Crack Tax Collectors


Tennessee proudly announces that its tax on "unauthorized substances," including illegal drugs and moonshine, generated $1.7 million in 2005, the first year it was in force. In addition, the Tennesseean reports, "more than $32 million in uncollected taxes has been assessed." The paper explains:

Under the law, drug dealers are to pay taxes to the Department of Revenue within 48 hours of acquiring an unauthorized substance and obtain a state tax stamp. The amount of money taxed varies based on the type and amount of the drug. Payment of the tax is to be kept confidential and the information is not to be shared with law enforcement. If police catch a suspected drug dealer without the stamps, the tax is assessed, along with a fine for failure to pay the tax upfront.

The state can seize a suspected drug dealer's personal property in lieu of tax payments, even before he's convicted–indeed, even if he happens to be acquitted. A Nashville defense attorney told the Tennesseean the law "is allowing revenue agents to seize personal property of citizens based solely on an accusation by a police officer."

Stephen F. Hayes reported on Indiana's similar scheme of double punishment in the February 2000 issue of Reason.

[Thanks to mediageek for the tip.]

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  1. Didn’t they do something similar during prohibition?

  2. Are the stamps admissible as evidence at a criminal trial (eg, for possession with intent)?

    If they were admissible, then how can you keep these stamps without increasing your possession or purchase liability?

  3. I guess the State of Tennessee gets to have its drug prohibition and eat it too, or something like that. The thing is, if government can tax the drug trade without making it legal it truly never will be made legal.

  4. This has got to be a joke.


    so….if i have a pound of x illegal-substance, I call the state and tell them to send me my stamps, *in case* they catch me?

    this makes my head hurt. Am i missing something about this that makes sense?

  5. giles de more: yeah. the cops have guns.

  6. I saw this in another thread and thought it was a joke. Oh well, stupid me. I bet the grinches who run NY are kicking themselves in the pants right now ‘cos they didn’t think of it first.

  7. Am i missing something about this that makes sense?

    No. But you’re using the term “makes sense” in relation to government, which is or should be a felony.

  8. Wow, I just read that horror story from Indiana. It just boggles the mind that everyone involved, from cops to judges, lawyers, lawmakers, and most of the public, just wink and nod at each other and go on pretending that they’re accomplishing some lofty goal, rather than ruining some guy’s life.

  9. Didn’t they do something similar during prohibition?

    Don’t think they did a tax on the alcohol. But they nailed several gangsters for failing to pay income tax on their ill-gotten gains.

  10. Hit & Run headlines rule!

  11. The purpose of such laws is to employ the traditionally draconian powers of the tax collectors against supposed criminals.

    The traditional powers of the tax collectors reverse the presumption of innocence. The burden is on the individual must prove that they don’t owe taxes. Tax collectors can seize assets and then the individual has to prove the seizure was unwarranted. Tax collectors can also perform warrant-less searches in many circumstances (just ask the Coast Guard).

    It is interesting how many people who consider themselves civil libertarians don’t bat an eyelash when it comes to the possible abuses of power made possible by the legal framework of the tax system.

  12. I still don’t understand the stamps. The 1.7 million number suggests that there are really people in the state of Tennessee who are selling drugs and sending in for stamps to pay the government for their taxes. I just can’t believe anyone would do that. You are still going to be on the hook for Federal Tax Evasion Charges, but most importantly, you are sending your name and address and a giant red flag screaming “I’m engaged in illegal activites!” to the goverment and apparently just taking it on faith that they aren’t going to share that info with the cops. What sane person would do that?

  13. The state government of Tennessee is running a “protection” racket:
    “If police catch a suspected drug dealer without the stamps, the tax is assessed, along with a fine for failure to pay the tax upfront. If the person is unable to pay the tax, personal property can be seized.”

    Like the eminent domain racket run by almost bankrupt Norwood, a suburb of Sinincinnati, Tennessee is getting equally crazy because it has no income tax.

    Scarcity of tax revenue for governments is a gateway drug to ever more insanity in the war on drugs.

  14. “The 1.7 million number suggests that there are really people in the state of Tennessee who are selling drugs and sending in for stamps to pay the government for their taxes.”

