Some legislators are looking for a fix of the state’s tax on illegal drugs, often referred to as the “crack tax,” even after the original law was declared unconstitutional by every Tennessee court that examined it, including the state Supreme Court last summer.
A state House subcommittee sent a bill purporting to address the court’s findings, HB3164, to the House Judiciary Committee last week.
Under the previously passed law, someone in possession of an “unauthorized substance” could supposedly remain anonymous if they chose to inform state government revenue authorities that they were holding illegal drugs and would like to pay the special tax on their stash, in keeping with state law.
The owner of the drugs could then affix stamps to the container of the drugs to notify law enforcement agents who might happen to confiscate the drugs during an arrest that the state had gotten its required taste of the otherwise illicit action.
But the Supreme Court ruled in July 2009 (pdf) that the revenue-generating scheme actually constitutes “privilege tax,” and that “possession of an illegal substance is no privilege” that the government has granted.
The state, therefore, by the court’s reasoning, had exceeded the authority granted government by the state constitution by trying to implement the tax.
The Supreme Court also ruled that while the state has the authority to tax merchants and peddlers, the original law “taxes only possessors and makes no reference to one who sells or, by virtue of the quantity of the cocaine or other factors, displays the intent to sell.”
Supporters of the new legislation, sponsored in the House by Rep. Charles Curtiss, D-Sparta, are attempting to redefine the word “dealer” in such a way that the attorney general’s office could successfully defend the law.
Money collected from the tax is reportedly used by state and local officials to both fund more drug busts and for use in their general fund.
Revenue department officials claim they seized millions of dollars worth of private property in the name of collecting on the tax on illegal substances before it was ruled unconstitutional by the Supreme Court.
From the inception of the tax in 2005 until the Supreme Court struck down the law, $7.8 million was collected through tax, penalty, and interest, Tennessee Revenue Department spokeswoman Sara Jo Houghland said in an email. She said about $3.2 million has been returned to its owners, and more is pending return.
According to the bill’s fiscal note, the tax is expected to bring in about $1.086 million annually.
The House Judiciary Committee is scheduled to take up the bill Tuesday, March 30. The companion bill in the Senate is scheduled to be before the Tax Subcommittee then as well.
The Senate sponsor is Sen. Randy McNally, R-Oak Ridge.