Examining the NC Drug Tax Law: Why Reform Is Necessary for Justice-Impacted
Communities
In North Carolina, a little-known law continues to impose financial penalties on individuals already impacted by the justice system. Commonly referred to as the NC
Drug Tax Law, or the Unauthorized Substances Tax, this policy has been in place since 1990.
Despite its low public profile, it has had a significant impact on thousands of North
Carolinians—particularly those from marginalized communities who are trying to rebuild their
lives after contact with the justice system.
What Is the NC Drug Tax Law?
The NC Drug Tax Law requires individuals who possess certain illegal substances including marijuana, cocaine, or moonshine to pay a state tax on those substances. This tax must be paid
anonymously, and upon payment, the state issues tax stamps as proof. Importantly, paying the tax
does not legalize the possession of these substances or prevent criminal charges. It is simply an
additional, civil financial penalty.
Most people are unaware of the law until they are charged with drug possession and are
told they owe thousands of dollars in unpaid taxes, interest, and penalties. In practice, few, if any,
individuals voluntarily purchase the stamps. Instead, the law is largely enforced after arrest, with
the state seeking back taxes and often seizing property to satisfy the debt.
What Are the Tax Rates?
The tax rates imposed under the NC Drug Tax Law are not based on street value or income,
but rather on quantity. These rates are high and can result in severe financial penalties, especially
when multiple charges are involved. The following are the current tax rates:
Marijuana:
• $3.50 per gram (approximately $99 per ounce)
• $200 per gram for stems and stalks not sold with the leaves or flowers
Cocaine:
• $50 per gram
Crack Cocaine:
• $50 per gram
Methamphetamine:
• $200 per gram
Heroin:
• $200 per gram
Illicit Spirituous Liquor (e.g., moonshine):
• $31.70 per gallon
Illicit Mixed Beverages:
• $12.80 per gallon
Other Controlled Substances (not listed above):
• $50 per 10 dosage units (or per gram, if not sold in units)
These tax amounts accumulate quickly and can lead to tax assessments in the tens or even
hundreds of thousands of dollars, particularly when large quantities are involved or multiple
substances are seized.
The Law’s Impact
Over the past three decades, the NC Department of Revenue has collected tens of
millions of dollars under this statute. A portion of the revenue is distributed to local law
enforcement agencies, creating potential financial incentives for aggressive enforcement.
However, its broader impact is troubling. The law disproportionately affects individuals
who are already facing criminal charges, adding another layer of financial burden. These
penalties are especially harmful to low-income individuals, many of whom are striving to
reintegrate into their communities and support their families.
Why the Law Is Controversial
There are several reasons why advocates, legal experts, and community organizations have
called the law into question:
• Constitutional concerns: Requiring individuals to self-report illegal activity—even
anonymously—raises concerns about self-incrimination and due process.
• Double punishment: The drug tax functions as an additional civil penalty on top of
criminal prosecution, which many argue is duplicative and unfair.
• Disproportionate impact: Communities of color and economically disadvantaged
individuals are more likely to be targeted under drug laws and to bear the brunt of these financial penalties.
• Minimal voluntary compliance: The law’s stated function as a tax tool is questionable,
given that almost no one uses it proactively. It functions more as a punitive measure than
a fiscal policy.
Why Reform or Repeal Is Needed
For individuals reentering society after incarceration, financial stability is one of the most
critical factors in achieving long-term success. The NC Drug Tax Law undermines this by adding
a substantial and often insurmountable financial penalty, sometimes in the tens of thousands of
dollars, on top of existing legal consequences.
Reforming or repealing this law would:
• Remove redundant penalties that serve more as punishment than deterrent.
• Align state policy with modern drug reform efforts, which increasingly emphasize
public health and harm reduction over criminalization.
• Support reentry and rehabilitation by reducing the financial barriers faced by returning
citizens.
• Ensure more equitable enforcement, particularly for communities that have historically
borne the weight of over-policing and systemic inequality.
A Path Forward
Creating systems that support accountability, healing, and opportunity benefits everyone. The NC Drug Tax Law stands in contrast to these goals. It is a remnant of a punitive era in drug policy and one that no longer reflects the values of fairness, equity, and second chances. Lawmakers, stakeholders, and community members are encouraged to consider meaningful reform that eliminates this financial penalty and helps individuals move forward—free of unnecessary burdens that hinder their ability to rebuild.
