Title: State v. Gulledge
Citation: 257 Kan. 915
Docket Number: 72,315
State: Kansas
Issuer: Kansas Supreme Court
Date: June 2, 1995

257 Kan. 915 (1995)
STATE OF KANSAS, Appellant,
v.
BARBARA GULLEDGE, Appellee.
No. 72,315

Supreme Court of Kansas.
Opinion filed June 2, 1995.
Joe Shepack, county attorney, argued the cause, and Robert T. Stephan attorney general, was with him on the brief for appellant.
Reid T. Nelson, assistant appellate defender, argued the cause, and Jessica R. Kunen, chief appellate defender, was with him on the brief for appellee.
Brian Cox, Legal Services Bureau, was on the brief for amicus curiae Kansas Department of Revenue.
The opinion of the court was delivered by
HOLMES, C.J.:
The State of Kansas appeals from an order of the district court dismissing a complaint against Barbara Gulledge a/k/a Barbara Jones for possession of marijuana in violation of K.S.A. 1993 Supp. 65-4127b and possession of marijuana without a tax stamp in violation of K.S.A. 79-5201 et seq. Based on Montana Dept. of Rev. v. Kurth Ranch, 511 U.S. ___, 128 L. Ed. 2d 767, 114 S. Ct. 1937 (1994), the district court found further prosecution of the complaint would constitute double jeopardy because a drug *916 tax had already been assessed and partially satisfied. This court has jurisdiction pursuant to K.S.A. 1994 Supp. 22-3602(b)(1) (appeal to Supreme Court from order dismissing complaint).
For the purposes of this appeal, the parties have stipulated to the following facts:
The docketing statement filed by the State asserts that the drug tax assessed against the defendant "was satisfied in full." The defendant filed a pretrial motion seeking dismissal of the criminal charges on the grounds that further prosecution after assessment and payment of the drug tax constituted double jeopardy under the United States and Kansas Constitutions. Following argument, the trial court granted the motion based upon the holding of the Supreme Court in Kurth Ranch.
The issue now before us may be stated as: Does assessment and payment of amounts allegedly owed under the Kansas Drug Tax Act constitute a criminal punishment for double jeopardy purposes *917 under the holding in Montana Dept. of Rev. v. Kurth Ranch, 511 U.S. ___, 128 L.Ed.2d 767?
Before turning to the Supreme Court's decision in Kurth Ranch and the position of the parties to this appeal, the relevant provisions of the Kansas Drug Tax Act and our decisions interpreting the act will be briefly reviewed.
The statutes imposing a tax on marijuana and controlled substances, commonly referred to as the Kansas Drug Tax Act (Act), were first adopted in 1987 and are codified at K.S.A. 79-5201 et seq. "Marijuana" is defined by reference to the appropriate subsections of K.S.A. 65-4101 and is included within the Act if possessed in violation of Kansas law. K.S.A. 1993 Supp. 79-5201(a). A "dealer" is any person who unlawfully acquires or possesses more than 28 grams of marijuana. K.S.A. 1993 Supp. 79-5201(c). K.S.A. 1993 Supp. 79-5202 imposes a tax on marijuana and other controlled substances and bases the rate of taxation on the weight of the substance in a dealer's possession. Marijuana is taxed at $3.50 per gram. K.S.A. 79-5203 provides for administration of the tax by the Director of Taxation and requires certain forms to be filled out at the time of payment of the tax.
K.S.A. 1993 Supp. 79-5204(a) prohibits a dealer from possessing marijuana unless the tax has been paid. Official stamps or labels are to be purchased from the Director of Taxation and affixed to the marijuana as evidence of payment. Each stamp is valid for three months after issuance. Any person may purchase the stamps without disclosing his or her identity. K.S.A. 1993 Supp. 79-5204(b). The tax is due immediately upon acquisition or possession of marijuana in the state. K.S.A. 1993 Supp. 79-5204(d). K.S.A. 1993 Supp. 79-5205(a), applicable here, allows the Director to assess the tax immediately upon learning it has not been paid. If payment is not immediately made after notifying the dealer of the tax, penalty and interest due, the Director may collect the amount due as provided in the income tax statutes. The taxpayer has 15 days to request a hearing regarding the assessment. K.S.A. 1993 Supp. 79-5205(b). Information obtained in compliance with the Act is confidential and may not be used against the dealer in any criminal *918 proceeding except proceedings involving taxes due under the Act. K.S.A. 79-5206.
