92-1787

Illegal Drug Stamp

Signed 2/29/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX,

Petitioner, ) FINDINGS OF FACT,

: CONCLUSIONS OF LAW,

v. ) AND FINAL DECISION

:

AUDITING DIVISION OF THE ) Appeal No. 92-1787

UTAH STATE TAX COMMISSION, :

)

Respondent. : Tax Type: Drug Stamp

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for an Initial Hearing on XXXXX. At that time, it was stipulated that the matter could be converted to a Formal Hearing, and that a decision could be entered based upon the facts and evidence which are already contained in the file, and further upon the briefs which have been filed in the case in support of Motions for Summary Judgment. G. Blaine Davis, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was XXXXX, Attorney at Law. Present and representing Respondent were XXXXX, Assistant Attorney General, and XXXXX from the Collection Division.

Based upon the evidence and testimony presented at the hearing, and further based upon the facts contained in the file and the briefs presented by the parties, the Tax Commission hereby makes and enters its:

FINDINGS OF FACT

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

2. The period in question is XXXXX.

3. On XXXXX, Petitioner was arrested and on XXXXX Petitioner was charged in a three-count information charging possession, distribution and production of marijuana. The information was filed by the XXXXX Attorney's Office.

4. On XXXXX, the Utah State Tax Commission, Collections Division, sent a letter constituting a Notice and Demand for Payment of Tax under Declaration of Taxes in Jeopardy, and declared unpaid tax and penalties to be due under the Illegal Drug Stamp Tax Act in an amount of $$$$$.

5. The tax was declared for a total weight of XXXXX grams of marijuana, which at $$$$$ per gram came to a total amount of $$$$$. The statute imposes a 100% penalty, or an additional $$$$$ of penalty which was added to the tax for the grand total of $$$$$.

6. On XXXXX, Petitioner pleaded guilty to a Class A misdemeanor on the criminal charges, and he was sentenced on the criminal charges on XXXXX.

7. The imposition of the tax herein was prior to the date of the criminal conviction or the sentencing by the court.

8. Petitioner does not dispute the possession of the marijuana, or that a guilty plea has been entered on the charges of possession of the marijuana. Also, Petitioner does not dispute the amount of the marijuana or the calculation of the tax as imposed thereon.

9. Petitioner's only defense to this action is the allegation that the drug stamp tax act enacted by the State of Utah is illegal and unenforceable because it twice punishes the Petitioner for the same conduct, which Petitioner alleges is a violation of the double jeopardy provisions of both the Utah State and Federal Constitutions.

10. A tax had not been paid and the drug tax stamps had not been affixed to the marijuana that was in the possession of Petitioner.

CONCLUSIONS OF LAW

A tax is imposed upon marijuana and controlled substances based upon the quantity of marijuana or the weight or dosage units of other controlled substances which are in the possession of a dealer. (Utah Code Ann. '59-19-103.)

A ADealer@ means a person who, in violation of Utah law, manufactures, produces, ships, transports, or imports into Utah or in any manner acquires of possess more than 42-1/2 grams of marijuana, or 7 or more grams of any controlled substance, or 10 or more dosage units of any controlled substance which is not sold by weight. (Utah Code Ann. '59-19-102(2).)

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 a tax has been paid on the controlled substance as evidenced by a stamp or other official indicia. (Utah Code Ann. '59-19-104(2).)

Any dealer violating the provisions of the Drug Stamp Tax Act is subject to a penalty of 100% of the tax in addition to the tax imposed by '59-19-103. The penalty is to be collected as part of the tax. (Utah Code Ann. '59-19-106(1).)

Any tax and penalties assessed by the Commission are presumed to be valid and correct. The burden is on the taxpayer to show their incorrectness or invalidity. (Utah Code Ann. '59-19-106(4).)

DECISION AND ORDER

As noted above, Utah=s Illegal Drug Stamp Tax Act imposes a tax on marijuana and other illegal substances. Dealers in possession of such substances must pay the tax by purchasing and affixing drug stamps to the substances. Failure to do so renders the dealer liable for the amount of the tax plus a 100% penalty.

