STATE TO TAX ILLEGAL DRUGS

With the new year, the tax man is coming after drug dealers in Tennessee.
Drug dealers will be required to pay state excise taxes on illegal
substances - from marijuana to moonshine, from cocaine to the often
illegally obtained prescription painkiller OxyContin - under a new law that
went into effect Jan. 1.

A 10-person tax agency has been created at a one-time cost of $1.2 million
to assess the taxes and collect them. The annual cost to enforce the drug
tax will be $800,000.

Tennessee joins at least 22 other states in taxing illegal drugs. Its law
was modeled after North Carolina's which has collected $83 million in the
14 years it has been on the books. Last fiscal year, the drug tax brought
in $8.5 million and $4.9 million since July 1, according to the state's
Unauthorized Substances Tax Division.

According to the state Web site, of the 72,000 taxpayers North Carolina has
assessed, only 79 people voluntarily brought stamps. According to
information posted on the Tennessee Department of Revenue Web site, the new
tax would be collected in two ways:

* Drug dealers can go to any of the state revenue offices within 48 hours
of coming into possession of unauthorized substances. They pay the tax and
get a "stamp" to put on the drugs showing they have paid up. They would not
be required to give their name, address, Social Security number, or other
identifying information. State tax collectors would be constrained by
taxpayer privacy laws from reporting them to police. Still, state officials
say voluntary payment is unlikely to happen often.

* The most probable way the tax will be collected is when police make drug
busts. Law enforcement agencies are required to call tax officials within
48 hours detailing the drugs found.

Tax collectors then assess the tax on the drug suspects, as well as
additional fines for not paying the tax in the first place. If the suspects
cannot make immediate payment, the state seizes and sells any assets, such
as cars, homes and personal belongings, to pay off the liability. Paying
the tax does not immunize a drug dealer from criminal prosecution, not does
nonpayment result in harsher jail sentences or fines, other than a tax
penalty. Typical tax penalties are 5 percent of the unpaid tax liability.
According to the Dept. of Revenue, three-fourths of the tax money collected
will go to the law enforcement agency that initiated the arrest, and
one-fourth will go the state's general fund.