No. 4-96-CV-10278




        Petitioner Christopher F. Padavich seeks a writ of habeas corpus pursuant to 28 U.S.C. 2254.  The parties have filed briefs on the merits of the case, as has amicus curiae, and the matter is ready for ruling.   The court denies the petition.


        In its order of November 15, 1996, the court discussed the proceedings of petitioner's state court conviction, and that discussion need not be repeated here.  Petitioner argues his conviction for possession of marijuana with intent to deliver and for failure to affix a drug tax stamp violate the Double Jeopardy Clause because they occurred after he was assessed a tax for failure to affix a drug tax stamp.  See Iowa Code Ch. 453B (1993).  Petitioner also argues his trial and appellate counsel rendered ineffective assistance of counsel by not raising the double jeopardy challenge in state court.  This court ruled it would be futile for petitioner to pursue his double jeopardy claim in state court and ordered further briefs on the merits of the double jeopardy issue.

Iowa's Drug Tax

        The relevant version of Iowa's drug tax stamp act provides as follows:

A dealer shall not possess, distribute, or offer to sell a taxable substance unless the tax imposed under [chapter 453B] has been paid as evidence by a stamp . . . . Taxes imposed . . . are due and payable immediately upon manufacture, production, acquisition, purchase, or possession by a dealer.

Iowa Code 453B.3 (1993).  A "dealer" is

any person who . . . acquires, purchases, possesses, manufactures, or produces . . . Forty-two and one-half grams or more of a substance consisting of or containing marijuana. . . . However, a person who lawfully possesses, manufactures, or produces a taxable substance in this state is not considered a dealer.

Iowa Code 453B.1(3).  Persons who lawfully possess marijuana are not required to pay the tax or affix stamps.  Iowa Code 453B.6.  The tax rate is $5 per gram of marijuana, or about $140 per ounce.  Iowa Code 453B.7.  A dealer who fails to pay the tax is subject to a penalty in the amount of the tax.   Iowa Code 453B.12.  The department of revenue and finance "shall not reveal any information obtained from a dealer; nor shall information obtained from a dealer be used against the dealer in any criminal proceeding, unless the information is independently obtained, except in connection with a proceeding" under the tax act.   Iowa Code 453B.10.  Tax revenue goes to "the general fund of the state."  Iowa Code 453B.2.
        One of the administrative rules accompanying the drug tax stamp law provides as follows:

Persons (including dealers) purchasing stamps are not required to provide identification such as their name or address when purchasing stamps. Neither the director nor any employee of the department shall reveal any information obtained from a stamp purchaser, nor shall information obtained from a stamp purchaser . . . be used against the stamp purchaser in any criminal proceeding, unless the information is independently obtained, except in connection with a proceeding involving taxes due under this chapter from the stamp purchaser against whom the tax was assessed.

Iowa Admin. Code 701-91.2(421A) (1991).

Double Jeopardy

        At issue in this case is the Double Jeopardy Clause protection against multiple punishments for the same offense.  See North Carolina v. Pearce, 395 U.S. 711, 717 (1969).  In Department of Revenue of Montana v. Kurth Ranch, 114 S. Ct. 1937, 1945 (1994), the United States Supreme Court considered whether Montana's 1987 tax on possession of unlawful drugs had "punitive characteristics that subject[ed] it to the constraints of the Double Jeopardy Clause."  Montana imposed a tax of the greater of $100 per ounce or 10 percent of the market value on the possession of marijuana.  Id. at 1941.   The law required collection of the tax "only after any state or federal fines or forfeitures ha[d] been satisfied."  Id.  Tax funds were allocated "to support 'youth evaluation' and 'chemical abuse' programs and 'to enforce the drug laws.'"  Id.  Law enforcement officers were required to report each person subject to the tax to the department of revenue.  Id. n.5.  Under administrative rules, taxpayers had to file a return within 72 hours of their arrest.   Id. at 1941.  Officers completed a dangerous drug information report at the time of arrest, and if the taxpayer refused to sign the report, the officer was required to file it within 72 hours of arrest.  Id. at  1942.  The Supreme Court stated that under the law, "[t]axpayer ha[d] no obligation to file a return or to pay any tax unless and until he [wa]s arrested."  Id.
        The Court acknowledged that, generally, unlawful activities may be taxed.  Id. at 1945.  It went on to explain that although the Montana law's high tax rate1 and obvious deterrent purpose did not mean the tax was punishment, the factors are at least consistent with a punitive character."  Id. at 1946.  The Court then focused on "[o]ther unusual features [that] set the Montana statute apart from most taxes."  Id. at 1947.  First, the tax was "conditioned on the commission of a crime," which suggested it had a punitive, rather than a revenue-raising, intent.  Id.   It was "exacted only after the taxpayer [was] arrested for the precise conduct that [gave] rise to the tax obligation in the first place," and only persons arrested for

        1In Kurth Ranch, the market value of lower-value "shake" was $200 per pound.  Kurth Ranch, 114 S. Ct. at 1943 n.12.  The Supreme Court called the $1600 per pound tax "unrivaled" compared to similar taxes on legal goods and services.  Id. at 1246 n.17.  The dissent pointed out the market value of marijuana "bud" was $2000 per pound.  Id. at 1952 n.4 (Rehnquist, C.J., diss.).