K.S.A. 79-5208 establishes criminal and civil penalties. A dealer violating the Act is subject to a civil penalty of 100 percent of the tax in addition to payment of the tax itself. The Act makes distributing or possessing marijuana without affixing the appropriate stamps a crime, and upon conviction, the dealer may be sentenced to not more than five years imprisonment and/or payment of a fine not exceeding $10,000. The statute was amended in 1994 to provide that the crime is a severity level 10 felony. See K.S.A. 1994 Supp. 79-5208. The Act does not give a dealer immunity from criminal prosecution. K.S.A. 79-5209. Those legally possessing the drug, such as doctors, pharmacists, or hospitals, are exempted. K.S.A. 79-5210.
Although the instant case does not involve the constitutionality of the Act itself, three Kansas cases which have considered various constitutional attacks on the Act are instructive. The first case to consider the constitutional validity of the Act was State v. Durrant, 244 Kan. 522, 769 P.2d 1174, cert. denied 492 U.S. 923 (1989). In Durrant, the court held the Act does not violate the Fifth Amendment privilege against self-incrimination because all information obtained through compliance with the Act is confidential and may not be used as evidence in the prosecution for any crimes, other than enforcement of the Act itself. 244 Kan. at 535.
Next, the Court of Appeals in State v. Matson, 14 Kan. App.2d 632, 798 P.2d 488 (1990), rev. denied 249 Kan. 777 (1991), considered a defendant's claim that the drug tax was really a criminal penalty and as such violated his Fourteenth Amendment right to due process. In Matson, the court relied heavily on United States v. Sanchez, 340 U.S. 42, 95 L.Ed 47, 71 S. Ct. 108 (1950), where the United States Supreme Court upheld a federal statute (now repealed) that taxed the transfer of marijuana to a person who had not paid a special tax and registered. Sanchez recognized a tax may be valid even though it regulates, discourages, or deters the activity taxed. This principle applies even though the revenue obtained is negligible or the revenue purpose of the tax is secondary. 340 U.S.  at 44.
*919 After reviewing Sanchez, the court in Matson analyzed the legislative history of the Kansas Drug Tax Act:
Matson upheld the constitutionality of the statute "[b]ecause revenue collection is one of the objectives of the statute and because imposition of the tax does not expressly depend on the illegal nature of the sale or possession of marijuana." 14 Kan. App.2d at 640. The brief of amicus curiae Kansas Department of Revenue (KDR) states that over one-half million dollars in drug tax was collected in both fiscal year 1993 and fiscal year 1994. This court addressed an identical argument in State v. Berberich, 248 Kan. 854, 811 P.2d 1192 (1991). The court quoted heavily from Matson and relied on Sanchez in concluding the Kansas drug tax does not violate due process and is constitutionally valid. In relying on Sanchez, the court stated:
As indicated earlier, the defendant does not assert that the Act is unconstitutional on its face but contends that assessment and collection of the tax constitutes punishment which precludes, as a violation of the Double Jeopardy Clause, her criminal prosecution. The Kansas appellate courts have not specifically addressed whether assessment of the drug tax constitutes punishment for purposes of the Double Jeopardy Clause. The Fifth Amendment to the United States Constitution provides that no person shall "be subject for the same offense to be twice put in jeopardy of life or limb." This clause is applicable to the states through the Fourteenth Amendment. Benton v. Maryland, 395 U.S. 784, 794, 23 L. Ed. 2d 707, 89 S. Ct. 2056 (1969).
In State v. Cady, 254 Kan. 393, 867 P.2d 270 (1994), we described the effect and application of the Double Jeopardy Clause as follows:
We now turn to the issue before us. Did the assessment and collection of the Kansas drug tax constitute a criminal punishment which bars any further prosecution of the defendant as a violation of the Double Jeopardy Clause? The trial court held that it did, basing its determination on the decision in Kurth Ranch.
