Alabama tax on illegal drugs goes from weapon to ‘headache’
by Tim Lockette
Assistant Metro Editor
Apr 04, 2011 | 8862 views |  0 comments | 12 12 recommendations | email to a friend | print
The Alabama Department of Revenue has tax stamps for illegal drugs in denominations of varying degrees.
The Alabama Department of Revenue has tax stamps for illegal drugs in denominations of varying degrees.
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A little more than a decade ago, the auditors in Charles Crumbley’s office were at the front lines of the drug war, finding ways to squeeze tax revenue out of drug dealers caught in the act.

These days, Crumbley rarely gets a call about the state’s tax on illegal drugs. And when he does, the calls are usually from pranksters or philatelists.

“We get calls from collectors who want the marijuana tax stamp,” he said. “And sometimes people just want one as a joke.”

Crumbley is director of the Investigations Division at the State Department of Revenue. Normally, his office investigates people and businesses suspected of tax fraud and tax evasion.

The division is also the place to contact if you want to pay the proper tax on your stash of illegal drugs. The state levies a $3.50 per gram tax on marijuana, $400 on 10 “dosage units” of any drug sold in pill form, and a $200 per gram levy on non-pill drugs like cocaine.

Yes, all those items are illegal.

Alabama’s illegal drug tax dates back to the late 1980s, when state governments were looking for new ways to crack down on the drug trade. Crumbley said about 20 states passed laws that levied a tax on dope, with the idea that drug dealers could be locked up for tax evasion in addition to the sentences they’d serve for dealing.

People who pay the tax receive a shiny tax stamp, which can be affixed to their merchandise.

According to one document from the Legislative Fiscal Office, “stamps are to be purchased immediately from the Department of Revenue when a dealer purchases, acquires, transports or imports into Alabama the illegal drug.”

In the early days, business was brisk for drug-tax investigators. In 1998, according to state documents, Alabama collected $161,947 in taxes on illegal drugs. In 2010, collections were just $1,275.

“Enforcing it was just more trouble than it was worth,” Crumbley said. “We spent most of our time in court.”

The Alabama drug tax was the subject of court cases almost from the beginning, with plaintiffs arguing, among other things, that the measure was really a punitive fine and not a tax. Illegal drug taxes in other states faced similar challenges. When a federal court struck down a Montana drug tax, Crumbley said, Alabama gave up on enforcement of its own tax.

For Revenue Department investigators, the measure was always a bit of a headache. As it turns out, drug dealers often don’t have a lot of liquid assets.

Crumbley said that sometimes tax investigators would encounter dealers with stashes of gold and cash. But more typically, tax investigators found themselves seizing sports cars and weapons caches — and trying to find a way to turn them into cash.

Then there were the details.

“When you’re taxing marijuana, do you weigh the roots, or just the stems?” Crumbley said. “Those questions have to be answered.”

He recalled a case when suspects tried to flush some drugs down a toilet. When police weighed the drugs, they weighed them still wet. Another case for a tax lawyer.

“It was just a headache,” Crumbley said.

The department still sells the tax stamps — glossy green, orange and pink stickers with a seal that bears the state’s name and an admonition to “just say no” to the drug being taxed.

State officials don’t ask people why they want the stamps — there’s that Fifth Amendment prohibition on self-incrimination. But most customers, Crumbley said, volunteer that they’re buying the stickers as a joke or for a stamp collection.

The marijuana stamp is by far the most popular. But then, Crumbley said, it’s the cheapest. There are stamps available in denominations up to $40,000, which doesn’t happen to be a big seller.

And then there are the calls from journalists. Crumbley said it occurs to reporters to check in on the state of the law from time to time. He said he’s spoken to reporters from a number of nationwide magazines.

If the coverage boosts sales of the stamp, Crumbley said, state employees don’t mind. It’s just more tax revenue for the state.

“It generates some interest from time to time,” he said. “We’re used to it.”

Star assistant metro editor Tim Lockette: 256-235-3560.
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Alabama tax on illegal drugs goes from weapon to ‘headache’ by Tim Lockette
Assistant Metro Editor

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