Department of Revenue Unauthorized Substance Abuse Tax Assessments


Soon after being charged with felony possession of marijuana in North Carolina, you will likely receive a notice of a tax assessment from the state’s Department of Revenue. The attorneys of the Everett Law Firm have experience representing taxpayers facing these onerous bills, and may be able to help you settle the amount owed to the state for a fraction of the total demanded. Below are answers to a number of the common questions that come to light upon receiving this unfortunate notice from the folks in Raleigh, and what they mean for you:

I Owe What?

The amount of the bill may come as a great surprise, as several factors significantly raise the tab beyond what would logically be expected:

  • NC General Statute 105‑113.106 states that the state weighs all parts of a marijuana plant, not solely the buds. This by itself dramatically increases the tax bill, as a few ounces of marijuana can quickly turn into pounds.
  • If the marijuana was still growing at the time it is seized, it will be weighed with the water still inside, resulting in a weight quantity far greater than what it is worth.
  • The assessment will probably include a 40% penalty for failure to file, failure to pay, and a “large tax deficiency.”  Essentially, the state charges you fees for failing to pay tax on the property prior to realizing any income on it or even being made aware that the tax exists!
  • Interest builds on the total tax and penalty at 5% per month until paid.

The result of these draconian calculations is that you will owe the state of North Carolina roughly $10,000.00 per 4.5 lbs of marijuana, which actually is probably not even be a pound of usable product! Fortunately, it may be possible to eliminate a large portion of this debt if you take the appropriate steps.

Timely Appeal Required

You have a right to request a formal review of the assessment, but pursuant to G.S. 105-241.11, this must be made in writing with 45 days of the date of the assessment. However, the date of the assessment is not the date that notice is received - most taxpayers do not receive the notice for a while after it is issued, and in cases where they are incarcerated upon the state seizing the marijuana, the taxpayer may be left with little time to respond. Once the assessment becomes final, either after the 45 days or upon the assessment being upheld after a review, the agent assigned to the debt will begin to take the actions described in the following paragraph. The sooner the taxpayer acts, including hiring counsel, the more likely they are to avoid these actions.  

Can they really do that?

Most likely the answer is yes. Shortly after receiving the notice of the tax assessment, you may find that your bank account balance doesn’t quite match-up with your record keeping, and may even show a large negative balance. This is because the agents with the Department of Revenue have wide discretion to pursue the owed funds, including depleting checking/savings accounts, and freezing them for a few weeks. In addition to taking what you have in the bank, they may file liens on real property, seize personal property including vehicles or items of value within the building the marijuana was seized from, or garnish wages. The Everett Law Firm’s attorneys may be able to get items of property back or prevent them from being seized in the first place should they become involved early enough in the process.

But what if I beat the rap?

It doesn’t matter. The tax assessment is a civil matter and independent of the criminal proceeding. There is no obligation upon the Department of Revenue to prove beyond a reasonable doubt in court that you are guilty of anything in order to take action against your finances. If their assessment is challenged, they merely must show upon a  “preponderance of the evidence” that the marijuana was yours. The Department of Revenue has no interaction whatsoever with the district attorney prosecuting your case for possession, maintaining a dwelling, manufacturing, or possession with intent to sell and deliver (PWISD). This can be both good and bad for criminal defendants. Negotiating with the state and paying any portion of the tax cannot be used against you in court, pursuant to NC General Statute 105-113-112. However, while your criminal case is pending, which could last a year or more, the Department of Revenue will not be waiting for it to go to trial. They will be pursuing the debt, regardless of whether or not you’ve been found guilty of anything. And even if you are found not-guilty, or if the prosecution is forced to dismiss the charges against you, they state will continue to hold a legally-enforceable debt. It is important for anyone in this position to recognize that the taxes and criminal charges are completely separate problems, and to have counsel that can address both issues wisely.