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WPD wants to use $40,000 in NC drug tax to start ‘law enforcement museum’

Wilmington Police Department headquarters
Benjamin Schachtman
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WHQR
The Wilmington Police Department headquarters on Bess Street.

Each year, the state receives millions of dollars from the unauthorized substances tax, levied on illegal drugs, liquor, and mixed drinks — three-quarters of that money goes back to law enforcement agencies whose investigations lead to tax levies.

On Tuesday, August 16, Wilmington City Council will vote on an ordinance that will allow the Wilmington Police Department to use $40,000 of “drug tax revenue” to create the “Wilmington Police Department Law Enforcement Museum.”

WPD hopes the museum will “showcase the history of the Department,” according to the proposed ordinance.

“For years WPD has collected artifacts. The items are currently stored in a room away from employees and the public. WPD wants to proudly display these items and tell the history of our agency and our service to our community,” according to the ordinance.

WPD plans to locate the museum on the first floor of the department’s headquarters on Bess Street and hopes visitors will visit both the museum and the Memorial for Fallen Officers, which is located outside of the headquarters.

The Unauthorized Substance Tax program

The North Carolina Drug Tax Revenue program, also known as the unauthorized substances tax, is a levy on illegal drugs like cocaine, marijuana, and heroin and illicit alcohol products like unlicensed liquor — that is, moonshine — and mixed drinks served without the appropriate license.

Even though these are illegal products, the state’s Department of Revenue (NCDOR) still requires stamps to be purchased within 48 hours of acquiring the illegal goods, to prove the tax has been paid.

While some have pointed to the potential absurdity of charging a tax on an item that is illegal to possess, purchase, or sell, NCDOR does make provisions to avoid entrapment. NCDOR does not require those purchasing the tax stamps to identify themselves and keeps any information about tax stamp purchasers confidential.

“Information obtained pursuant to the unauthorized substances tax law is confidential and may not be disclosed or, unless independently obtained, used in a criminal prosecution other than a prosecution for a violation of the unauthorized substances tax law. Revenue employees who divulge information regarding stamp purchasers to law enforcement shall be guilty of a Class 1 misdemeanor,” according to NCDOR.

According to a 2019 paper from the University of North Carolina School of Government, the state has annually brought in between $6 million and $11 million in recent years. By law, 25% of that goes to the state, and 75% goes to the “state or local law enforcement agency whose investigation led to the assessment.”

But only a fraction of a percent of that funding comes from people who actually pay the tax on illegal goods. Just over a hundred people had purchased tax stamps since the program started in the 1990s compared to 5,000 or more tax delinquency cases processed by NCDOR every year, according to a 2010 WRAL interview. The SOG note that amount may have gone up, but not likely by much.

The vast majority of the unauthorized substance tax program revenue comes from charging back taxes, penalties, and interest — which can allow the state to garnish people’s wages and repossess property until the tax debt is paid up.

Critics, including the left-leaning think tank NC Policy Watch, have noted that stamps are “nearly impossible” to actually purchase. Writing for the SOG, former state and federal prosecutor Jonathan Holbrook was more measured, but did note that process was confusing. In particular, he noted the mail-in process required providing personal information:

“Both forms ask the applicant to fill out his or her name, phone number, and mailing address. (After all, how else will they send the stamps back to you?) Then the form cites to the statute that says a person is not required to give his or her name, address, or any other identifying information in order to buy stamps,” Holbrook wrote.

NCDOR now clarifies on its website that anonymous tax stamp purchases can only be made in person at service centers.

Holbrook added that the mail-in option made it “difficult to see how ordering stamps through the mail (anonymously or otherwise) would enable a dealer to fully comply” with the state law’s requirement that the tax be paid and the stamp affixed within 48 hours.

For those who do wish to pay the tax on illegal and illicit products, the NCDOR provides the following rate guide:

NCDOR tax rate for illegal and illicit substances
NCDOR
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WHQR

Ben Schachtman is a journalist and editor with a focus on local government accountability. He began reporting for Port City Daily in the Wilmington area in 2016 and took over as managing editor there in 2018. He’s a graduate of Rutgers College and later received his MA from NYU and his PhD from SUNY-Stony Brook, both in English Literature. He loves spending time with his wife and playing rock'n'roll very loudly. You can reach him at BSchachtman@whqr.org and find him on Twitter @Ben_Schachtman.