Tax on Marijuana and Controlled Substances (Drug Tax program)

In 1987, the Kansas Legislature passed laws imposing an excise tax on the illegal possession and/or distribution of marijuana and controlled substances. The laws state that any person who illegally possesses and/or distributes these substances in quantities exceeding a threshold amount is a “drug dealer.” The threshold amount is designed to avoid taxing the casual user of these substances. The tax must be paid by the “dealer” by purchasing the proper amount of drug tax stamps from the Kansas Department of Revenue and then affixing them to the packaging of the illegal drugs as proof of payment of the tax as soon as the “dealer” comes into possession of the illegal substance(s). The stamps may be purchased anonymously at the Department’s Taxpayer Assistance Center in Topeka. The stamps are valid for three months after purchase. A “dealer” is not required to give his/her name or address when purchasing stamps and the Department is prohibited from sharing any information about the stamp purchased with law enforcement or anyone else. Purchasing the drug tax stamps does not make possession of marijuana or controlled substances legal.

The tax rates are found in K.S.A. 79-5202.

If any state or local law enforcement officer finds a person in possession of more than the threshold amount of marijuana or controlled substance without the correct quantity of drug tax stamps affixed, the officer may inform the Department of Revenue. Possession may be either actual (on the person of the “dealer”) or constructive (located in a place controlled by the “dealer”). Based on that information, the Department may assess the tax and a 100% late penalty against the “dealer” and demand immediate payment. If the “dealer” is not able to pay the full amount of the assessment immediately, the Department may immediately seize property owned by the “dealer” sufficient to pay the tax and penalty. If more than one person has control of the substance, the Department may jointly assess each of the persons involved and collect the assessment from any of those persons. However, the amount of the assessment may only be collected once.

The law also makes it a felony crime if the “dealer” is found in possession of these illegal substances without the proper amount of current tax stamps affixed. Prosecution for this crime is the responsibility of the local county attorney or district attorney and is a completely separate legal matter from the assessment and collection of the tax and penalty by the Department of Revenue. The Department is not bound by the outcome of any criminal proceeding for tax purposes regarding the illegal drugs.

If a “dealer” disagrees with a drug tax assessment made by the Department of Revenue, the “dealer” may file a written appeal with the Department within 15 days of when the Notice of Assessment was personally served on the “dealer” or placed in the U.S. Mail addressed to the “dealer’s” last known address. As part of the appeal process, the “dealer” is entitled to a hearing before a Department hearing officer designated by Secretary of Revenue. If the “dealer” disagrees with the ruling of the hearing officer, that ruling may be appealed to the Kansas Board of Tax Appeals.