Taxing Illicit Drugs Violates Constitution, Tenn. Court Rules

Tennessee’s so-called “crack tax” violates the state constitution because it doesn’t constitute a levy on “merchants, peddlers and privileges,” the state’s highest court has ruled.

The Associated Press reported July 24 that the tax on illicit-drug sales, imposed in 2004, has generated $10.4 million for the state. But the high court, while acknowledging the high cost of drug use on society, ruled the levy unconstitutional by a 3-2 vote.

However, the state Supreme Court did not follow the reasoning cited by lower courts, which said the tax violated constitutional protections against self-incrimination, holding out the possibility that state lawmakers could draft a new law that would pass constitutional muster.

Twenty states currently impose taxes on sales of illicit drugs, which drug dealers don’t typically pay — leading to another layer of penalties when they are convicted. A spokesperson for the Tennessee State Revenue agency expressed disappointment in the court ruling. The decision stops the sale of tax stamps and collection of taxes, and officials are looking into whether taxpayers will need to be reimbursed.