No. 91-379 and 91-569 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1992 

Plaintiff and Respondent, 

THE STATE OF MONTANA, 

DEPARTMENT OF REVENUE, 

Defendant and Appellant. 

No. 91-569 

THE DEPARTMENT OF REVENUE, 

Petitioner and Appellant, 

-vsPAUL A. WILLIAMS, JR., 

Respondent and Respondent. 

APPEALS FROM: District Courts of the Fourth (91-379) and First 

(91-569) Judicial Districts, 

In and for the Counties of Missoula (91-379) and 

Lewis & Clark (91-569), 

The Honorable John S. Henson (91-379), Judge 

presiding and The Honorable Jeffrey M. Sherlock (91- 

569), Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

R. Bruce McGinnis, Tax Counsel, Dept. of Revenue, 

Helena, Montana (91-379) 

Paul Van Tricht argued, Tax Counsel, Dept. of 

Revenue, Helena, Montana (91-569) 

For Respondent: 

Clinton H. Kammerer argued, Kammerer Law Offices, 

Missoula, Montana (91-379) 

Edmund F. Sheehy argued, Cannon & Sheehy, Helena, 

Montana (91-569) 

Filed: 

I Clerk 
Justice Fred J. Weber delivered the Opinion of the Court. 

The Montana State Department of Revenue (DOR) appeals from two 

separate District Court rulings wherein the courts determined that 

the tax assessed by the DOR on Merlin L. Sorenson (Sorenson) and 

Paul A. Williams, Jr. (Williams) violated double jeopardy. We have 

combined these cases for appeal. We reverse. 

The DOR assessed tax on Sorenson's possession of cocaine after 

he pled guilty to criminal possession of cocaine. In a declaratory 

action, the Fourth Judicial District Court granted summary judgment 

in favor of Sorenson finding that Montana's Dangerous Drug Tax, 15 

15-25-101, MCA et seq., is a criminal penalty and violates double 

jeopardy . Likewise, after Williams pled guilty to criminal possession of 

marijuana, the DOR assessed tax on the marijuana Williams had in 

his possession. The DOR petitioned the First Judicial District 

Court to determine the constitutionality of Montana's Dangerous 

Drug Tax. The court found the Drug Tax violated double jeopardy. 

The DOR appeals these rulings and raises the following issues 

for our review: 

1. Is Montana's Drug Tax a multiple punishment which violates 

double jeopardy? 

2. Is Montana's Drug Tax Act unconstitutional on its face? 

Both Sorenson and Williams pled guilty to possession of 

dangerous drugs and received sentences and fines under Montana's 

criminal code. Subsequently, the DOR assessed tax under Montana's 

Dangerous Drug Tax Act, 55 15-25-101, MCA et seq. In both cases, 

the District Courts held Montana's Drug Tax violated double 
jeopardy. 

Is Montana's Drug Tax a multiple punishment which violates 

double jeopardy? 

The Drug Tax clearly violates double jeopardy if it is a 

criminal penalty. Double jeopardy protects citizens from a second 

prosecution for the same offense after acquittal; a second 

prosecution for the same offense after conviction; and multiple 

punishments forthe same offense. North Carolina v. Pearce (1969), 

395 U.S. 711, 717, 89 S.Ct. 2089, 23 L.Ed.2d 656. 

Next, the Drug Tax may violate double jeopardy if it is an 

excessive civil sanction. United States v. Halper (1989), 490 U.S. 

735, 109 S.Ct. 1892, 104 L.Ed.2d 487. In Hal~er, the Court stated 

that civil as well as criminal sanctions may constitute punishment 

and violate double jeopardy when the sanction, as applied to the 

individual, serves the goals of punishment rather than the remedial 

purposes of compensating the government for its loss. Hal~er at 

448, 109 S.Ct. at 1901-1902, 104 L.Ed.2d at 501-502. 

The DOR contends that double jeopardy does not attach to 

Montana's Drug Tax because the tax is an excise tax for raising 

revenue, not a criminal penalty or civil sanction. Appellees 

contend Montana's Drug Tax is a criminal penalty, and thus, 

violates double jeopardy. 

