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Published: August 21, 2018 

Drugs and moonshine can spell big (tax) trouble

Categories: #drugs, #criminal-defense, #moonshine, #taxes

JOSEPH C BOWMAN

Attorney at Law

Joseph Bowman headshot

Envision the following scenario: You got arrested. The police confiscated your stuff, which was not too easy or cheap for you to come by in the first place. And, as to be expected, the only thing they gave you in exchange was some arrest papers and a future court date. Already sounds bad enough, right? Unfortunately, this may not be the half of it. 

 At this point, you’ve made bail, met with your attorney, and started mulling over the possible consequences (jail-time, probation, community service, fines, and so forth). But then, to add insult to injury, you receive an official letter from the State of North Carolina notifying you of a tax debt that is presently due. And this bill could be sky-high… (We can help with that.) 

Many people are taken aback by the notion that our government could (or would) tax something that (a) is illegal to possess, and (b) was taken from you before it could be consumed or resold. The oddity of this may come across as some cruel joke. 

You can be assured that we are not kidding with you about drugs and moonshine taxes. And the State isn’t either. In fact, controlled substances like moonshine, marijuana, and most commonly-known street drugs have been taxed in North Carolina since 1990.  

Most everyone knows that certain drugs are illegal. But many are unaware that, under the “unauthorized substances tax,” persons who get caught possessing illegal drugs or home-brewed hooch in North Carolina may be required to pay taxes on those items. By now, this has become a significant source of revenue for the state. Since the tax law first went into effect on January 1, 1990, the NC Department of Revenue reports that it has levied more than $100 million in drug taxes. That’s quite a ransom for any state government, to say the least.

Enough with the history lesson. You probably want to know how the tax works and how much it could cost.

What is the unauthorized substances tax?

The unauthorized substances tax, as codified under N.C. General Statutes 105-113.105 through 105-113.113, is an excise tax on controlled substances (e.g., marijuana, cocaine, heroin), illicit spirituous liquor (“moonshine”), mash, and certain mixed beverages.

Who is required to pay the tax?

The tax is due from any individual who possesses an unauthorized substance upon which the tax has not been paid previously, as evidenced by an official tax stamp.

When is the tax due?

The tax is considered to be due and payable within 48 hours after an individual takes possession of any taxable unauthorized substance.

Minimum quantity before tax is assessed.

How much will be assessed is determined by the type and amount of controlled substance that was seized. Notably, there is no tax consequence for persons who are in possession of less than the minimum quantities specified under N.C. Gen. Stat. 105-113.107. Minimum quantity before tax is assessed.

Applicable tax rates and quantity limits. 

You should find a chart attached below, which lists the effective tax rates and minimum quantities applicable to unauthorized substances that are confiscated in North Carolina.

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