Unless you happen to be the most tax-conscious drug dealer in the world, you may be unfamiliar that the North Carolina Department of Revenue taxes the sale or possession of unauthorized substances. The same way sales taxes are levied by the State, if you are caught and charged with a drug trafficking or possession crime in North Carolina, you may receive a tax bill in the mail that will need your attention, separate and apart from any criminal charges.
What is the Unauthorized Substance Tax?
North Carolina General Statute §§ 105-113.105-113 governs the unauthorized substance tax and permits the State to impose an excise tax on illegal drugs and liquor. Depending on the particular illegal substance, there are different tax rates imposed according to the weight or dosage units possessed. Violators can be liable for the tax amount, an additional penalty, plus interest. It is not unusual for the unauthorized substance tax amount to be several thousand or even tens of thousands of dollars.
Can I timely pay the Unauthorized Substance Tax without fear of prosecution?
Yes. The statute provides a manner for you to pay taxes on illegal income on time and, supposedly, in an anonymous manner without notification to law enforcement. A recent article from the UNC School of Government discusses the author’s efforts to obtain unauthorized substance tax stamps. For obvious reasons, individuals in possession of illegal drugs or illicit liquor rarely, if ever, make an effort to comply with the law and pay taxes on these substances. Additionally, even if a drug dealer were to obtain the necessary tax stamps and pay the tax in a timely manner, it does not eliminate the risk of criminal prosecution.
What should I do if I receive a notice of Unauthorized Substance Tax Assessment?
So, what should you do if you receive an unauthorized substance tax assessment? First, take it seriously! The same way that you probably hired an attorney to represent you when you were charged with a drug crime, you should hire an attorney to assist with the tax issue.
While the two issues are related, they are two separate proceedings in two different forums. Also, DO NOT assume that your criminal attorney is aware that you received notice of a tax assessment, even though it may be related to the drugs you were charged with selling or possessing. The tax assessment is likely not part of the criminal file and, unless you share this information with your attorney, they will likely have no way of knowing about it.
Second, there is a very strict 45-day deadline to file a request for review with the NC Department of Revenue. This deadline is important and will be enforced! Failure to request review in writing within 45 days will close the opportunity to contest the assessment and result in the tax becoming final which the State can pursue through civil action and/or garnishments.
How do I contest an Unauthorized Substance Tax Assessment?
As discussed above, in order to contest an assessment, you will need to request review in writing within 45 days of the notice. If you have timely requested review, the assessment may be removed, or alternatively, you or your attorney will be given an opportunity to provide information to investigators at the Department of Revenue demonstrating why the tax assessment is incorrect or otherwise improper.
An experienced attorney will be able to review your particular case and help identify potential challenges to the assessment which may include questions about the weight amount, issues regarding the particular substance identified, whether you meet the statutory definition of “dealer,” and if statutory exceptions are applicable.
Often, a conference will be scheduled which is usually an informal hearing over the phone. While the process can take several months, it may be possible during that period of time to reach a settlement. If settlement is not possible, a Final Notice of Determination will be issued by the Department of Revenue and further proceedings must be appealed to the Office of Administrative Hearings.
Contact the experienced attorneys at Dysart Willis Houchin & Hubbard to discuss issues regarding illegal income and have received a notice of unauthorized substance tax assessment. Have questions? We are eager to help.