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Defenders of Justice
Justice Circle Recently changed state tax law provides relief from old debt for certain taxpayers, including qualifying individuals who are assessed the Unauthorized Substance Tax, commonly known as the Drug Tax.
If you or someone you know owes a drug tax debt that is 10 years old or older, you can confirm with the NC Department of Revenue that your debt has been forgiven:
NC Department of Revenue: 1-919-707-7596
What is the NC Drug Tax?
The NC Drug Tax is a statutory relic from the War on Drugs, extracting hundreds of thousands of dollars from low-income communities and communities of color each year. Under state law, a person in possession of unauthorized controlled substances is required to pay a tax based on the amount and type of the substance. In order to pay this excise tax, an individual is expected to purchase stamps at a local Department of Revenue office. In practice, little to no money is generated from stamp sales because virtually no one, besides stamp collectors, purchases the stamps.
Once someone is assessed the drug tax, the state uses all means available — such as taking money from a person’s bank account, seizing and selling a person’s personal and real property, or garnishing a person’s wages — to collect the back taxes, penalties, and interest. A person can be assessed the drug tax even if the associated criminal charges are dismissed or result in a “not guilty” verdict by the court. Statewide, over four thousand people a year, are exposed to thousands in back taxes, interest, and penalties. The average assessed drug tax is $8,872, which can be a major financial burden for individuals and families living in poverty, particularly Black people.
What is the impact of the new law?
The updated law provides limited relief from the drug tax, removing a major hurdle to gaining meaningful employment, obtaining property, and maintaining a bank account. This allows many North Carolinians to move on with their lives.
N.C. Gen. Stat. 105-241.24, which was created in Senate Bill 174/ S.L. 2023-12, sets a 10-year statute of limitations for the enforcement of tax debts. The 10-year enforcement window starts once the tax becomes collectible. After the statute of limitations has expired, debt will be eliminated and the state can no longer seek enforcement of the debt through mechanisms such as garnishing wages, seizing property, or withdrawing money.