89-1623 - Illegal Drug Stamp





Petitioner :






Respondent :



This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Paul F. Iwasaki, Presiding Officer, heard the matter for and in behalf of the Commission. Present and representing the Petitioner was XXXXX, Attorney at Law. Present and representing the Respondent was XXXXX, Assistant Attorney General.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:


1. The tax in question is illegal drug stamp tax.

2. The period in question is XXXXX.

3. Pursuant to a consent search of the residence occupied by the Petitioner and her husband, members of the XXXXX County Metro Narcotics Strike Force seized XXXXX grams of cocaine.

4. The Petitioner and her husband maintained separate closets in their bedroom. The cocaine was located in the husband's closet within that bedroom.

5. The Petitioner's husband admitted to the police officers that the cocaine belonged to him and also that he had been engaged in distributing the cocaine for value.

6. Neither the Petitioner nor her husband made any statements to the police officers which indicated that the Petitioner had any knowledge nor control over the cocaine found in the husband's closet.

7. No drug stamps were affixed to the cocaine.

8. A set of scales was found in the home. The use of scales is consistent with the weighing and packaging of cocaine for sale.

9. The scales had been obtained by the Petitioner from XXXXX High School where the Petitioner had been a school teacher. The Petitioner testified that the scales had been broken and she had brought them home to repair them.

10. A tax deficiency in the amount of $$$$$ and a penalty in an equal amount were assessed against the Petitioner and her husband for the failure to have the required drug stamps affixed to the controlled substances.


A dealer may not possess any marijuana or controlled substance upon which a tax is imposed by Title 59, Chapter 19, of the Utah Code unless the tax has been paid on the controlled substance as evidenced by a stamp or other official indicia. (Utah Code Ann. 59-19-104(2)).

"Dealer" means a person who, in violation of Utah law, manufactures, produces, ships, transports, or imports into Utah or in any manner acquires or possesses more than 42-1/2 grams of marijuana, or seven or more grams of any controlled substance. (Utah Code Annotated 59-19-102(2)).


In the present case, the Petitioner presented three issues to be decided by the Commission:

1. Whether the illegal drug stamp tax is unconstitutional in that it violates an individual's right against self-incrimination under the United States and Utah constitutions;

2. Whether the Illegal Drug Stamp Tax Act violates the due process clause of the United States and Utah constitutions; and

3. Whether the Petitioner is a "dealer" within the meaning of the Illegal Drug Stamp Tax Act.

The issue as to whether the Petitioner was a dealer within the meaning of the Illegal Drug Stamp Tax Act is dispositive of this matter and therefore, will be discussed first.

The requirement to purchase and affix drug stamps is imposed only upon "dealers" as that term is defined in the Act. Section 59-19-102(2) defines dealer as "a person who, in violation of Utah law, manufactures, produces, ships, transports, or imports into Utah or in any manner acquires or possesses more than ... seven or more grams of any controlled substance ..." (emphasis added). Thus, under the Act, mere possession of the controlled substance is not sufficient in and of itself to be a violation of the Act. The possession must be one which is unlawful under Utah law. It must, therefore, be determined whether the Petitioner's actions in the present case were sufficient so as to find her in violation of Utah law.

Under Utah Code Ann. 58-37-8(2)(a)(i) it is unlawful for any person to knowingly and intentionally unlawfully possess or use a controlled substance. Possession need not be actual possession, but may also be constructive possession.

In determining the factors that constitute constructive possession, the Utah Supreme Court in State v. Fox, 709 P.2d 316 (Utah 1985), stated that "to find that a defendant had constructive possession of a drug or other contraband, it is necessary to prove that there was a sufficient nexus between the accused and the drug to permit an inference that the accused had both the power and the intent to exercise dominion and control over the drug." Id. at 319. That test presupposes, of course, that the accused had knowledge of the presence of the controlled substance. The Court went on to state that whether a sufficient nexus exists is dependent upon the facts and circumstances of each case, and that although ownership and/or occupancy of the premises in which the drugs are found are important, that fact alone is not sufficient to establish constructive possession particularly where the occupancy is not exclusive, as is the situation in the present case.

In the present case, there has not been a sufficient showing of evidence to establish the necessary nexus between the Petitioner and the controlled substance in question. The Respondent argued that an inference could be drawn that the Petitioner exercised dominion and control over the cocaine from the disputed facts that she was aware of the drug trafficking activities, that she admitted to regular cocaine use, and that she benefitted from the use of the illegal drug sale proceeds. Those "facts", however, were based upon the hearsay statements contained in police reports written by the investigating officer.

Although hearsay evidence is regularly admitted in these proceedings, findings of facts may not be based solely on contested hearsay. In this case, the Petitioner testified under oath that she was not aware of the presence of the cocaine in her home, that she was not aware of her husband's trafficking in cocaine, and denied that certain items were purchased with proceeds from the cocaine sales.

Based upon those statements, made under oath with no testimony to the contrary, the Commission is not persuaded to accept the hearsay statements contained in the police reports as evidence to support the inference that the Petitioner was aware of the existence of the cocaine in the home and that she was in a position to exercise dominion and control over it.

Based upon the foregoing, the Tax Commission finds that the Petitioner did not unlawfully possess the controlled substances in question and therefore was not subject to the requirements of the Illegal Drug Stamp Tax Act.

To the extent that the determination of the Collection Division assesses a deficiency against XXXXX, such a determination is reversed and the Petitioner's request to release the Petitioner, XXXXX, of liability is granted. It is so ordered.


R. H. Hansen Roger O. Tew

Chairman Commissioner


Joe B. Pacheco G. Blaine Davis

Commissioner Commissioner