The United States Supreme Court in Kurth Ranch held that a tax on the possession of illegal drugs assessed after the State had *921 imposed a criminal penalty for the same conduct constituted a second punishment in violation of the Double Jeopardy Clause. Kurth Ranch considered the effect and application of the Montana Dangerous Drug Tax Act, which imposed a tax on the "possession and storage of dangerous drugs." The taxpayer was required to file a return within 72 hours of arrest. There was no obligation to file a return or pay any tax unless and until a taxpayer was arrested. The tax was to be collected only after any state or federal fines or forfeitures had been satisfied. The tax rate was either 10 percent of the drug's assessed market value or a specified amount per ounce ($100 per ounce for marijuana), whichever was greater. Tax proceeds were to be allocated between substance abuse programs and enforcement of drug laws. 128 L. Ed. 2d  at 773-74.
Under the facts of Kurth Ranch, a Montana district court convicted and sentenced six members of the Kurth family for drug crimes arising out of their operation of a marijuana farm. In a separate proceeding, the Montana Department of Revenue attempted to collect a tax on the marijuana. The defendants challenged the constitutionality of the assessment, and the lower courts found the assessment invalid under the Double Jeopardy Clause. In determining whether the assessment was subject to the constraints of the Double Jeopardy Clause, the United States Supreme Court analyzed whether the tax should be characterized as a punishment.
Initially, the Court recognized that while the unlawfulness of an activity does not prevent its taxation, "`there comes a time ... [when a] so-called tax ... loses its character as such and becomes a mere penalty with the characteristics of regulation and punishment.'" 128 L. Ed. 2d  at 778 (quoting Magnamo Co. v. Hamilton, 292 U.S. 40, 44, 78 L. Ed. 1109, 54 S. Ct. 599 [1934]). Next, the Court noted that "neither a high rate of taxation nor an obvious deterrent purpose automatically marks this tax a form of punishment," although those factors were consistent with a characterization of the tax as punishment. 128 L. Ed. 2d  at 779. The Court found the Montana tax was remarkably high, as a significant part of the assessment was more than eight times the drug's market value. Additionally, the Court found the deterrent purpose of the *922 tax was beyond question. However, the Court then focused on two "unusual features" of the Montana tax which set it apart from most taxes and which the Court relied upon in holding the tax violated the Double Jeopardy Clause.
First, the tax was conditioned upon the commission of a crime. The Court recognized that in Sanchez it had "relied on the absence of such a condition to support its conclusion that a particular federal tax was a civil rather than a criminal sanction." 128 L. Ed. 2d  at 780. The Court described the Montana tax:
The Court explained that taxes imposed on illegal activities are different from taxes with pure revenue raising purposes or mixed-motive taxes which are intended to deter an activity and raise money. The justifications for mixed-motive taxes do not apply to taxes based solely on illegal activity because revenue could as easily be raised by increasing the fine imposed upon conviction. 128 L. Ed. 2d  at 780.
The second unusual feature of the Montana tax was that, although it was purportedly a property tax on "the possession and storage of dangerous drugs," it was levied on goods the taxpayer neither owned nor possessed when imposed. 128 L. Ed. 2d  at 781. Because the tax was not assessed until and unless a taxpayer was arrested, the drugs presumably were already destroyed or no longer possessed by the taxpayer when the tax was imposed. The Court found this kind of tax "imposed on criminals and no others" departed so far from normal revenue laws as to become a form of punishment. 128 L. Ed. 2d  at 781. The Court concluded: "Taken as a whole, this drug tax is a concoction of anomalies, too far removed in crucial respects from a standard tax assessment to escape characterization as punishment for the purpose of Double Jeopardy analysis." 128 L. Ed. 2d  at 781.
