Avalara > Blog > Sales and Use Tax > Illegal Drugs Are Subject to Tax. Wacky Tax Wednesday. - Avalara

Illegal Drugs Are Subject to Tax. Wacky Tax Wednesday.

  • Sep 3, 2014 | Gail Cole

While I can’t speak from experience, I’m pretty sure that people who sell illegal drugs do not consider sales tax.

Sales and excise taxes are remitted to state departments of revenue by sellers. Sellers typically collect the tax from their customers at the time of sale, as anyone who has ever purchased a taxable item knows. Can you imagine a pot dealer tacking tax on to a sale? And then filing the appropriate paperwork with the state, along with the payment?

Are you imagining it?

21 states do have a marijuana tax stamp law. According to NORML, the law “mandates that those who possess marijuana are legally required to purchase and affix state-issued stamps onto his or her contraband. Failure to do so may result in a fine and/or criminal sanction.”


Take the Texas Controlled Substances Tax, which imposes a tax “on the purchase, acquisition, importation, manufacture, or production by a dealer of a taxable substance on which the tax has not been paid.” According to the Window on State Government, the rate of tax for marijuana is $3.50 per gram, with a four ounce minimum. Other substances (not defined) are taxed at a rate of $200 per gram, with a seven gram minimum.  The due date? “When a ‘dealer’ imports, manufactures, produces, acquires, and/or possesses a controlled substance.”

Electronic reporting is not permitted.


Anyone in possession of a controlled substance in Idaho is required under the Illegal Drug Stamp Act “to purchase and affix drug tax stamps to the substances or face civil and criminal penalties.” Given the obvious complication of such a law, an amendment provides “confidentiality for stamp purchasers” along with “penalties for those who would divulge this information.” Using identifying information in criminal investigations or proceedings is also prohibited.

Is anyone actually charged under the Illegal Drug Stamp Act?  Yup. In the case Idaho v. Victor H. Smith, 1991, Mr. Smith was charged with “possession of a controlled substance with intent to deliver and failure to affix controlled substance tax stamps to the cocaine.”

That’s wacky.

Know any wacky tax tales? Share them in the comments below.

photo credit: .v1ctor Casale. via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole is a Senior Writer at Avalara. She’s on a mission to uncover unusual tax facts and make complex laws and legislation more digestible for accounting and business professionals.