Pubdate: Sat, 08 Sep 2007 Source: Knoxville News-Sentinel (TN) Copyright: 2007 The Knoxville News-Sentinel Co. Contact: http://www.knoxnews.com/ Details: http://www.mapinc.org/media/226 Author: Jamie Satterfield Bookmark: http://www.mapinc.org/coke.htm (Cocaine) STATE 'CRACK TAX' STRUCK DOWN BY COURT OF APPEALS You can tax sin, but you can't tax crime. So concludes the state Court of Appeals in striking down as unconstitutional the state's Unauthorized Substance Tax Act, more commonly known as the "crack tax." In an opinion delivered Friday by Appellate Judge Sharon G. Lee, the court joined a growing list of chancellors across the state in declaring the crack tax unconstitutional. But it did so from an entirely different angle, thus sidestepping what has been the primary legal beef with the tax. Rather than address whether the tax violates an alleged drug dealer's rights to due process and against self-incrimination, the court instead determined that the tax itself is unconstitutional. "Because it seeks to levy a tax on the privilege to engage in an activity that the Legislature has previously declared to be a crime, not a privilege, we must necessarily conclude that the drug tax is arbitrary, capricious and unreasonable and, therefore, invalid under the Constitution of this state," Lee wrote. The ruling comes in the case of construction worker Steven Waters. Waters was nabbed in April 2005 in a reverse sting operation by the Knox County Sheriff's Office. Ten days later, the state Department of Revenue slapped him with a tax bill of more than $55,000, including penalty and interest of more than $5,000 for not voluntarilypaying the tax by buying an "excise" sticker. The agency filed a lien on his Lenoir City home and later confiscated $4,000 from his bank account -- all this before Waters had even appeared in court to face the charges. In fact, he still hasn't been tried. Knoxville attorney Phil Lomonaco appealed, arguing that the crack tax was unconstitutional. Loudon County Chancellor Frank V. Williams III agreed, opining that the tax violated Waters' right against self-incrimination and the right to due process. Williams' opinion mirrored that of a Davidson County chancellor who had heard an appeal by Knoxville attorneys James A.H. Bell and Richard Holcomb on behalf of admitted Jefferson County pot supplier Jeremy Robbins. The state also appealed that ruling. The appellate court has not yet ruled on Robbins' case, but its constitutional claims mirror exactly those in Waters' case. Holcomb and Bell have a third case pending in Davidson County. Even though Friday's opinion did not address the constitutionality of imposing a tax on a crime alleged but not yet proven, Lomonaco was pleased. "I think it's a just decision," he said. "The tax is not one that should be on the books." The tax was passed in 2005 and was largely painted as a sin tax akin to those levied against cigarettes and alcohol. Drug dealers would be expected to voluntarily purchase an excise sticker on their illegal wares, with the amount of the tax determined by the weight of the drugs. Most people laughed off the measure since few expected drug dealers to voluntarily pony up. But the Department of Revenue wasn't waiting for voluntary compliance. Agents worked closely with drug investigators, hitting drug suspects with tax bills within hours or days of arrest. The agency has collected more than $4 million so far. The tax has been under legal attack for more than a year now, but the agency has continued its collection efforts. It was not immediately clear Friday whether the state Attorney General's Office would advise the Department of Revenue to stop collecting the tax. "Our office is reviewing the opinion," said AG's Office spokeswoman Sharon Curtis-Flair. "We have 60 days to file an appeal." Bell responded, "The only surprise development in this entire thing is the commissioner of revenue is operating under the illusion that these opinions don't exist and the agency continues to exercise their apparent authority." According to Friday's opinion, the crack tax was nonsensical on its face. "The tax applies only to persons in unauthorized possession of substances which the Legislature has declared to be illegal," Lee wrote. "However, the Legislature through the drug tax now seeks to tax the possession of these substances upon the premise that the possession of such is a privilege." Lomonaco said Waters will take his criminal case to trial in October. The attorney contends Waters had developed a cocaine habit but was not a dealer. He said Knox County Sheriff's Office undercover agents made repeated offers to sell Waters a kilogram of the drug. Each time he rebuffed the offer, the agents lowered the price until it became "a deal too good to pass up," the attorney said. Friday's ruling came at a good time for Bell, who had spent the past few days trying to convince people that it was Dandridge attorney James W. Bell who was slugged by a client in court this week and not him. James A.H. Bell, who has offices in Knoxville and Sevierville, is listed as one of the nation's top criminal defense lawyers, so an erroneous television report linking him to the courtroom fracas drew calls from across the country. He is often confused with James W. Bell, who is several years his senior and whose practice is far more limited. The two are not related. - --- MAP posted-by: Richard Lake