Tennessee Court Strikes Down "Crack Tax"; State Can Tax Sin, But Not Crime

The Tennessee Court of Appeals on Thursday invalidated the state's "Crack Tax" (a tax on persons in possession of drugs, not on plumbers):

The issue we address in this appeal is whether Tennessee’s Drug Tax is constitutionally valid. Plaintiff was arrested for possession of cocaine, and shortly thereafter, the Tennessee Department of Revenue assessed taxes, penalty, and interest against him pursuant to a state excise tax statute that levies a tax on persons in possession of designated amounts of unauthorized substances, T.C.A. § 67-4-2801, et seq. Subsequently, the Department of Revenue filed a tax lien against plaintiff’s real property and executed a levy against his bank account. Plaintiff filed suit against the Commissioner of Revenue, charging that the tax statute violates both the state and federal constitutions. The trial court entered judgment in favor of plaintiff, decreeing that the tax constitutes a violation of constitutional rights of due process and protections against self incrimination. We affirm the trial court’s conclusion upon the alternate ground that the statute is arbitrary, capricious, and unreasonable and, therefore, invalid under the Tennessee Constitution, in that it seeks to tax as a privilege, activity that prior legislation has designated as criminal activity.

Waters v. Chumley, No. E2006-02225-COA-R3-CV (Tenn. Ct. App. 9/6/07).  Press coverage:

• Associated Press
• Knoxville News
• The Tennessean