The North Carolina Unauthorized Substance Tax

You may have heard about the North Carolina Unauthorized Substance Tax, commonly called the “drug tax”. This law was implemented in 1990 and requires anyone in possession of illegal drugs or moonshine to pay a tax on them. The Unauthorized Substance Tax arises following a drug or moonshine possession arrest or confiscation of illegal substances by any law enforcement officer. Police officers are required by law to file a report with the North Carolina Department of Revenue anytime they seize illegal controlled substances, even if they do not arrest you, listing the type and quantity of drugs or moonshine confiscated, along with all identifying information on who they seized it from.  Then the Department of Revenue calculates the tax owed by the person from whom the illegal substances were seized.  

The tax is owed whether you are arrested or not, and you owe the NC drug tax even if you are never tried or convicted of any crime.  Most people who get a bill for this tax think that if they were found not guilty or if the charges were dropped, they don’t owe the tax. That is not the case. The drug tax law says that anybody who has illegal substances in their possession is subject to tax, period. The tax, interest, and penalties can amount to hundreds of thousands of dollars and should be taken as seriously as any other tax owed to the state. Often the tax, penalty, and interest amount to more than the street value of the illegal drugs or moonshine that was confiscated.

What Exactly Is the NC Drug Tax?

The NC Drug Tax is essentially a form of excise taxation applied to the possession of illegal drugs and unauthorized substances such as moonshine/bootleg liquor, as defined and governed by North Carolina General Statute §§ 105-113.105-113. Under these tax laws, individuals found with unauthorized illegal substances are required to pay tax on them. This includes a wide range of substances from marijuana and cocaine to moonshine and illegally sold prescription medications. The tax rates vary, being determined by either the weight of the substance or, in the case of drugs like anabolic steroids, the number of dosage units or gallons of moonshine. 

Who Does the Unauthorized Substance Tax Apply To?

The Unauthorized Substance Tax specifically targets those considered “dealers” in the eyes of North Carolina law. According to North Carolina General Statute §§ 90-95(d)(4), a “dealer” is someone found with quantities of illegal substances beyond what might be considered for personal use. This includes individuals with over 42.5 grams of marijuana, which is roughly more than 1.5 ounces. Furthermore, anyone in possession of at least seven grams of any controlled substance sold by weight, or at least 10 dosage units of substances not sold by weight, falls under this category. This law also encompasses those with illegal alcohol or moonshine intended for sale. 

What Do I Do If I Receive a North Carolina Unauthorized Substance Tax Assessment?

If you find yourself holding a North Carolina Unauthorized Substance Tax Assessment notice, the first thing you should do is get in touch with a tax expert who is experienced in dealing with this highly specialized tax. This situation needs someone who can navigate the complexities of tax law. It’s critical to understand that handling criminal charges and dealing with a tax assessment are two distinct processes. Your criminal charges for possession and/or sale of the illegal substances will be handled by a criminal defense attorney.

Don’t make the mistake of thinking your criminal defense lawyer will automatically take care of or even know about the tax assessment. The tax assessment is a separate civil matter handled by the Department of Revenue, not the courts. You must act quickly once the tax is assessed. There is a 45-day deadline from the date the tax bill (“notice”) is issued so that you can hire a tax expert to request a review of the assessment from the NC Department of Revenue. Missing this deadline is not an option if you wish to challenge the tax assessment. Once the 45-day deadline passes, the state of North Carolina will begin to pursue collection of the tax due by seizing assets, such as motor vehicles (even tractors and lawnmowers), bank accounts, retirement plans such as IRAs, 401-Ks, SEPs, brokerage accounts containing stocks bonds or cash. They can and will garnish your paychecks too.

Faced With an NC Unauthorized Substance Tax Assessment? Contact Swaim & Associates Today

Dealing with an NC Unauthorized Substance Tax Assessment can feel overwhelming, but you don’t have to face it alone. Swaim & Associates is here to offer you the legal guidance and support you need during this challenging time. We will provide you with the effective representation necessary to mitigate the impact of a large tax assessment. Don’t let the fear and stress of dealing with a massive tax bill resulting from an Unauthorized Substance assessment by the North Carolina Department of Revenue overwhelm you financially or disrupt your life. Reach out to us at 336-433-9997 and let’s discuss how we can help you.