Petitioner concedes that the substance found in his possession was marijuana. Petitioner also concedes that no drug stamps had been purchased or affixed to the marijuana. Petitioner=s only defense in this matter is his contention that the Utah Drug Stamp Tax Act is illegal and unenforceable because it twice punishes him for the same conduct, which Petitioner alleges is a violation of the double jeopardy provisions of both the Utah state and Federal constitutions. The basis for the position of Petitioner is the case of Department of Revenue of Montana v. Kurth Ranch 128 L.ED.2nd 767(1994). The position of Petitioner is that the tax has an obvious punitive object, which is to punish people for possession of controlled substances, and that such conduct was found to be inpermissable in the Kurth Ranch case.

The Commission finds that the Kurth Ranch case would not mandate that the Utah Drug Stamp Tax Act is unconstitutional as applied to the Petitioner. In the Kurth Ranch case, the imposition of the tax was conditioned upon the commission of a crime. In this case, a crime is not required. The tax is simply a tax which is imposed upon the drugs, and a penalty is also imposed for failure to properly pay the tax in a timely manner. This is identical to the imposition to all other taxes with an associated penalty for failure to timely pay the tax due.

In the Kurth Ranch case, the tax was only exacted after the taxpayer had been arrested for possession of the drug. In this case, the tax is imposed regardless of whether or not the taxpayer is arrested for possession of the drug. If Petitioner had properly paid the tax in advance, there would have been no tax or penalty affixed at the time that Petitioner was arrested for possession of the drug.

In the Kurth Ranch case, if Petitioner did not file a tax return, the law enforcement officers were authorized to file it for and in behalf of Petitioner. That is not the case with Utah law, where the Petitioner is required to obtain the stamps, but is not required to divulge his or her identity of any other identifying information.

Also in the Kurth Ranch case, the Montana statute levied the tax at the time the taxpayer no longer owned the drugs or controlled substances. Under the Utah law, the tax is imposed upon the drugs at the time that Petitioner owns such drugs or controlled substances.

The Utah Drug Stamp Tax also serves a valid revenue raising and remedial purpose, the constitutionality of which has been upheld in XXXXX v. State Tax Commission of Utah, 842 p.2nd, 848 (Utah 1992). In addition, the Drug Stamp Tax was the first penalty which was imposed upon Petitioner in this case. If there has been double jeopardy, the double jeopardy was caused by the imposition of any fine or jail sentence imposed by the courts, and was not imposed by the imposition of the Drug Stamp Tax which was the first penalty imposed upon Petitioner.

Based upon the foregoing, the Commission finds that Petitioner was in possession of the marijuana upon which Respondent based its assessment of tax and penalty, that the amount of tax has been properly calculated and imposed upon Petitioner. The Commission further finds that the drug stamp tax is legal and enforceable and does not twice punish the Petitioner for the same conduct and does not constitute double jeopardy under the provisions of either the Utah state or the Federal constitutions.

The Commission further finds it is without authority to determine the statute unconstitutional, and that it is required to enforce the statutes as they are written by the Legislature.

Based upon the foregoing, the Commission finds that Petitioner was in possession of the marijuana upon which Respondent based its assessment of tax and penalty. The Commission therefore affirms Respondent=s assessment of tax and penalty against Petitioner which was made pursuant to Utah=s Illegal Drug Stamp Tax Act. The Commission further finds that the relevant statutes are constitutional and have been properly imposed in this case. The Petitioners= Petition for Redetermination is therefore denied. It is so ordered.

DATED this 29 day of February, 1996.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner

NOTICE: You have twenty (20) days after the date of a final order to file a Request for Reconsideration with the Commission. If you do not file a Request for Reconsideration with the Commission, you have thirty (30) days after the date of a final order to file a.) a Petition for Judicial Review in the Supreme Court, or b.) a Petition for Judicial Review by trial de novo in district court. (Utah Administrative Rule R861-1A-5(P) and Utah Code Ann. ''59-1-601(1), 63-46b-13 et. seq.)

^^