Opinion ID: 1316238
Heading Depth: 1
Heading Rank: 6

Heading: Punitive characteristics and effects.

Text: We note initially that the Nevada CSA is exclusively applicable only to illegal activities, and the behavior to which it applies is already a crime. See Hudson, 522 U.S. at 99, 118 S.Ct. 488 (quoting Kennedy, 372 U.S. at 168, 83 S.Ct. 554). For example, the preamble to the CSA describes the provision as: AN ACT relating to controlled substances; requiring illegal dealers in controlled substances to register with the department of taxation; imposing a tax on illegally sold controlled substances; providing for the confidentiality of certain information submitted by dealers; providing a penalty; and providing other matters properly relating thereto. See 1987 Nev. Stat., ch. 717, at 1737. Moreover, any person lawfully in possession of a controlled substance is specifically exempted from the tax. See NRS 372A.060(1). Thus, as in Kurth Ranch, Nevada's tax in substantive and practical effect is conditioned on the commission of a crime. Ursery, 518 U.S. at 282, 116 S.Ct. 2135. As the Supreme Court has observed, this is significant of penal and prohibitory intent. Kurth Ranch, 511 U.S. at 781, 114 S.Ct. 1937 (quoting United States v. Constantine, 296 U.S. 287, 295, 56 S.Ct. 223, 80 L.Ed. 233 (1935)). Unlike the Montana tax at issue in Kurth Ranch, however, the Nevada tax is due and payable prior to or upon the occurrence of the taxable activity, rather than upon an arrest for that activity. Under Nevada's CSA, a dealer must purchase and affix revenue stamps to all illegal drugs the dealer sells. NAC 372A.020. Thus, theoretically at least, the Nevada tax is not necessarily exacted only after the taxpayer has been arrested for the conduct giving rise to the tax obligation. Rather, the tax is broadly applicable to any person who unlawfully sells, offers to sell, or possesses with the intent to sell a controlled substance. See NRS 372A.070(1). Further, Nevada's CSA provides for anonymous payment and specifically precludes use of tax information in criminal prosecutions. Illegal drug dealers are not required to give a name, address, social security number or other identifying information, see NRS 372.070(3); information obtained from a dealer who registers or pays the tax is confidential, see NRS 372A.080(1); no criminal prosecution may be initiated on the basis of such information, see NRS 372A.080(2); and no such information is admissible in a criminal prosecution unless the information was independently or inevitably would have been discovered, see NRS 372A.080(3). It is these features which primarily distinguish our state's statutory scheme from the Montana scheme at issue in Kurth Ranch. We recognize that other courts have distinguished Kurth Ranch and have rejected double jeopardy challenges to statutory schemes similar to Nevada's on the basis of these distinctions. See, e.g., Com. v. Bird, 979 S.W.2d 915 (Ky.1998), cert. denied, 526 U.S. 1145, 119 S.Ct. 2019, 143 L.Ed.2d 1031 (1999); Covelli v. Commissioner of Revenue Servs., 235 Conn. 539, 668 A.2d 699 (1995), vacated and remanded, 518 U.S. 1031, 116 S.Ct. 2577, 135 L.Ed.2d 1092, aff'd after remand, 239 Conn. 257, 683 A.2d 737 (1996), cert. denied, 520 U.S. 1174, 117 S.Ct. 1445, 137 L.Ed.2d 551 (1997); Milner v. State, 658 So.2d 500 (Ala.Civ.App.1994); State v. Lange, 531 N.W.2d 108 (Iowa 1995); State v. Gulledge, 257 Kan. 915, 896 P.2d 378 (1995); McMullin v. South Carolina Dept. of Rev. & Taxation, 321 S.C. 475, 469 S.E.2d 600 (S.C. 1996). We conclude, however, that such constitutional distinctions based on the pretense that dealers may prepay taxes are unpersuasive and elevate form over substance and practicality. As a practical matter, it will be the rare circumstance indeed where a dealer in illegal drugs will register and tender prior payment of taxes due under Nevada's CSA, particularly where, as here, the high rate of taxation appears even more remarkable than that assessed against the Kurth Ranch taxpayers. [6] As Chief Justice Rehnquist noted in his dissent in Kurth Ranch: Because the activity sought to be taxed is illegal, individuals cannot be expected to voluntarily identify themselves as subject to the tax. Kurth Ranch, 511 U.S. at 788 n. 2, 114 S.Ct. 1937 (Rehnquist, C.J., dissenting). We are not persuaded that these essentially illusory, anonymous payment provisions constitute credible constitutional bases for distinguishing Nevada's CSA from the provision addressed in Kurth Ranch. Instead, we conclude that the similarities between Nevada's tax and the Kurth Ranch tax are more compelling than the differences. We agree with those courts that expressly or implicitly recognize that, realistically, imposition of a tax like Nevada's will follow only after a dealer is apprehended and subject to arrest and that double jeopardy concerns are indeed implicated where such taxation is expressly limited to the unlawful drug activity. See, e.g., Lynn v. West, 134 F.3d 582 (4th Cir.) (finding drug tax punitive although double jeopardy question not at issue), cert. denied, 525 U.S. 813, 119 S.Ct. 47, 142 L.Ed.2d 36 (1998); Commissioner of Revenue v. Mullins, 428 Mass. 406, 702 N.E.2d 1 (1998) (holding that revenue stamp tax on controlled substances is punishment for double jeopardy purposes); Brunner v. Collection Div. of Tax Com'n, 945 P.2d 687 (Utah 1997) (same); Wilson v. Department of Revenue, 169 Ill.2d 306, 214 Ill.Dec. 849, 662 N.E.2d 415 (1996) (same); Bryant v. State, 660 N.E.2d 290 (Ind.1995) (Indiana controlled substance tax constitutes punishment for double jeopardy purposes), cert. denied, 519 U.S. 926, 117 S.Ct. 293, 136 L.Ed.2d 213 (1996); see also People v. Maurello, 932 P.2d 851 (Colo.Ct. App.1997) (addressing double jeopardy concerns of Colorado drug tax that did not contain confidentiality or anonymity provisions and that did not prohibit use of drug information in criminal prosecution). Thus, we conclude that, as in Kurth Ranch, Nevada's CSA hinges on the commission of a crime and realistically, will normally be exacted only after the taxpayer is apprehended and subject to arrest for the same conduct giving rise to the tax obligation. We have assessed the remaining factors identified in Kurth Ranch, Ursery, and Hudson, and are persuaded by the clearest proof that the tax assessed against Desimone was the functional equivalent of a criminal prosecution. First, as noted above, the Nevada tax is at least as high as the tax at issue in Kurth Ranch. Second, it has an obvious deterrent purpose and clearly promote[s] the traditional aims of punishment-retribution and deterrence. [7] Hudson, 522 U.S. at 99, 118 S.Ct. 488 (quoting Kennedy, 372 U.S. at 168, 83 S.Ct. 554). Third, its alternative function of raising revenue could be equally well served by increasing the fine imposed on illegal drug transactions. Id. at 115, 118 S.Ct. 488 (Breyer, J., concurring). Fourth, in light of the exceedingly high taxation rate and the improbability that a taxpayer will possess the contraband goods when the tax and penalties are levied, we conclude that the Nevada tax depart[s] radically from `normal revenue laws.' Id. We conclude that, taken as a whole, Nevada's tax in practice and effect is a concoction of the same anomalies and unusual features that the Court found in Kurth Ranch to be too far removed in crucial respects from a standard tax assessment to escape characterization as punishment for the purpose of double jeopardy analysis. Kurth Ranch, 511 U.S. at 783, 114 S.Ct. 1937.