    No, I seriously doubt that anybody voluntarily buys the stamps. Here’s the way it works: When somebody is arrested for drug possession, the police notify the department of revenue:

    “Every local law enforcement agency and every state law enforcement agency must report to the department of revenue within forty-eight (48) hours after seizing an unauthorized substance, or making an arrest of an individual in possession of an unauthorized substance, listed in this subsection (b) upon which a stamp has not been affixed.”

    Then the department of revenue sends a notice to the person who was arrested:

    “The commissioner shall notify the dealer in writing of the amount of the tax, penalty, and interest due, and demand its immediate payment.”

    “If the dealer does not pay the tax, penalty, and interest immediately upon receipt of the notice and demand, the commissioner shall collect the assessment, including penalty and interest, pursuant to the procedure set forth in chapter 1, part 14 of this title, unless the dealer files with the commissioner sufficient security in the amount of the assessment, including penalty and interest.”

    “The lien shall attach to all interests in property, either real or personal, tangible or intangible, in this state then owned or subsequently acquired by the person against whom the assessment is made.”

    So, basically, if you can’t immediately pay the full amount of the tax, the state can seize everything you own and sell it. Plus, since the tax is due within 48 hours of possession, you will be charged interest from whenever they claim that you first possessed the drugs.

    Oh, by the way, the cops get to keep a pretty sizeable chunk of the money:

    “the commissioner shall remit seventy-five percent (75%) of the unencumbered tax proceeds that were collected by assessment to the state or local law enforcement agency that conducted the investigation of a dealer that led to the assessment.”

  15. Dave W: “Are the stamps admissible as evidence at a criminal trial (eg, for possession with intent)?”

    My understanding is that drug tax laws in other states have been found unconstitional on 5th amendment self-incrimination grounds. The Tennessee law avoids this by making the stamps inadmissible:

    “Notwithstanding any other provision of law, information obtained pursuant to this part is confidential and, unless independently obtained, may not be used in a criminal prosecution other than a prosecution for a violation of this part. Stamps issued pursuant to this part may not be used in a criminal prosecution other than a prosecution for a violation of this part.”

  16. Another interesting point: The 4th amendment exclusionary rule applies only to criminal trials.

    In other words, if the evidence of drug possession is obtained in a blatantly unconstitutional manner it can still be used as evidence in the tax proceedings even though it is inadmissible in the criminal trial.

  17. Vigilantes already have a life.
    Police can’t have a life without running a protection racket.

    Do we endorse “justice” or cops?

  18. More evidence that functionally; Government=Mafia

  19. Wow. When I was on the high school debate team, my partner and I actually independantly came up with the idea of taxing the illegal drug trade as a means of funding our plan (if we were arguing the affirmative side that day). It was a half-serious idea at best, borne more of our desire to see the debate season come to a merciful end than our desire to win our round. Whenever we brought it up, the negative team (and, too often, the judges) basically laughed us out of the room.

    Normally, this news would fill me with a sense of vindication, but it actually just makes me depressed.

  20. I’m reading this over and over and I just fail to understand it. It seems to be a way for The State to grab more of your stuff for itself than it already does when you’re nabbed for drugs – i.e. just another way to fill the government coffers, like (say) increasing the cigarette tax. So… why not just increase the drug fines if all you’re looking for is more dough for The State? Why the charade of pretending to “tax” drugs?

  21. More evidence that functionally; Government=Mafia

    Except that most government dicks don’t have cool nicknames.

  22. On top of all the other examples of how dumb this is, wouldn’t it in the long run give the state reason to want more people to sell drugs? After all, no drug dealers=less stuff to steal.

  23. Mr. Yuri:

    Thanks for doing my research for me. I wonder if a Federal Court would abide by the Tennessee evidence exclusion provision you mention. That seems like a latent legal risk (which is stacked on top of the factual risk that Tennessee itself would ignore the no-sharing-info-with-law-enforcement provision).

  24. Rhywun: “why not just increase the drug fines if all you’re looking for is more dough for The State?”

    Criminal fines are accompanied by the full range of constitutional protections. Taxes are not.

    Before a person can be fined criminally, they must be charged with the crime and convicted by a jury beyond a reasonable doubt. The right to counsel is guaranteed and constitutional protections (search and seizure, self-incrimination, etc.) are enforced with the exclusionary rule.