In United States v. Ward (1980), 448 U.S. 242, 100 S.Ct. 2636, 

65 L.Ed.2d 742, the Court held that a federal fine imposed for 

failure to notify officials of an oil spill was a civil sanction, 

not a criminal penalty, and did not violate double jeopardy. 

First, the Court determined that Congress intended to establish a 

3 
civil penalty. Next, using criteria established in Kennedy v. 

Mendosa (1963), 372 U.S. 144, 83 S.Ct. 554, 9 L.Ed.2d 644, it 

determined that the penalty was not so punitive in purpose or 

effect that the civil remedy was transformed into a criminal 

penalty. The Kennedy factors include whether the sanction: 

involves an affirmative disability or restraint, has historically 

been regarded as a punishment, requires a finding of scienter, 

promotes retribution and deterrence, applies to criminal behavior, 

has an alternate purpose, and is excessive in relation to the 

alternate purpose. Kennedy at 168-169, 83 S.Ct. at 567-568, 9 

The Supreme Court in Ward determined that Congress intended 

to establish a civil penalty. Ward at 250-251, 100 S.Ct. at 2642, 

65 L.Ed.2d at 750-751. Similarly, here the Montana Legislature 

clearly intended to create a tax not a criminal sanction. In 

Chapter 563, Montana Session Laws 1987, the following descriptive 

paragraphs precede the wording of the "Dangerous Drug Tax Act" 

itself: 

WHEREAS, dangerous drugs are commodities having 

considerable value, and the existence in Montana of a 

large and profitable dangerous drug industry and 

expensive trade in dangerous drugs is irrefutable: and 

WHEREAS, the state does not endorse the 

manufacturing of or trading in dangerous drugs and does 

not consider the use of such drugs to be acceptable, but 

it recognizes the economic impact upon the state of the 

manufacturing and selling of dangerous drugs; and 

WHEREAS, it is appropriate that some of the revenue 

generated by this tax be devoted to continuing 

investigative efforts directedtowardthe identification, 

arrest, and prosecution of individuals involved in 

conducting illegal continuing criminal enterprises that 

affect the distribution of dangerous drugs in Montana. 

THEREFORE, the Legislature of the State of Montana 
does not wish to give credence to the notion that the 

manufacturing, selling, and use of dangerous drugs is 

legal or otherwise proper, but finds it appropriate in 

view of the economic impact of such drugs to tax those 

who profit from drug-related offenses and to dispose of 

the tax proceeds through providing additional anticrime 

initiatives without burdening law abiding taxpayers. 

The intention of the Montana Legislature to enact a revenue 

producing tax on drugs is clear. Thus, we conclude Montana's 

Dangerous Drug Tax Act satisfies the first tier of the Ward 

analysis. 

Next, we analyze the tax under the Kennedv factors to 

determine whether the tax is so punitive in either purpose or 

effect as to negate the intention to create a tax. First, the tax 

does not impose any affirmative disability or restraint upon the 

taxpayer. The taxpayer is required to pay an assessment based on 

the quantity of drugs in his possession, and is not subject to 

incarceration or any other restraint of his liberty or privileges. 

Next, the tax has a remedial purpose other than promoting 

retribution and deterrence. Section 15-25-122, MCA, earmarks the 

use of the tax funds collected to defray the costs of drug abuse. 

The tax collected is used for such things as youth evaluations, 

chemical aftercare, chemical abuse assessments and juvenile 

detention facilities. The tax collected is based on the quantity 

of drugs possessed or stored by the taxpayer, and is not excessive 

in relation to the remedial purposes addressed in 5 15-25-122, MCA. 

Next, several state courts as well as federal courts have 

upheld the legitimacy of a tax on the transfer or possession of 

dangerous drugs. In United States v. Sanchez (1950), 340 U.S. 42, 

71 S.Ct. 108, 95 L.Ed 47, the Court determined that taxes on 

illegal activities are not necessarily penal or unconstitutional. 

