Hamilton Herald Masthead

Editorial


Front Page - Friday, July 12, 2019

Why would anyone pay taxes on sales of illegal goods?




Dig around in laws much and you turn up some doozies. For example, the book “Planet Cat” asserts that in Natchez, Mississippi, “cats may not drink beer.”

Why the discrimination against our feline companions, you may be wondering. What about dogs and beer? Parakeets? Ferrets?

My topic today is closer to home. In Tennessee, purveyors of unauthorized substances are supposed to voluntarily pay state taxes on their illegal weed, white lightning, blow or other such illicit goodies.

There’s even a schedule and rate included in the code:

“40 cents for each gram, or fraction thereof, of harvested marijuana stems and stalks that have been separated from and are not mixed with any other parts of the marijuana plant.”

“$12.80 for each gallon, or fraction thereof, of illicit alcoholic beverages not sold by the drink.”

Seven other guidelines include coverage for cocaine, controlled substances and controlled substance analogues, whatever that may be.

“Merchants or peddlers may purchase stamps from the Department of Revenue and affix them to the substance as proof that tax has been paid.”

This is supposed to be done within 48 hours of acquiring said stash. And bear in mind: Paying the tax doesn’t render the stuff legal. You can still be thrown in the slammer for having it.

Not to worry, though, the “revenooers” promise not to rat out anyone complying with the tax:

“[A]ny information obtained is strictly confidential and it may not be disclosed or used in a criminal prosecution, other than a prosecution for a violation of the unauthorized substances tax law.”

Right. Sure.

The law itself has a somewhat shaky history. First effective Jan. 1, 2005, it yielded a little more than $5 million during its first four years, including a high of $1,578,182.26 in Fiscal Year 2007.

Of that total, 99.94% was the result of assessments, penalties, interest and such on drugs seized by the authorities.

Only $3,070.67 came from people voluntarily buying tax stamps.

Clearly, Tennessee’s drug dealers, moonshiners and such by and large did not feel obliged to comply with the tax law.

Oh, and then the state Supreme Court found the law unconstitutional.

An aside here: Taxes on illegal activities and substances go way back in this country. My home state, Mississippi, for decades collected a 10% “black market tax” on illegal liquor openly sold before the end of statewide prohibition in 1966. It was a tacit admission by the state that prohibition was unenforceable.

And a number of other states have imposed taxes on authorized substances, some of which have been upheld, some of which haven’t.

The reasons Tennessee’s law fell short are laid out in a lengthy opinion by the state court in a case styled Waters v. Farr. Feel free to look it up; it’s long on background and legal citations. Bottom line: Law scrapped.

Tennessee legislators were undeterred.

“In the very next session, the Tennessee General Assembly amended the unauthorized substance tax law in an attempt to remedy the problem pointed out by the Waters court,” according to Kelly Cortesi, the very helpful spokeswoman for the Department of Revenue.

Has that new and improved version of the law been a success? I’ll let you be the judge. Here are the tax collections for the past eight fiscal years:

    •  2011: $0.

    •  2012: $0.

    •  2013: $0.

    •  2014: $1,091.10.

    •  2015: $0.

    • 2016: $70.

    •  2017: $0.

    •  2018: $0.

“It’s difficult to say with certainty why revenues have gone down since 2010,” Cortesi says. She suggests that some confusion may have existed after the old law was struck down. “Additionally, the new version of the law narrows who must pay the tax.”

All those zeros in collection suggest a pretty extreme narrowing. I’d say that makes for a silly law.

Speaking of silly: I don’t want to leave you hanging about cats and beer in Natchez. My research has failed to uncover any evidence that such a ban actually exists. Should I learn otherwise, I will of course advise.

Meanwhile, based on my experience, I suspect that cats have little desire to drink beer anyway. Nor am I inclined to share it.

Joe Rogers is a former writer for The Tennessean and editor for The New York Times. He is retired and living in Nashville.