NYC sues roll-your-own cigarette shops over taxes

By DAVID B. CARUSO | November 21, 2011 | 2:35 AM EST

NEW YORK (AP) — Government officials in several states are cracking down on businesses that help smokers avoid high taxes by having them manufacture their own cigarettes right in the store.

New York City recently joined the fight, filing a lawsuit against the owners of Island Smokes.

The company is among a growing number of businesses that sell customers loose tobacco and paper tubes, and then direct them to machines that turn those ingredients into finished cigarettes.

Even though people walk out with finished cartons, they aren't being charged the state and local tax of $5.85 per pack. The city says that amounts to tax evasion.

A lawyer for the company says it's all legal.

Similar legal fights are ongoing in several states.