citybeat (2006-15)

The debate over the constitutionality of Tennessee’s levy on illegal substances

Wednesday, April 5

The Sin Tax, Expanded

"Can I look out your window? It’s pretty from up here.” Justin, a thick, towering 23-year-old with a face much younger than that ambles over to the 6th-floor window of the Metro Pulse conference room, seemingly amazed by the aerial view of downtown. “Sorry, I don’t watch TV, I just like to look at things.”

He might resemble your typical spaced-out ex-stoner, but Justin (his name’s been changed to protect his identity) says he has never sold marijuana. However, he’s currently dealing with the consequences of Tennessee’s Controlled Substance Tax, which places taxes on illegal drug dealers.

Justin’s back was badly injured a few years ago while he was working at TVA, he says, and, having received a hefty settlement, he turned to prescription drugs to deal with the chronic pain that still plagues him. Eventually, friends turned him onto pot to battle the pain. “The painkillers made me so zombified, but pot is different. It helps my back pain, my nausea and my depression,” he says.

Justin had a nice house in Loudon County and, since he had a lot of idle time, it became the hangout for his gang of friends—“I know everyone in Loudon,” he says. It didn’t take the cops long to sniff out the distinctive burnt scent of marijuana. “I just hung out in my house and smoked my pot. I wasn’t hurting anybody,” says Justin. “Next thing you know, the cops were kicking down my door with a warrant.”

Though not exceedingly surprised to get busted for possession, as he says cops would often sit outside his house in their cruisers, waiting, Justin was appalled at the ransacking that took place. “They immediately started destroying my house, knocking things over, taking what they wanted, and putting on a new pair of gloves in between each thing they destroyed.”

After going to jail and making bail, however, the real trouble began. A letter from Tennessee Department of Revenue came, alerting him that he owed $400 in controlled substance taxes for the drugs found in his house. He held off on paying the taxes because he feared it amounted to admission of guilt. Then one day, Justin was on his way to take his grandmother for her flu shot, and DOR representatives came and confiscated his BMW. “They thought it was bought with drug money, I guess. But I broke my back in three places and got a settlement from TVA, so of course I’m going to drive a nice car with lumbar support.” He’s most perturbed that the car, which he’d paid $43,000 for, sold at auction for $1,500.

The tax in question went into effect in Tennessee on January 1, 2005 under the Controlled Substance Tax Act, which essentially levies taxes on “dealers,” who in Tennessee are defined by amounts of substances they possess: 42.5 grams of marijuana, 7 grams of substances measured by weight (like cocaine), and 10 or more doses of substances in pill form (such as oxycontin). It sounds a lot like a sin tax, but here, the product is illegal.

Of 30 states that have enacted the measure in the past few years, nearly half have subsequently declared it unconstitutional. The main reason is that, since the tax is supposed to be paid through the purchase of stamps and affixed to the product, the mere payment of the tax could be perceived as comparable to admitting guilt, therefore going against the Fifth Amendment’s self-incrimination clause. “Because of the nature of the tax, by paying it you are compelled to provide incriminating information,” says Richard Holcomb, a Knoxville attorney of the law offices of James A.H. Bell. “When you acquire the controlled substance, you’re supposed to immediately purchase the stamps within 48 hours. They’ve created this hypothetical situation where people affix these to the drugs, but no one ever does that in reality.”

Al Laney, director of tax enforcement at the Department of Revenue, acknowledges that argument as well. “It’s all after the fact. We don’t really expect drug dealers to buy the stamps in advance,” he says. “There’s really no profit motive for them, and it won’t reduce the criminality of the offense. If he never gets caught, he never pays the taxes, so why would he?” Laney says the state has only sold a few actual stamps, mostly to collectors. But according to his department’s accounts, the state collected $1.5 million in 2005 from the tax. That money is then funneled into law enforcement drug prevention programs.

Laney disputes the claims that the money is collected in a hostile or unfair manner. “When the law-enforcement agencies send us a report telling us the type and quantity, we contact that person and try to collect,” he says. “We do offer a payment plan, but if they refuse, the law allows us to seize assets. We then sell those assets and apply them to the tax liability.”

In the aftermath of the whole ordeal, Justin has a lot of anger and confusion. He feels it was unlawful to confiscate the BMW without a trial. But technically, the unpaid tax is a civil offense, not criminal, and does not procedurally go to trial. “They have authority and they abuse it,” he says. “They make too much money off of [pot], and that’s the only reason it’s illegal.”

As far as the stamps are concerned, Justin is skeptical. “I wouldn’t buy the stamps, because they’re just gonna sit across the street and watch you,” he says. “If they would just legalize pot, I’d say tax it as much as you want, but right now it’s just legalized robbery.”

The stamps are sold in state government buildings, which would typically be grounds a drug dealer would avoid, but the statute purports to protect the identity of stamp-

Another issue of contention is that the act is seen by some to violate the Fifth Amendment’s double-jeopardy clause, in that it applies two separate penalties to the same crime. More obviously, it taxes, and in essence legalizes (in terms of state revenue), the sale of illegal substances. Laney argues that point by claiming, “It is by statute an excise tax that the state has levied on the possession of those substances. It is not predicated upon whether a person is guilty or innocent.”

Technically, the tax is an excise tax and fits under the state constitution Article 2, section 28, which grants the power to tax “merchants, peddlers and privileges.” The excise tax is levied on “privileges,” but, as Holcomb points out, in this case, “There’s no privilege to own controlled substances; in fact, it’s a crime.”

Wanda (her name has also been changed) is currently facing the

Legally, though, her criminal exculpation didn’t stop the Department of Revenue from collecting on the controlled-substance tax, confiscating two vehicles among other valuables. “They take everything you’ve got, so when you go to get a lawyer to handle your case, you have no money,” says Wanda. “It feels like this isn’t America—it’s not a free country, it’s communist.”

Like Justin, Wanda disagrees with the amounts that law enforcement claims to have found, thus causing much aggravation and distrust for the system. “I’ve worked all my life and paid taxes, and now, according to this tax, I have no rights,” she says. “They go by whatever the cops say they found in your house, but if they had proof, then we would have been charged with it.”

Wanda’s case might sound like a violation of the double-jeopardy clause, in that she’s paying taxes on illegal substance charges that have been dropped. But Laney says, “If you’ve been arrested with those substances in your possession, and the stamp is not present at that time, then we assume the tax hasn’t been paid…. The statute does not try to assess whether there’s any criminal liability involved.”

Therein lies the problem, according to the tax’s opponents. “Their position is that it’s unrelated, that it’s a completely separate analysis,” says Holcomb. “Our position is that it’s a separate punishment, but it’s enacted for the same conduct.”

Like most legal issues, it does come down to a question of semantics. And it also comes down to money. A tax on illegal substances gives new meaning to the term sin tax. On one hand, the tax could be seen as an arm of the war on drugs—a profitable arm at that. And many people would say, it’s about time drug dealers paid their debt to society. Others wonder whether such a profit is worth the possibility of compromising constitutional ethics.


Wednesday, April 5

Thursday, April 6

Friday, April 7

Saturday, April 8

Sunday, April 9

Monday, April 10

Tuesday, April 11