5 
"A tax does not cease to be valid merely because it regulates, 

discourages or deters the activities taxed, even though the revenue 

raised by the tax is negligible." Sanchez at 44, 71 S.Ct. at 110, 

95 L.Ed. 49. Similarly, in State v. Berberich (Kan. 1991), 811 

P.2d 1192, and Harris v. State, Department of Revenue (Fla.App. 1 

Dist. 1990) , 563 So. 2d 97, both courts upheld the validity of their 

state marijuana taxes as legitimate exercises of taxing power, not 

improper penalties or fines. Thus, we conclude a tax on dangerous 

drugs has not been historically regarded as a punishment. 

Finally, the tax is based on possession and storage of 

dangerous drugs. Where possession gives rise to the tax, we 

conclude that the Act does not involve a finding of scienter. 

Respondents argue that the scienter factor is not material 

where the crime, criminal possession of dangerous drugs under Title 

45, MCA, similarly requires no scienter. Respondents claim double 

jeopardy is violated under the Act because the taxpayer is subject 

to both a criminal penalty and a tax for the same conduct. We 

disagree. 

In Helvering v. Mitchell (1938), 303 U.S. 391, 399, 58 S.Ct. 

630, 633, 82 L.Ed. 917, 922, the Court allowed both a civil and 

criminal penalty for the same act or omission. It held that double 

jeopardy did not attach to a tax fraud penalty where Congress had 

created a civil procedure for collecting the penalty and the 

amount of the penalty was remedial. Helvering at 401-404, 58 S. Ct. 

634-636, 82 L.Ed. 923-925. Here, as in Helverinq, the tax is 

remedial and collected through a separate administrative procedure. 

Thus, although the conduct of possessing dangerous drugs subjects 

the taxpayers to both a criminal penalty and a tax, we conclude 

6 
that it is not so punitive in purpose or effect that it negates the 

legislative intent to create a civil sanction. 

Williams contends Montana's Dangerous Drug Tax is derived from 

the taxpayer's criminal conviction. Thus, it is a criminal penalty 

and violates double jeopardy. Williams emphasizes that the tax is 

not imposed on persons in legal possession of drugs. Next he 

points out the tax may be collected as part of the fine imposed in 

a criminal conviction, or recovered from forfeited property. 

Finally, unlike other compliance based tax reporting, Title 15, 

MCA, does not provide for taxpayer compliance prior to arrest. 

Rather, under 15-25-113, MCA, law enforcement officers are 

required to report to the DOR the names of persons subject to the 

tax. We do not find merit in these contentions. 

Here, the assessment of the drug tax does not rest on a 

criminal conviction. As previously discussed, both civil and 

criminal penalties may attach to the same act or omission. 

Helverinq, 303 U.S. 399, 58 S.Ct. at 633, 82 L.Ed. 922. Further, 

we do not conclude that the method of reporting the tax due on the 

possession of dangerous drugs or the method of collecting the 

amount of tax authorized by statute or administrative rules 

transforms this tax into a criminal penalty. 

We conclude Montana's Dangerous Drug Tax is not derived from 

a criminal conviction. 

Both respondents contend Montana's Dangerous Drug Tax is a 

criminal penalty. However, in the alternative, if this Court finds 

the tax is not a criminal penalty, they contend it violates double 

jeopardy under Hal~er. In HalDer the Court held that a civil 

sanction violates double jeopardy when it serves the goals of 

7 
punishment rather than the remedial purposes of compensating the 

government for its loss. Hal~er 490 U.S. at 448, 109 S.Ct. 1901- 

1902, 104 L.Ed.2d at 501-502. In that case, Halper, a medical 

service manager submitted sixty-five inflated claims to medicare 

demanding a $12 payment on each claim, when the company was 

actually entitled to $3 per claim. Halper received a $2000 penalty 

for each false claim totalling $130,000. The Court concluded that 

the tremendous disparity between the government's damages of $585 

and the civil penalty of $130,000 served the goals of punishment 

and violated double jeopardy. Haluer, 490 U.S. at 452, 109 S.Ct. 

at 1904, 104 L.Ed.2d at 504. 