a crime were subject to the tax.  Id. (footnote omitted).  The Court distinguished Montana's tax from a valid federal tax imposing liability on a transferor when a transferee failed to pay a special tax and register before a transfer of marijuana.  Id. at n.20 (citing United States v. Sanchez, 340 U.S. 42, 45 (1950)).2  The Court further explained the Montana tax was on forbidden conduct, and consequently it lost any revenue-raising justification because the sovereign imposing the tax could obtain the same revenue-raising objective by increasing the criminal fine for the activity.  Id. at 1947.  The Court also distinguished cases in which different sovereigns, as opposed to the same sovereign,   imposed taxes on unlawful activities.  Id. at n.22.

        2The law in Sanchez required "every person who imports, manufactures, produces, compounds, sells, deals in, dispenses, prescribes, administers, or gives away marihuana" to pay a special tax of between $1 and $24 and register.  Sanchez, 340 U.S. at 43.   Transferees were obliged to complete a government-issued order form before a transfer of marijuana.  If the transferee paid the special tax and registered, the tax on the transfer was $1 per ounce.  If the transferee did not pay the special tax and register, the tax was $100 per ounce.  The transferor was liable for the tax if the transferee did not pay the tax and complete an order form.  Id. at 44.   The Court upheld the $100 tax even though it appeared to be a regulatory and punitive measure.  The Court held a collateral regulatory or deterrent purpose was not enough to render a tax invalid, even if the revenue raised "is obviously negligible."  Id.  The Court also held the tax on transferees was not conditioned on the commission of a crime but rather on transfer of marijuana to someone who had not paid the special tax and registered.  Because the transferor's liability was tied to the transferee's failure to pay the tax, liability did not rest on a criminal act.  Id. at 45.

        Second, the Court found it unusual that the tax was a species of property tax on possession and storage of goods, yet it covered goods the taxpayer neither owned nor possessed when the tax was imposed, and in fact, was a tax on goods the taxpayer never lawfully possessed.  Id. at 1948.  The Court held the law had attributes indicative of a punitive intent and concluded that "[t]aken as a whole, [Montana's] drug tax is a concoction of anomalies, too far-removed in crucial respects from a standard tax assessment to escape characterization as punishment for the purpose of Double Jeopardy analysis."  Id. (footnote omitted).

Iowa Caselaw

        In light of Kurth Ranch, the Iowa Supreme Court held Iowa's drug tax law does not constitute punishment for double jeopardy purposes.  State v. Lange, 531 N.W.2d 108, 117 (Iowa 1995).  The Iowa court focused on the two "unusual features" of the Montana law and concluded Iowa's law has neither feature and therefore is not punishment for double jeopardy purposes.  First, the court pointed out there is no tax liability unless a dealer possesses at least forty-two and one-half grams of marijuana, therefore someone may illegally possess marijuana and not be subject to the tax.  Id. at 116.   Additionally, the revenue and finance department must assess and collect the tax in the same manner as all delinquent income taxes upon learning the stamp was required but not purchased.  Id.  Therefore, the court reasoned, the tax is "not conditioned on the commission of a crime [or] exacted only after the taxpayer is arrested."  Id.
        Second, the court explained it decided in State v. Gallup, 500 N.W.2d 437, 444-45 (Iowa 1993) that the Iowa drug tax and penalty for nonpayment is a civil tax and sanction rather than a criminal sanction, and Iowa's law is no different than that upheld in Sanchez.  The Lange court found it significant that the Court in Kurth Ranch distinguished Sanchez as a tax not conditioned on criminal conduct.  The Lange court explained that Iowa taxpayer liability arises the moment the dealer manufactures, produces, acquires, purchases, or possesses marijuana, therefore the Iowa law is not "imposed on goods a taxpayer neither owns nor possess."  Lange, 531 N.W.2d at 117.


