Smokers dodge taxes with new roll-your-own cigarette technology

Taxes make up a large part of the cost of a pack of cigarettes, and smokers reeling at the skyrocketing cost of their habit (now up to as much as $11 a pack in New York) are desperately seeking a way to cut the cost. And they have. The work-around takes advantage of two loopholes in the law; the difference between the tax on cigar and cigarette tobacco, and the difference between buying ready-to-smoke cigarettes and rolling their own.

Cigarettes and pipe tobacco carry different federal excise taxes: cigarettes are charged $1.01 a pack, (around $30 a pound), and tobacco labeled for roll-your-own cigarettes is taxed $24.78 a pound. Pipe tobacco is taxed only $2.83 a pound.

A pound of tobacco yields around three cartons of roll-your-own cigarettes. $30 a pound vs. $2.83 a pound is plenty of incentive for tobacco manufacturers to make and brand some cigarette-like tobaccos as pipe tobaccos.