Drug dealers have to pay taxes too.

Date:June 21, 2004 / year-entry #244
Orig Link:https://blogs.msdn.microsoft.com/oldnewthing/20040621-00/?p=38783
Comments:    19
Summary:In the state of Kansas, "The fact that dealing marijuana and controlled substances is illegal does not exempt it from taxation. Therefore drug dealers are required by law to purchase drug tax stamps."

In the state of Kansas, "The fact that dealing marijuana and controlled substances is illegal does not exempt it from taxation. Therefore drug dealers are required by law to purchase drug tax stamps."

Comments (19)
  1. Delphi7 says:

    I actually like the idea – It’s another way to hit the small time drug dealers who would get away with a slap on the wrist

  2. Ben Hutchings says:

    Taxation of marijuana in the US predates the explicit ban. The taxes were introduced around 100 years ago but the required tax stamps were never made available, so anyone in possession of marijuana became a tax-evader. It’s not clear to me whether there is a practical way to pay the tax in Kansas now or whether it’s a continuation of this practice.

  3. Cooney says:

    So, would that tax be on production or trade? Drug warriors spend so much time being clever that they forget to ask why they’re waging the war at all.

    In related news, you are required to declare your income (and source, I imagine) to the IRS. Because this is required by law, it cannot be shared with law enforcement (5th ammendment, don’tchaknow). This means that you can be a prostitute and the IRS won’t come after you if you pay your taxes. They won’t help the FBI either, so you can operate rather safely. I wonder if Kansas has the same protections for their state tax service.

  4. matthew says:

    I’m not sure how much dope costs in Kansas, but those tax rates seem quite high. In the UK a gram of cocaine can be had for around £50, and an eighth of marijuana (3 grams) for about £10. So taxes of $200 on a product worth less than half of that seem too much. When you are already breaking the law, it’s pretty tempting to break it again when this is going to double the cost of your product.

    Makes the slightly-less-law-abiding drug dealer who doesn’t pay drug taxes down the street look like much better value…..

  5. In the UK prostitution is practically legal in reality – the laws are rarely enforced against the prostitutes directly. A lot of brothels now take credit cards, and these are used by the Inland Revenue Service for calculating how much tax to charge. In addition, if an accountant believes his client is making money from gun-running or drugs they must report it – however prostitution does not have to be reported.

    (in case your wondering, I’m the son of an accountant, not someone who visits prostitutes)

  6. jaybaz [MS] says:

    This came up once before, about 10 years back. They arrested someone for selling pot, and then tried to get him for not paying the stamp tax, as well.

    He argued that it was double jepoardy, and succeeded. Only the pot-selling charge stuck.

  7. Ben Hutchings says:

    matthew: As another citizen of the UK I don’t understand why you are surprised by such tax rates. There are similarly high rates of duty on alcohol and tobacco here.

    Neil: There are laws against soliciting and against pimping ("living off immoral earnings"), which as you say are rarely enforced. There is no law against prositution per se, though I hear Herr Blunkett has been talking about writing one. There are lots of ads in the local paper for "escort services" which are plainly call-girl operations. I believe they would claim to charge for "escorting" and that any sex that follows is unrelated and free of charge.

  8. mat says:

    If you tax something that is illegal, isn’t the receipt of funds in and of itself tatamount to state-sponsored blackmail?

    If the state still requires a stamp tax of an illegal product, is the state not suggesting a double standard?

    Why hasn’t Kansas enacted a law whereby if you should choose to piss on the sidewalk, you must have a stamp on your penis? It may still not be legal to urinate in public, but they could also allow the purchase of these penis stamps in advance, in case you do break the law but don’t want to be charged with evading the urine tax? (Don’t ask about a female equivalent – I don’t have a clue…)

    I’d have pegged this to be somewhere like Kentucky where they used to run moonshine… alas, it’s Jayhawk country. LMAO.

  9. Ross says:

    This is also true in the State of Iowa. They have the stamps printed up and waiting at the state house for anyone dumb enough to wonder in to try to buy them.

  10. Raymond Chen says:

    From Kansas’s FAQ: "KDOR associates cannot share any information relating to drug tax stamp purchases with anyone, including law enforcement agencies."

    Too bad the minimum purchase is $100. Would be a hoot to buy the stamps just to have them in your stamp collection.

  11. anon says:

    Actual quote, or so it has been reported.

    "I am no prostitute. I sell designer condoms and provide free demonstrations"

  12. Rutger says:

    This goes for *all* criminal activity here in The Netherlands.

  13. mikeb says:

    The feds have this covered, too. Only they’re a bit broader – you have to pay tax on any illegal income, not just drugs (this is apparently somewhat like they get a conviction on Al Capone).

    From IRS Publication 525:

    Illegal income, such as stolen

    or embezzled funds, must be included in your

    income on line 21 of Form 1040, or on Schedule

    C or Schedule C–EZ (Form 1040) if from your

    self-employment activity.

  14. Petr Kadlec says:

    Recently, there have been a similar (well, a kind of reversed) case in Czechia. During the court with some man (I don’t recall exactly for what crime he was tried), the judge explained why he had issued quite small fine using something like "the defendant had big expenses, so we have to deduce it from his illegal income, which is the base for computing the fine". I am expecting that drug dealers will start to deduce their expenses from their taxes soon…

  15. J. Random Hacker says:

    IIRC, Al Capone was ultimately busted by the IRS for not paying taxes. It seems that you’re expected to report all income, legal or illegal, and give the IRS its cut.

    Nobody escapes the tax man (unless they’ve paid off some Congresscritter directly).

  16. carlos says:

    This fascinating article describes why the original drug law was a tax law:


  17. li hang says:

    hay if the price is cut down peole will pay ipersonal love the biz people see tomato amd potatos so we can seel drugs and be taxed lik others

  18. Dave Wink says:

    It would be impossible to tax the production and/or trade of marijuana. There are far too many underground dealers that distribute marijuana daily throughout the word to tax them. The only way the government would be able to tax marijuana would be if it were made legal to smoke, and able to buy in stores. If you could walk into a Wal*Mart and buy a dime bag, then the government would make billion just off of taxes alone. Let alone how much Wal*Mart would make. -Dave

  19. Jekke says:

    The whole point of laws that require taxation of illegal products (at least in cases like this,) is to increase the penalty on drug possession and give law enforcement another way to prosecute drug crimes.

    The taxes are far higher than the value of the product in order to guarantee that no one EVER pays them. They’re not meant to be paid. They’re meant to be evaded.

    This tactic goes back to the prosecution of Al Capone, who ultimately went to jail not for racketeering, murder, or bootlegging, but for income tax evasion.

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