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Here’s one weird tax that Idaho drug dealers and users ignore

The Idaho Tax Commission sells tax stamps for marijuana and other illegal substances.
The Idaho Tax Commission sells tax stamps for marijuana and other illegal substances. adutton@idahostatesman.com

Most people don’t know about it. Almost nobody pays it. Those who do remain anonymous.

Ambitious stamp collectors — not drug dealers or users — are the likeliest source of the $150 to $450 that Idaho makes in a typical year from a state tax on illegal substances, according to the Idaho Tax Commission. (The minimum denomination for an Idaho drug tax stamp is $150.)

Idaho charges $200 per gram for controlled substances such as cocaine, $3.50 per gram for pot and $775 for a growing marijuana plant. “The tax applies to each possession, no matter how often the same substance may be transferred,” state rules say.

The tax, enacted in 1989, generated more than $69,000 in revenue in 2003. But that was an anomaly, spurred by “a lot of illegal drug tax cases that came from law enforcement” that year, said Renee Eymann, the Idaho Tax Commission’s public information officer. That year, the Idaho Court of Appeals sided with the state in a case in which a jury found a man guilty of aiding and abetting the failure to affix drug tax stamps.

Idaho collected nothing from the tax in the fiscal year that ended June 30. The state has collected $154 so far in the year that began July 1.

Idaho is one of many states taxing drugs and other illicit substances, including moonshine. North Carolina makes millions of dollars a year from its tax.

Can I buy a stamp?

You sure can. Here’s the form you need to fill out.

Is this a trap? Will I go to jail for buying this stamp?

No. The stamp purchases are anonymous. (In states such as Iowa, it’s a misdemeanor to divulge the identity of a stamp buyer.) As a result, the Idaho Tax Commission has no idea who buys its colorful stamps or why.

But take note: Fastidiously affixing stamps to your pile of drugs does not render it legal. It just means you’re following tax law.

What do other states do?

Nebraska — whose stamp displays an “RIP” tombstone with a skull and crossbones fashioned from a joint and a syringe — has collected more than $500,000 from its tax since it first issued it in 1991, according to the Omaha World-Herald. Most of that was from prosecutions after a drug bust, not from drug dealers meeting their tax obligations.

Tax rates and taxable substances vary by state.

The federal government also requires drug dealers to pay taxes on their income from the drug trade. The Internal Revenue Service says you can report that income on Line 21 of Form 1040.

Isn’t evading federal taxes on illegal income how the feds got Al Capone?

Exactly.

If some states make millions of dollars, why don’t all of them?

The tax is hard to collect. And it raises constitutional questions. At least one state got rid of its drug tax within the past year.

“Illegal drugs in Texas are no longer taxable,” The Texas Tribune wrote in January. “The tax went to its unheralded death last September, part of a legislative weeding of the state’s tax laws.”

The law was toothless anyway, the Tribune wrote. That’s because of a 1996 case in which a court sided with a man — billed $49,070 after being caught with marijuana — who argued the state was trying to punish him twice for one crime, which is unconstitutional.

The same argument has been made successfully in other states. The Kansas Supreme Court this month overturned a drug dealer’s tax evasion conviction because it was double jeopardy.

Does double jeopardy make the law toothless in Idaho, too?

“We don’t believe our statutes have the same double jeopardy issues as the other states,” Eymann said.

The commission doesn’t go after drug kingpins. It depends on “voluntary compliance and referrals from law enforcement” to collect any money, Eymann said.

She said it is not the commission’s place to say whether the law should stay on the books. That is the Legislature’s call.

Audrey Dutton: 208-377-6448, @IDS_Audrey

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