Because the tax was a punishment and imposed in a separate proceeding, the Court held it placed the defendants in double jeopardy. *923 The Court concluded the tax must be imposed during the first prosecution or not at all. 128 L. Ed. 2d  at 781-82. It stated: "Montana no doubt could collect its tax on the possession of marijuana, for example, if it had not previously punished the taxpayer for the same offense, or, indeed, if it had assessed the tax in the same proceeding that resulted in his conviction." 128 L. Ed. 2d  at 778. The Court, however, reserved the question "whether an ostensibly civil proceeding that is designed to inflict punishment may bar a subsequent proceeding that is admittedly criminal in character." 128 L. Ed. 2d  at 780 n. 21. Likewise, in view of the result hereinafter reached, we do not need to consider that question. For a critical analysis of Kurth Ranch, see The Supreme Court  Leading Cases, 108 Harv. L. Rev. 139, 171 (1994).
The question for this court is whether the Kansas drug tax has such punitive characteristics that it is subjected to the constraints of the Double Jeopardy Clause. Like the Montana tax, the Kansas tax has a primarily deterrent purpose and the Kansas tax rate of approximately $100 per ounce is comparable to the Montana rate, which was more than eight times the market value of a significant portion of the drugs. 128 L. Ed. 2d  at 779 n. 17. It should also be noted that the tax upheld in Sanchez was $100 per ounce. Additionally, as amicus curiae points out, there is no evidence in this case regarding the relationship of the assessment to the market value of the marijuana or any other benchmark. The market value can vary depending on a number of factors, such as quality, supply and demand, and volume sold. In Kurth Ranch, Chief Justice Rehnquist notes in his dissent that the majority focuses on the value of the low-grade "shake" and "glosses over" the fact that the tax imposed on the higher-quality "bud" amounted to only 80 percent of its market value. 128 L. Ed. 2d  at 785-86. In the present case there is simply no evidence on this point. The defendant also argues the tax rate is high because the tax stamps are valid for only three months. Presumably, the short life span of the tax stamps reflects the legislature's recognition of the rapid turnover rate of illicit drugs. Nevertheless, assuming that the rate is high, the facts of "a high tax rate and deterrent purpose ..., in and of themselves, *924 do not necessarily render the tax punitive." 128 L. Ed. 2d  at 779.
In Kurth Ranch, the Court, in finding a double jeopardy violation, relied upon certain unusual features of the Montana drug tax statutes which set them apart from most tax statutes. Absent these unusual features the Court, apparently, would not have found the Montana tax violated the Double Jeopardy Clause.
The initial "unusual feature" of the Montana tax was that it was conditioned on the commission of a crime. Although the Kansas drug tax applies only to those who unlawfully possess more than minimum quantities of marijuana or other controlled substances, unlike the Montana tax, assessment of the Kansas tax does not directly rest on criminal conduct. First, the tax does not apply to everyone who illegally possesses drugs. It only applies to those possessing illegal drugs in larger quantities in response to legislative concern that this flourishing underground economy not operate on a tax-free basis. In Matson, the defendant contended the Kansas tax was "in reality a criminal penalty and as such ... an unconstitutional denial of due process under the Fourteenth Amendment." 14 Kan. App.2d at 637. After recognizing that the primary purpose of the tax was to combat drug usage, the court went on to hold: "Because revenue collection is one of the objectives of the statute and because imposition of the tax does not expressly depend on the illegal nature of the sale or possession of marijuana, we hold that the statute is constitutionally valid under the United States Constitution." 14 Kan. App.2d at 640.
In Berberich, the defendant requested that we overrule the holding in Matson, making the same argument that the tax constituted a criminal penalty. We declined to do so. 248 Kan. at 863-68.
The Montana tax, on the other hand, was not only expressly dependent upon the commission of a crime and the illegal nature of the drugs, it did not even give rise to taxation until "after the taxpayer has been arrested for the precise conduct that gives rise to the tax obligation in the first place. Persons who have been arrested for possessing marijuana constitute the entire class of taxpayers subject to the Montana tax." 128 L. Ed. 2d  at 780. The *925 Kansas tax is levied on the possession of drugs regardless of whether the taxpayer has been arrested for criminal conduct. The tax is due immediately upon acquisition or possession of marijuana in the state; criminal prosecution is not required. Significantly, the taxpayer is not required to expose his or her identity to comply with the tax, and any information obtained through compliance with the Act is confidential and cannot be used against the taxpayer in a criminal proceeding other than enforcement of the Act itself. Nor are law enforcement officers required to report drug arrests to KDR. The Director of Taxation assesses the tax based on personal knowledge or information available.