    A tax can be assessed and enforced without any sort of hearing until after the fact. There is no guarantee of cousel if you can’t afford it (and keep in mind that your money and property may have already been seized), there is no exclusionary rule, and the burden of proof is on the individual to show that the tax is not owed.

  25. “…many people who consider themselves civil libertarians don’t bat an eyelash”

    But since you are not a civil libertarian you do not object to this state version of forfieture law?

    Guilty until one can prove their innocence? As when the prezz decides to order a terror suspect shot, for instance.

  26. Isn’t this the same as when the Feds tried to have pot tax stamps in the 70’s and Leary went to SCOTUS and they ruled that it was indeed the government having it both ways (go figure). I think the ruling stated that the government was not able to profit from a tax on a substance it did not recognize as being legal to begin with.

    So now if your busted and you have no stamps you lose all your property etc. I thought they already took all your property for any drug/prostitution violation anyway. Then you have 48 hours to pay a fine. A fine which I am sure they made damn sure you could not pay because they just finished confiscating all your cash and assets in the bust.

    Seems like this would be no different than states taxing alcohol except they add it directly to the price in most states for your convenience. So if they can charge you a tax for that drug and you can not be arrested for it while using it at home, exactly how would any other drug be any different? Typical double standard and this from the state that helps to kill people all the time with its tobacco products. Products which are also taxed at extreme rates already.

    This is really no surprise considering the direction the War on Americans who use drugs has taken over the years. Already you can have a wad of cash confiscated in a traffic stop. At which point you have to hire and lawyer to prove it was not drug money. Forget the fact that its perfectly legal to carry cash and there is no law saying what amount or limit you can carry at any one time. Oh and you also have to overlook the fact that the person who got their money jacked is never arrested or charged with any crime during this whole deal.

    Call it Jackpot Justice.

    So depending on how much money they stole from you it may or may not even be profitable to hire a lawyer it may cost you more in the end in legal fees then you will recover. Not like the state or police are going to pay your legal fees should you win even if they were blatantly wrong to begin with and should be forced to pay pain and suffering as well.

    This shit happens all the time. Everyone thinks the Patriot Act is taking away our rights and it is but its only adding to the deduction of our rights we have already allowed in the name of the WoD.

    Damn shame you can murder someone and have it be caught on tape with 15 witnesses and your still considered innocent until proven guilty.

    Drive your car get pulled over and searched and have your cash stolen from you without even being arrested and your automatically guilty. Refuse to piss in the urine police cup and your guilty. Even thought they had no reason to begin with to question your innocence or guilt much less request a random urine test. For you to prove your innocence by being forced to testify against yourself via your bodily fluids or risk losing your job is the American Way after all right?

    Also they do not confiscate rapist or murders homes last I checked. Nor the homes of corrupt politicians and cops. I guess that would be because they will need a place to live while they do their time if any at all from home with a ankle charm. Got to save all the jail cells for the hardcore threats to society the illegal drug users!

    If they can take your property and money for something you did that they disagree with. Why then can I not deduct from my taxes all the things we pay for which I do not agree with and deduct for the all services which I hear are so vital to us all, yet I have never once used them.

    Hell if they can tax you for drugs for someone else to take naturally they will want to tax you for taking the bad drugs. Bad= No profits for Pharma.

    We need a subsidy or entitlement program for our illegal drugs. 800 billion over the next 5 years would be a good start. After all just like prescription drug prices, illegal drug prices are higher than they should be because of the same government. On one hand they suck pharma ass for money then allow them to do as they please. On the other they incarcerate which causes our prices to go up. Same root cause for high pricing in both legal and illegal drugs, government!

    Now that they have given their friends 800 billion for drugs for old people I think the younger generation should demand an entitlement for its illegal drugs as well. After all we would be the ones paying for both fucking plans anyway!

    They say there is no tax on medication only tax on the profit of the corporations that make and sell the drugs. So certainly this tax is added pre-sale to the price of retail.

    Now if it is truly illegal to tax someone for their medication wouldn’t that mean being taxed to provide someone else their medication is in all actuality being taxed for medicine with the added insult that its not medicine even intended for you to take?

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