We do not find Haluer controlling. The court in HalPer 

limited its ruling to similar cases. It stated: "What we announce 

now is a rule for the rare case, where a fixed-penalty provision 

subjects a prolific but small-gauge offender to a sanction 

overwhelmingly disproportionate to the damages he has caused." 

Halper at 449, 109 S.Ct. at 1902, 104 L.Ed.2d at 502. Halper 

involved a civil sanction and a fixed penalty per offense which was 

not based on remedial costs. As mentioned, the penalty was $2000 

for each event regardless of how small the dollar amount was in 

terms of cost to the government. In contrast, the Montana 

Dangerous Drug Tax is an excise tax based on the quantity of drugs 

in the taxpayer's possession. 

We note that both District Courts held the tax was excessive 

and punitive, not remedial, because the DOR failed to provide a 

summation of the costs of prosecution and societal costs of drug 

use. However, unlike the civil sanction in Halper where such proof 

may be required, a tax requires no proof of remedial costs on the 

8 
part of the state. Commonwealth Edison Co. v. State of Montana 

(l98O), 189 Mont. 191, 615 P.2d 847. In Commonwealth this Court 

held that the state is not required to defend the validity of an 

excise tax by offering a summation of the costs of governmental 

benefits. Commonwealth, 189 Mont. at 207, 615 P.2d at 855-856. 

Finally, respondents contend the tax was excessive. Sorenson 

was assessed a tax of $200 per gram, or $4,216 for his possession 

of 21.08 grams of cocaine. Similarly, Williams was assessed a tax 

of $100 per ounce, or $1,260 for his possession of 12.6 ounces of 

marijuana. We do not conclude that this tax is excessive. It is 

neither a fixed penalty as in Halper, nor is the amount of tax so 

grossly disproportionate as to transform this tax into a criminal 

penalty which violates double jeopardy. We also note that the 

foregoing rates of tax on various drugs are comparable to those in 

other states and also comparable to the amounts in effect for many 

years during the effective period of the Federal Drug Tax Act which 

has now been repealed. 

We hold that Montana's Dangerous Drug Tax is not a multiple 

punishment and does not violates double jeopardy. 

I I 

Is Montana's Drug Tax Act unconstitutional on its face? 

The court in Williams held that Montana's Dangerous Drug Tax 

Act, on its face, violated the double jeopardy clause of the Fifth 

Amendment to the United States Constitution. We disagree. As 

stated previously, the tax is not a criminal penalty and does not 

rest on a criminal conviction. Further, under the Halper analysis 

the tax does not serve the goals of punishment. Neither is the tax 

excessive or grossly disproportionate to the harm suffered by the 

9 
government. Finally, the reporting procedures outlined in 5 15-25- 

113, MCA, do not relate the tax to a criminal conviction. Rather, 

they protect the taxpayer's Fifth Amendment right against selfincrimination. 

We hold Montana's Dangerous Drug Tax Act is constitutional on 

its face. 

Reversed. 

We Concur: /'-" 

,yA. - 

i / Chief Justice 

Justices 
Justice William E. Hunt, Sr., dissenting. 

I dissent. Once again the majority uses the club of the "drug 

crisis" to crack the shield of the Bill of Rights. Montana's Drug 

Tax Act clearly violates a constitutional right against double 

jeopardy through the use of multiple punishments. 

As the United States Supreme Court stated in HalRer, the 

labels of "criminal" and llcivil" are not of "paramount importance." 

United States v. Halper (1989), 490 U.S. 438, 447, 109 S. Ct. 1892, 

1901, 104 L. Ed. 2d 487, 501. To determine whether a civil penalty 

amounts to a criminal penalty "requires a particular assessment of 

the penalty imposed and the purposes that the penalty may fairly be 

said to serve." HalRer, 490 U.S. at 448. 

In HalRer, the United States Supreme Court held that: 

[Ulnder the Double Jeopardy Clause a defendant who 

already has been punished in a criminal prosecution may 

not be subjected to an additional civil sanction to the 

extent that the second sanction may not be fairly 

characterized as remedial, but only as a deterrent or 

retribution. 

