Roll-your-own cigarettes won't be hit with a 15-cent tax in Washington when the new law takes effect Sunday, ruled Franklin County Superior Court Judge Bruce Spanner.
The judge granted a preliminary injunction Monday after a hearing in Pasco where plaintiffs claimed the tax violated state law.
Spanner disagreed with state attorney David Hankins, who argued that the court had no right to question why the new tax didn't have two-thirds approval of the Legislature.
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 taxing bill, House Bill 2565, passed in the House, but the Senate did not pass it by a two-thirds majority. Gov. Chris Gregoire signed the bill into law anyway. The bill was supposed to close a loophole that gives roll-your-own cigarette buyers 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 the 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 did not have the authority to tax roll-your-own cigarettes under the existing law.
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, even if it was a work-around on the two-thirds majority requirement.
"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.
Weiss said the governor's strong support for the tax did not give her "the right to override 1053."
Spanner said he has the right to scrutinize what the Legislature has signed off on.
"It's what we're doing here," the judge said.