Marijuana and Illegal Drug Taxation Already Exist

Marijuana was initially made illegal at the federal level by the Marijuana Tax Stamp Act of 1937. Anyone wanting to sell the drug had to register and pay taxes on it. Then the federal government simply did not allow people to register or pay taxes, so everyone selling marijuana was doing so against the law. This act was struck down after a court challenge by Timothy Leary on Fifth Amendment grounds (of course the government immediately passed another law against it). The IRS, however, still officially requires people to pay taxes on their income from illegal drugs:

"Illegal income, such as money from dealing illegal drugs, must be include in your income on Form 1040, line 21..." (IRS Publication 17, p.87)

but in more recent years, many of the states have passed their own specific drug taxation laws. These generally take the much more interesting form of Marijuana & Controlled Substance Tax Stamps. The most common tax rate for marijuana is $3.50 a gram, or about $12.25 an eighth, although Nevada's is a shocking $100 a gram, more than the drug itself is worth. The stamps are supposed to be affixed to the drug as it is sold, similar to the way tax stamps are stuck to cigarette packs. North Carolina even has a tax return form for drugs.

To avoid self-incrimination, the act of purchasing these stamps is not immediately used against the drug dealer, but the point of the stamp tax laws is not for people to actually buy the stamps. Therefore, they may have to be purchased in person at some distant office, for example, or the stamps may be perpetually sold out. They are simply another tool in the drug war. The de facto purpose of the law is to have another way to charge drug dealers and make money of them. Drug dealers will of course not buy the stamps, since possessing them still doesn't make drug possession and sales legal. Therefore, if they are caught, they can be charged both with possession or distribution of drugs and with evasion of the drug tax. The tax evasion charge typically fines them for an amount even greater than the declared tax, and their property can be seized.

Perhaps the most interesting part of the state drug tax laws are some of the stamps themselves. Some stamp collectors have taken to purchasing them even though they're not dealing drugs. Many of them are simple and unadorned, but a few states actually made interesting designs. The Illinois stamp features a "Marijuana-busters" logo and "JUST SAY NO." The Nebraska stamp features a skull and crossbones, with the crossbones replaced with a joint and syringe. Perhaps best of all, the Texas stamp has a shiny metallic background with a grim reaper, and the word "DRUGS" with arrows leading to life's two certainties, "DEATH" and "TAXES." (They also still spell it "Marihuana.")

These laws are sometimes on shaky constitutional grounds, but many states still have them on the books and use them. I have not heard of any instances of people actually buying drugs with stamps attached.

Interesting Links And Sources

NORML page on Marijuana Taxation - an overview of the laws.

Drug Tax Stamp Exhibit - a stamp collector's exhibit. See pictures of the stamps!

Connecticut State Brochure - an example of a typical state drug taxation regime.