HalRer, 490 U.S. at 448-49. Both Williams and Sorenson were 

previously convicted and punished before the DOR assessed the tax. 

Clearly, the facts of this case fit the mandate of HalRer because 

the Montana Drug Tax is a civil sanction which violates double 

jeopardy by serving the goals of punishment rather than the 

remedial purpose of compensating the government for its loss. 

Not only does the tax serve the goals of punishment, it fails 

to bear any rational relationship to the goal of restoring to the 

State its losses incurred when enforcing its drug laws, 
particularly when considering the excessive criminal fines imposed 

by § 45-9-101 through -127, MCA. In addition, the DOR failed to 

provide any evidence which would establish the societal cost of 

prosecuting these cases. Indeed, the majority bestows upon the DOR 

an unfettered license to impose an arbitrary, unequal, and unfair 

tax. 

Although there is evidence that the legislature intended to 

create a civil penalty, the purpose and effect of the statute is 

still punishment and deterrence. The Montana Drug Tax Act has 

previously been litigated in the federal system. As United States 

Bankruptcy Court Judge for the District of Montana, John L. 

Peterson, ruled: 

The punitive nature of the tax is evident here, because 

drug tax laws have historically been regarded as penal in 

nature, the Montana Act promotes the traditional aims of 

punishment -- retribution and deterrence, the tax applies 

to behavior which is already a crime, the tax allows for 

sanctions by restraint of Debtors' property, the tax 

requires a finding of illegal possession of dangerous 

drugs and therefore a finding of scienter, the tax will 

promote elimination of illegal drug possession, and the 

tax appears excessive in relation to the alternate 

purpose assigned, especially in the absence of any record 

developed by the State as to societal costs. Finally, 

the tax follows arrest for possession of illegal drugs 

and the tax report is made by law enforcement officers, 

not the taxpayer, who may or may not sign the report. 

All these aspects of the Drug Tax Act lead to the 

inescapable conclusion that it has deterrence and 

punishment as its purpose. 

Drummond, Trustee et al. v. Department of Revenue (1990), 8 MBR 

288. The Federal District Court affirmed the holding and reasoning 

of Judge Peterson. In re Kurth Ranch (D. Mont. April 23, 1991), 
The majority attempts to hide behind the veil of facts of 

these cases to justify that the tax imposed is reasonable and not 

excessive. In Judge Peterson's case, the DOR attempted to impose 

a tax assessment in excess of $800,000 on the bankrupt estate of 

the Kurths. The DOR levied a tax on drugs that were not even 

defined in the statute. Nor did the DOR provide any rational 

explanation regarding how it determined the value of the drugs 

seized. Judge Peterson correctly found that tax to be so grossly 

disproportionate as to transform it into a criminal penalty. He 

recognized quite clearly, as did State District Court Judge John S. 

Henson in Sorenson, State District Court Judge Jeffrey D. Sherlock, 

in Williams, and Federal District Court Judge Paul G. Hatfield, in 

affirming Judge Peterson, that a criminal penalty by any other name 

is still a criminal penalty. 

For these reasons I would hold that the Montana Drug Tax Act 

is unconstitutional on its face and would affirm the lower court's 

decision. 

/ 

Justice Terry N. Trieweiler concurs in the foregoing dissent 

of Justice William E. Hunt, Sr. 
July 21, 1992 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

R. Bruce McGinnis 

Dept. of Revenue 

Mitchell Bldg. 

Helena, MT 59620 

Clinton H. Kammerer 

Kammerer Law Offices 

101 E. Broadway, Ste. 200 

Missoula, MT 59802 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATEAOF MONTANA 

BY: &+-. 

Depu 
July 21, 1992 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

PAUL VAN TRICHT, Tax Counsel 

Department of Revenue 

Office of Legal Affairs 

Mitchell Building 

Helena, MT 59620 

Edmund F. Sheehy 

CANNON & SHEEHY 

P.O. Box 5717 

Helena, MT 59604 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA 

BY: 

Depu