Kai Ryssdal: The federal excise tax on a pack of cigarettes in this country is a dollar and a penny -- $1.01. State and city taxes vary, but they're often higher. In the end, it all adds up. In New York City, for instance, a pack of smokes will set you back 11 bucks. So the roll-your-own movement is gathering steam. With a twist.
Erin Toner reports from WUWM in Milwaukee.
Erin Toner: Breanna Wohlfeil has dyed pink hair, carries a purse with a big peace sign, and she rolls cigarettes at home because she feels it's a more natural way to smoke. But Wohlfeil calls the process a "horrible pain."
Breanna Wohlfeil: The filters always break, and like, if you don't put enough in, it's not packed enough. It's just a pain.
So Wohlfeil decided to check out a new shop near Milwaukee called "Let's Roll Tobacco." It's sort of like those paint-your-own pottery shops. Here, customers use sophisticated machines to make their own cigarettes.
Wohlfeil: Since you have a blend of more than two tobaccos here, you can just put it in this bucket and give it a good shake.
Wohlfeil chooses a bold tobacco blend, and menthol-flavored filters and carries both over to a rolling machine the size of a vending machine. Store manager Jack Vlasak instructs Wohlfeil to gently pour the tobacco into the machine's hopper, insert the filters, and push start. One at a time, cigarettes pop out of a chute near the base of the machine and land in a plastic bin.
Wohlfeil: I like it a lot. It's a lot faster.
The machine rolls nearly 200 cigarettes -- or the equivalent of a carton -- in just eight minutes. It costs just under $30. At a gas station down the road, a carton of Marlboro Lights sells for $74.
Jack Vlasak says the store's been open just two months, and business is booming.
Jack Vlasak: Most of the customers, 99 percent of them are very, very happy with what they're getting. They're saving money, they're saving time.
Hundreds of roll-your-own shops like this have opened around the county. They're able to offer cheaper cigarettes because they use pipe tobacco, which is taxed at around $3 a pound, compared to $25 for rolling tobacco. The stores are very careful to appear as retailers. Employees instruct customers during the process, but don't touch any of the equipment. They also call their products smokes, not cigarettes.
But regulators say what looks like a cigarette, is a cigarette.
David Rienzo: They're doing this little dance, you know, that is like a concerted search for loopholes.
David Rienzo is an assistant attorney general in New Hampshire. He's sued several roll-your-own shops alleging they're actually cigarette manufacturers and therefore subject to all cigarette laws and taxes.
Rienzo: They make a profit off of the cigarettes that are being made. And they make a profit off the fact that the cigarettes are being manufactured in their store. To us that meant that they were in the business of manufacturing cigarettes.
The federal government is also weighing in. The Treasury Department says the shops should be taxed as cigarette manufactures, but that ruling is tied up in court.
Phil Accordino is one of the parties that challenged the ruling. He owns the company that makes the big rolling machines. Accordino says his product only slightly improves upon the devices people use at home, legally, to roll their own cigarettes.
Phil Accordino: Our machine will make at best about four cartons in an hour. A true cigarette manufacturing machine will make upwards of 20,000 cigarettes a minute. You cannot confuse the two.
Accordino says there are several do-it-yourself precedents, like stores that let customers brew their own beer on premises. The federal government says those stores are legal, and exempt from excise taxes if store employees do not assist in the production.
In Milwaukee, I'm Erin Toner for Marketplace.