A Pasco consumer of roll-your-own cigarettes and a Kennewick smoke shop are suing the state over a new tax they say is invalid.
Right now, smokers don't have to pay state taxes when they use a machine that fills empty cigarette tubes with loose-leaf tobacco. The "RYO Filling Station" is in 65 stores across the state and is operated by consumers, similar to an automatic teller machine.
But a new law signed by Gov. Chris Gregoire that goes into effect July 1 will require taxes be paid by the retailer and the purchaser for each cigarette filled.
Taxes already are paid on the loose tobacco and the tubes, and the lawsuit contends paying additional taxes on the finished cigarettes is unwarranted and excessive.
The lawsuit, filed last week in Franklin County Superior Court, claims that the Washington Constitution and state law were violated when Gregoire approved the bill.
The measure passed the House during this year's regular legislative session, but didn't make it out of the Senate. Yet, "the defeated (House Bill) 2565 somehow was pushed to the governor" who signed the invalid bill, resulting in "an unconstitutional attempt to impose taxation on the people," court documents say.
The bill violates Initiative 1053, which passed in 2010 and requires a two-thirds vote of the Legislature to pass any new taxes.
The lawsuit was filed by Dana Henne of Pasco, 1/2 Price Smokes, which is on Clearwater Avenue, and RYO Machine, LLC, the Ohio company that makes the rolling devices.
The defendants named in the complaint are: the state of Washington; Brad Flaherty, director of the state Department of Revenue; and Pat Kohler, administrative director of the state Liquor Control Board.
"Small business owners like me are struggling to survive in today's uncertain economy," said Gary Alexander, owner of 1/2 Price Smokes, in a news release. "The new taxes are a job killer. They clobber small business."
Henne suffers from arthritis and reportedly turned to the machines to help her make her own cigarettes, instead of rolling them by hand. The machines can roll a carton of cigarettes in about 10 minutes at half the price of pre-packaged cigarettes.
Under the new law, Henne would have to pay an additional $30.25 for 200 cigarettes, documents say.
Dan Sytman, a spokesman for the state Attorney General's Office, said officials on Friday had not yet seen a copy of the lawsuit. The state has 20 days to respond to the lawsuit after being served.
"The duty of the Washington State Attorney General's Office is to defend state laws, whether those laws are passed by the Legislature or directly through the initiative process," he told the Herald. "As we do with all other state laws, we will defend this new law regarding roll-your-own cigarettes."
Gregoire told reporters in late March that she supports collecting the tax, the Tacoma News Tribune earlier reported. The paper cited the bill's fiscal note in reporting that the average price for a roll-your-own carton would go from $34.50 to $67.60, resulting in more than $12 million in increased revenue for the state in the first year, and about $13 million annually after that.
The legislation was signed May 2.
While the case is pending, roll-your-own retailers are asking a Franklin County judge to issue a preliminary injunction preventing the state from levying the new tax. A hearing on the issue is set June 25.