A not-so-well known (and not-so-commonly followed) tax law that exists in some states says that it is necessary to pay a tax to the state when selling illegal drugs. A number of states have such a tax, but few drug dealers actually pay it on their own.

Buying Tax Stamps

According to these state laws, if you are going to sell illegal drugs (which is illegal to do), you need to buy tax stamps from the Department of Revenue and stick them on your drugs before selling them.

From the Kansas Dept. of Revenue:

“Drug dealers are required by law to purchase tax stamps from the Department of Revenue’s Business Tax Bureau (K.S.A. 79-5204). In order to protect against any possible violation of the self-incrimination constitutional protection, a dealer is not required to give his/her name or address when purchasing stamps and the Business Tax Bureau is prohibited from sharing any information relating to the purchase of drug tax stamps with law enforcement or anyone else. The stamps must be affixed to the drugs when they are seized to prevent tax liability. Payment of the drug tax (the purchase and affixation of stamps) is due immediately upon acquisition or possession by the dealer. The stamps are valid for 3 months from the date of issuance. If drugs are seized without stamps or the stamps which are affixed have expired, the possessor is liable for payment for the tax as well as a penalty.”

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Against the Tax

Some people think these tax stamps are ridiculous. What drug dealer is going to go in and buy stamps for their illegal substances? It turns out, not many. The stamps are rarely purchased, and some of the people who do purchase them are simply stamp collectors and curious citizens.

Some people have fought the tax stamps in court saying that the added penalties violate double jeopardy laws. Others have deemed drug tax stamps as unconstitutional on grounds of self-incrimination, even though the law says that someone will not be penalized for buying the stamps.

Revenue for States

Many people, therefore, wonder what good a tax stamp does when no one follows the regulations anyway. Actually, it can raise a lot of money. Drug dealers who are caught without drug stamps will usually have to pay extra fines, creating even more revenue for states. Tennessee, for example, raised $3.5 million from enforcement of their drug tax between 2004 and 2008.

It is still illegal to possess these drugs, even if someone went to the trouble of purchasing a stamp for them. The drug stamps are just a way for the state to recoup some money that gets spent in drug regulation and enforcement. It may seem like an empty threat, but if a drug tax allows states to recover some much needed money, many people would like to see it enforced more often.

Sources

Should Illegal Drugs Be Taxed?

A $200-a-Gram Tax on Cocaine

Me and My State Drug Tax Stamps

Selling illegal drugs? Don’t forget the stamps.