Is a Virginia tobacco shop that lets customers use an in-store roll-your-own (RYO) machine treated as a 'tobacco product manufacturer' under the Tobacco Escrow Statute?

Plain-English summary

Delegate Kilgore asked whether a Virginia tobacco shop that hosts a "roll-your-own" (RYO) cigarette machine for customer use becomes a "tobacco product manufacturer" under the Virginia Tobacco Escrow Statute, which implements Virginia's part of the Tobacco Master Settlement Agreement and requires manufacturers to deposit funds into escrow. Customers in the scenario buy loose tobacco and tubes from the retailer and run the RYO machine themselves to produce around 200 cigarettes every ten minutes for personal use; the retailer's involvement is limited to repairs and maintenance, and the machine is not used for commercial resale.

Cuccinelli concluded the retailer is not a manufacturer under § 3.2-4200. Two textual hooks drove the analysis. First, § 3.2-4200 defines "tobacco product manufacturer" as an entity that "directly ... [m]anufactures cigarettes anywhere that such manufacturer intends to be sold in the United States." The customer intervenes between the retailer's sale of tobacco and the production of cigarettes; the retailer does not "directly" manufacture them. The Georgia Court of Appeals reached the same conclusion in Carolina Tobacco Co. v. Baker, interpreting identical language: "directly" means "without any intervening agency or instrumentality," so only entities that physically fabricate cigarettes themselves count. (The New Hampshire Supreme Court reached a different conclusion in New Hampshire v. North of the Border Tobacco; the AG noted but did not follow that case.)

Second, the statute requires that the cigarettes be intended to be sold. In the scenario, cigarettes produced by the RYO machine are for personal use, not for sale. The AG cautioned that a different fact pattern (retailer operates the machine for customers, or sells the produced cigarettes) might change the analysis.

Currency note

This opinion was issued in 2011. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What's the practical significance of being a "tobacco product manufacturer"?
Manufacturers must deposit funds into an escrow account, a financial guarantee against future state tobacco-related claims. Non-manufacturers do not bear that obligation.

What does "directly" mean in the definition?
Without intervention. Black's Law Dictionary defines "directly" as "without anything intervening." Where a customer operates the RYO machine, the customer is the intervening agent, and the retailer does not directly manufacture.

Could the retailer become a manufacturer with a small change in facts?
Yes. The AG flagged that if the retailer operated the machine for the customer or sold cigarettes produced by it, the analysis might change.

Does this opinion apply outside Virginia?
No. The opinion expressly limits itself to the scope of the term as defined by Virginia law. Other jurisdictions may use broader definitions and reach different conclusions (the AG noted New Hampshire as an example).

Background and statutory framework

The Virginia Tobacco Escrow Statute implements Virginia's portion of the Tobacco Master Settlement Agreement and requires manufacturers to deposit funds into an escrow account. Section 3.2-4200 defines "tobacco product manufacturer" as an entity that "directly (and not exclusively through any affiliate)" manufactures cigarettes intended to be sold in the United States.

Two interpretive principles drive the analysis: the plain-meaning rule, and the rule that an undefined term takes its ordinary meaning. The opinion applies the ordinary meaning of "manufacture": "to make into a product suitable for use" or "to make from raw materials by hand or by machinery."

Other jurisdictions interpreting similar statutes have split. The Georgia Court of Appeals in Carolina Tobacco Co. v. Baker held that "directly" means "without any intervening agency or instrumentality," excluding entities whose role is mediated by customer use. The New Hampshire Supreme Court in New Hampshire v. North of the Border Tobacco took a different view (cited but not followed).

Citations

• Va. Code § 2.2-505 (authority for official advisory opinions)
• Va. Code § 3.2-4200 (definition of "tobacco product manufacturer")
• Commonwealth v. Cmty. Motor Bus Co., 214 Va. 155 (1973) ("directly" means without intervention)
• Carolina Tobacco Co. v. Baker, 670 S.E.2d 811 (Ga. Ct. App. 2008) (persuasive; "directly" excludes customer-operated production)
• New Hampshire v. North of the Border Tobacco, LLC, 2011 N.H. LEXIS 87 (contrary view, noted but not followed)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2011/11-095-Kilgore.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

September 2, 2011

The Honorable Terry G. Kilgore
Member, House of Delegates
Post Office Box 669
Gate City, Virginia 24251

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

Dear Delegate Kilgore:
I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented
You inquire whether a retail tobacco shop is a "tobacco product manufacturer" within the meaning of the Virginia Tobacco Escrow Statute when the retail tobacco shop allows customers to use an on-premises machine to make roll-your-own ("RYO") cigarettes for personal use but does not use that machine to produce any cigarettes for sale.