The second "unusual feature" of the Montana tax, relied upon by the Court, was that it was a property tax on confiscated goods which was only levied on the taxpayer after the taxpayer no longer owned or possessed the drugs. The Court explained:
The Kansas tax is due and owing upon acquisition or possession of a specified amount of unlawful drugs in the state and is intended to be assessed when the taxpayer is in possession of the property.
The Court of Appeals in Matson, and this court in Berberich, determined that the Kansas drug tax did not impose a criminal penalty on the taxpayer/criminal defendants. The issue on appeal in the present case is whether the recent decision in Kurth Ranch requires a different result. The defendant, of course, asserts that it does, while the State takes the position that the narrow holding in Kurth Ranch, based upon "unusual features" of the Montana tax not present in our statutes, does not require a finding that the Kansas tax constitutes a criminal penalty for double jeopardy purposes.
*926 In response to Kurth Ranch, other jurisdictions have faced similar arguments. In Milner v. State, No. 1940550, 1994 WL 740807 (Ala. Civ. App. Dec. 2, 1994), rev. denied March 3, 1995, the court summarily concluded that the two unusual features of the Montana tax did not exist in Alabama's drug tax and the holding in Kurth Ranch had no application. The drug tax was levied on the possession of drugs, regardless of whether criminal charges were filed against the taxpayer. The second feature was distinguishable because the Alabama tax was an excise tax on the dealer and not a property tax on confiscated goods. The Alabama tax statutes are similar to the Kansas statutes. Milner had been arrested in August 1992 for possession of marijuana and subsequently pled guilty to the federal criminal charges in September 1993. In December 1992 the Alabama Department of Revenue executed a final jeopardy tax assessment against Milner in excess of $31,000 for failure to purchase and affix drug stamps to the same marijuana that was the basis of the federal criminal charges. The Alabama court reviewed two earlier cases, Hyatt v. State Dept. of Revenue, 597 So. 2d 716 (Ala. Civ. App. 1992), and Briney v. State Dept. of Revenue, 594 So. 2d 120 (Ala. Civ. App. 1991), which had upheld the tax against double jeopardy arguments, and went on to state:
In a recent and more thoroughly considered opinion, the Iowa Supreme Court addressed the issue now before us in a nearly identical case. In State v. Lange, ___ N.W.2d ___ (No. 68/93-1028, filed April 26, 1995), the defendant was arrested for the manufacture of marijuana after two potted marijuana plants were found in his apartment following a consensual search of the premises. There were no drug tax stamps affixed to either plant. The State filed an information against Lange charging him with manufacture of a controlled substance. Several months later, the State filed a second complaint accusing Lange of failure to affix a drug tax stamp to the marijuana which formed the basis for the first charge.
Lange was found guilty on the charge of manufacturing marijuana prior to any trial on the drug tax stamp charge. At a bench trial the court found Lange guilty of the drug tax stamp charge, but Lange challenged the entry of judgment on his conviction, asserting that as he had paid $1,085 in drug tax assessments prior to trial any subsequent punishment would violate his right against double jeopardy. His challenge was denied, and the court imposed a sentence on the drug tax stamp charge. Lange appealed asserting several issues, including double jeopardy based upon Kurth Ranch.
Because of the similarity in the facts, statutes, arguments, and issues in Lange and our present case, we quote at length from the Iowa decision. The court stated:
Id. at ___, 114 S. Ct.  at 1947, 128 L. Ed. 2d  at 780.
We recognize at least two state courts in other jurisdictions have concluded differently; however, those decisions are currently pending review. We agree with the Iowa court's analysis and reasoning. The Kansas Drug Tax Act is significantly different than the Montana tax Act considered in Kurth Ranch. The Kansas Act does not contain the "unusual features" upon which the court relied in Kurth Ranch, and we conclude that the Kansas drug tax does not impose a criminal penalty for double jeopardy purposes. We adhere to the earlier decisions in Matson and Berberich. The trial *931 court erred in finding further prosecution of the complaint against the defendant would subject her to double jeopardy.
The judgment is reversed, and the case is remanded to the district court for further proceedings.