The Crack Tax

If you’ve been arrested for a drug crime in North Carolina – whether it’s possession with intent to sell or distribute (PWISD), drug trafficking, drug sale, drug possession, or drug manufacturing or obtaining a controlled substance by prescription fraud – the tax man might come knocking.

That’s because in North Carolina, the state’s Department of Revenue has a special criminal investigative division (CID) that enforces North Carolina’s tax laws and imposes an Unauthorized Substance Tax. The tax rates are available here.

The rates are absurd. For instance, a gram of crack cocaine may go for $40 to $50 on the street. The North Carolina DOR assesses a tax of $50/gram of cocaine, which makes the effective tax rate 100%. What other product in the world is taxed at 100% rate?

The tax rate is merely a way to punish people twice: first punish them in the criminal system with probation or prison time, and then punish them financially with these silly taxes.

The idea is to tax “dealers” who may have been selling such substances without assessing such taxes on the buyers. In other words, it’s kind of like a sales tax.

The idea is that a drug dealer, while he’s violating the state’s substantive law with respect to the illicit sale of, say, heroin, or marijuana, should be filing and paying taxes on the sale of such substances. (Al Capone was convicted not because he dealt in illicit alcohol, but because he failed to pay his “taxes” on those sales.)

There’s even a tax form that drug dealers can file with the Department of Revenue so that while they’re committing the offense of selling drugs, they’re complying with the tax laws.

Of course, no one who deals drugs illegally complies with the tax laws.

Therefore, upon their arrest for the illicit possession of dealer-quanity of drugs, the Department of Revenue swoops in to seize property and attempt to collect on “ill gotten” gains.

The problem becomes that many people are arrested and charged with felonies because they have an addiction problem, and have illegally obtained significant quantities of drugs in order to fee their habits. The Department of Revenue doesn’t care. They will swoop in to try to collect on such people for “uauthorized substance taxes” even though such people were never dealers, only users.

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Damon Chetson

Damon Chetson is a Board Certified Specialist in State and Federal Criminal Law. He represents people charged with serious and minor offenses in Raleigh, Wake County, and the Eastern District of North Carolina. Call (919) 352-9411.