Response
It is my opinion that a retailer who allows customers to use an on-premises machine to make RYO cigarettes for that customer's personal use is not a "tobacco product manufacturer" under the Virginia Escrow Statute. I note that this opinion addresses the scope of the term only as it is defined by Virginia law. Other jurisdictions may use a broader definition.

Background
You relate a scenario in which customers can purchase loose tobacco and cigarette paper from a retailer and then uses a roll-your-own cigarette machine ("RYO machine") at that retail establishment to roll their own cigarettes for personal use. The retailer leases or purchases the RYO machine, which allows customers to roll approximately 200 cigarettes every 10 minutes. You note that these RYO machines are used only by consumers in rolling cigarettes for personal use and not for commercial resale. You further note that retailers do not use the RYO machines to produce cigarettes for consumers and that the retailer's involvement in the operation of the RYO machines is limited to repairs and maintenance.

Applicable Law and Discussion
The Virginia Tobacco Escrow Statute imposes certain requirements on tobacco product manufacturers, including the payment of funds into an escrow account. Section 3.2-4200 defines a "tobacco product manufacturer" as "an entity that ... directly ... [m]anufactures cigarettes anywhere that such manufacturer intends to be sold in the United States." You ask whether the shop in the scenario you present constitutes such a manufacturer.

"In deciding the meaning of the statute, we must consider the plain language that the General Assembly employed in enacting this statute." Specifically, because the legislation does not go on to define "manufacture," its ordinary meaning must be applied. To "manufacture" is "to make into a product suitable for use" or "to make from raw materials by hand or by machinery[.]" Accordingly, a retailer who makes a RYO machine available to consumers is not a "tobacco manufacturer" under the definition set forth in § 3.2-4200. The retailer does not "manufacture" cigarettes for sale. Rather, in the situation you describe, consumers purchase their own tobacco and tubes and then rent the use of the RYO machine to make cigarettes for their own personal use. After that, the consumer, not the retailer, operates the RYO machine by putting tobacco in the top of the machine, putting tubes in the side, and collecting the cigarettes. The retailer does not "directly" manufacture the cigarettes and cannot become a manufacturer indirectly based upon a consumer's use of the RYO machines.

Further, by limiting its definition to cigarettes "intend[ed] to be sold," the General Assembly exempts cigarettes produced for personal use. You note that consumers are permitted to produce cigarettes by use of the RYO machine only for their personal use; thus, cigarettes produced by RYO machines fall outside the scope of the statute's definition of "tobacco product manufacturers."

Black's Law Dictionary (6th ed.) defines "directly" as "[i]n a direct way without anything intervening; not by secondary, but by direct means." Cf Commonwealth v. Cmty. Motor Bus Co., 214 Va. 155, 157, 198 S.E.2d 619, 620 (1973) ("'Directly' is usually defined as 'without intervention.'"). See also Carolina Tobacco Co. v. Baker, 670 S.E.2d 811, 814-15 (Ga. Ct. App. 2008) (interpreting identical language in Georgia statute and concluding: "'Directly' means 'without any intervening agency or instrumentality.' Thus, by using the adverb 'directly' to modify 'manufactures,' the legislature clearly intended to define as tobacco product manufactures only those entities that physically fabricate cigarettes themselves. Otherwise, the words 'directly (and not exclusively through any affiliate)' would be mere surplusage."). But see New Hampshire v. North of the Border Tobacco, LLC, 2011 N.H. LEXIS 87 (N.H. June 30, 2011). In the scenario you present, the customer who actually uses the machine "intervenes" between the sale of the tobacco and the "manufacture" of the cigarette. Accordingly, the retailer is not "directly" engaged in the manufacturing of cigarettes as required by § 3.2-4200.

Conclusion

Accordingly, it is my opinion that a retailer who allows customers to use an on-premises machine to make RYO cigarettes for that customer's personal use is not a "tobacco product manufacturer" under the Virginia Escrow Statute. While, based on the facts you provide, I conclude that the retailer is not a "tobacco product manufacturer" for purposes of § 3.2-4200, I note that even a small change in the facts could change the analysis. For instance, if the retailer were to operate the machine for the customer or sell sticks made on the machine, it may become a "tobacco product manufacturer." Nonetheless, because your request is limited to the facts as you present them, no such scenario is not before me, and therefore, I offer no definitive opinion on it.

With kindest regards, I am
Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General