New York City sued the city’s first “roll-your-own” cigarette business on Monday in its latest attempt to reduce smoking rates and retain revenue from the highest combined city and state tobacco tax in the nation.

City attorneys said that Island Smokes, which has storefronts in Manhattan and Staten Island with plans to expand to all five boroughs, was manufacturing cigarettes without paying city taxes.

Patrons of the business make their own smokes one by one, paying a fraction of the price of store-bought city cigarettes. The loose tobacco used at the shops is taxed at significantly lower rates than manufactured tobacco.

Customers of Island Smokes sit on bar stools and use individual machines that squirt the tobacco into a hollow paper-and-filter ensemble.

They pay about $4.50 per pack if they make one pack of cigarettes; the price drops to $3 a pack if they make an entire carton of 10 packs. By comparison, a pack of 20 cigarettes averages $12 to $13 in the city and can be as high as $15.

The company said they were simply facilitating the ability for customers to make their own cigarettes efficiently. The city disagreed.

“They are trying to get around the law by claiming they’re not in the business of selling cigarettes when they clearly are,” Mayor Michael Bloomberg said in a statement, adding the lower prices Island Smokes offers creates an unfair advantage over business owners who pay commercial tobacco taxes.

Since the city started raising cigarette taxes and expanding public health campaigns in 2002 under the Bloomberg administration, there has been a 35 percent drop in smoking rates, according to the New York City Department of Health, to 14 percent from 22 percent of New Yorkers in 2002.

But the higher taxes have also given rise to a lucrative underground market in contraband cigarettes.

Jonathan Behrins, a lawyer for Island Smokes, called the city’s lawsuit more symbolic than effectual.

“That’s what I resent about this whole thing ... they’re trying to paint us with the same brush of smugglers and counterfeiters.”

“It eludes me why they are going after, comparatively speaking, Lilliputians,” Behrins said, referring to the fictional race of tiny people in “Gulliver’s Travels.”

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By Chris Francescani

NEW YORK