity, and that’s what drives this market,’’ he said.

Indeed, Bob Beshaw, 46, from Shrewsbury, Mass., drove a long way for the discounted smokes. After snagging a carton, he lit up at a picnic table a few steps from the shop. It had the taste of freedom, he said. In Massachusetts, the $25 carton would have run him $75.

“I think we tax people enough already, on everything, don’t you?’’ Beshaw asked.