        Petitioner and amicus argue the Iowa drug tax law is, in effect, no different than Montana's, and they argue other courts have examined laws similar to Iowa's and have found them to be punishment for double jeopardy purposes.  Amicus further argues that in analyzing whether Iowa's drug tax law is punishment, the court must look at it as a whole and not just determine whether it has the two features singled out in Kurth Ranch, and amicus argues the Iowa law has additional punitive features not present in the Montana law.  Respondent relies on the analysis in Lange to support its position that the tax does not implicate the Double Jeopardy Clause.
        Petitioner first argues the Iowa tax is higher than the $100 per ounce tax in Kurth Ranch.  The Iowa tax is about $140 per ounce, or 11.5 times greater than the market value of "shake" as set out in Kurth Ranch.  In addition, petitioner points out, the Iowa law imposes a penalty of 100 percent of the tax if it is not paid immediately when due.  Second, petitioner argues the high tax and penalty serve a deterrent purpose rather than a legitimate, revenue-raising purpose.  Amicus also argues the statutory exemption for those who lawfully possess marijuana is evidence of the punitive intent and effect of the law.   Amicus argues the inclusion of counterfeit substances under the tax is further evidence of the punitive nature of the law.  Finally, amicus distinguishes Sanchez because the tax there was on all dealers, it was increased for transfers to unregistered persons, and it was enforceable against a registered dealer.  One collateral purpose of the law in Sanchez was to regulate marijuana trade, Sanchez, 340 U.S. at 43-45.  Amicus contends the Iowa law has no regulatory purpose because it exempts all lawful trade in marijuana.
        Third, petitioner argues the tax is, in effect, conditioned on the commission of a crime.  Although the law does not require a person to be arrested before tax liability arises and is imposed on marijuana amounts above a threshold level, petitioner argues the class of taxpayers includes only those in criminal possession of marijuana.  In practice, petitioner contends, only people arrested for possessing illegal drugs will be assessed the tax, and the tax therefore will be assessed when the taxpayer no longer has possession of the drugs.  See also Brunner v. Collection Div. of Utah, 1997 WL 578661 at *3 (Utah Sept. 19, 1997) (tax "imposed only on people who possess controlled substances 'in violation of Utah law,'" and lawful possessors not liable); Wilson v. DeDartment of Rev., 662 N.E.2d 415, 420 (Illinois 1996) (taxpayers include only persons who violate the Illinois Controlled Substances Act, and violation requires a criminal conviction); Bryant v. State, 660 N.E.2d 290, 297 (Ind. 1995) (law not limited to post-arrest, but in practice revenue department assesses tax only after police contact it), cert. denied, 117 S. Ct. 293 (1996); Desimone v. State, 904 P.2d 1, 4-5 (Nev. 1995) (criminal activity not required before tax imposed, but noncriminal possession and sale fall outside scope of tax), vacated and remanded, 116 S. Ct. 2576 (1996) (for consideration of United States v. Ursery, 116 S. Ct. 2135 (1996)); People v. Maurello, 932 P.2d 851, 853 (Colo. Ct. App. 1997) (police required to report seizures of 16 ounces or more of marijuana within 72 hours of filing criminal case regardless whether tax paid, taxpayers cannot buy stamps anonymously, and voluntary payment option "is at best illusory and does not . . . make the post-arrest imposition of the Tax any less a penalty"); cf. Stennett v. State, 941 S.W.2d 914 (Tex. Cr. App 1996) (although tax appears nonpunitive because liability arises when the taxable event occurs and not after arrest, and taxpayers can pay tax confidentially, clear legislative intent was to punish).
        Fourth, petitioner argues that although Iowa's tax is labeled an excise tax and not a property tax, it in effect is a property tax because it is imposed only after the controlled substance is confiscated, and therefore the taxpayer cannot "perform[] an act" or "enjoy[] a privilege" when the tax is assessed.  See Black's Law Dictionary 506 (5th ed. 1979); see also Bryant, 660 N.E.2d at 297; and see Brunner, 1997 WL 578661 at *3; Wilson, 662 N.E.2d at 420; Desimone, 904 P.2d at 5.  Amicus further argues that a tax on the act of possessing marijuana is just a species of property tax, and to distinguish Iowa's law from that in Kurth based on timing of the assessment is disingenuous because in practice no assessment will be made until after arrest and the person no longer has possession of or engages in the act of possessing marijuana.
        In addition to Iowa's Supreme Court, several other courts addressing the validity of their drug tax law have rejected the arguments petitioner and amicus suggest.  E.g., McMullin v. South Carolina Dept. of Rev. and Taxation, 469 S.E.2d 600, 602 (S.C. 1996) (tax on unlawful possession above threshold amount imposed regardless whether taxpayer arrested, police have no responsibility to report those subject to tax, and tax based on actual possession); Covelli v. Commissioner of Rev. Servs., 668 A.2d 699, 705-06 & nn.19 & 20 (Conn. 1995) (tax due immediately upon unlawful acquisition or possession of more than threshold amount of marijuana, officer may but not required to report arrests), vacated and remanded, 116 S. Ct. 2577 (for consideration of Ursery), on remand, 683 A.2d 737 (Conn. 1996) (again finding tax valid), cert. denied, 117 S. Ct. 1445 (1997); State v. Gulledge, 896 P.2d 378, 380-81, 384-58 (Kan. 1995) (agreeing with Lange analysis and concluding Kansas law did not have unusual features of Montana tax); State v. Ballenger, 472 S.E.2d 572, 574-75 (N.C. Ct. App. 1996) (tax due within 48 hours after dealer possesses unlawful substance upon which no tax is paid, therefore tax not contingent on arrest or confiscation of illegal drug; expressed legislative purpose is not solely to punish), aff'd, 481 S.E.2d 54 (N.C. 1997), cert. denied, 118 S. Ct. 68 (1997); Milner v. State, 658 So.2d 500, 502 (Ala. Ct. App. 1994) (tax levied on possession regardless of criminal prosecution, and tax is excise rather than property tax).


        Looking at Iowa's drug tax law on the whole, the court concludes it does not have punitive attributes that subject it to the Double Jeopardy Clause.  Although the Iowa tax and penalty for nonpayment is high, these factors are not dispositive.  In addition, although the Iowa Supreme Court recognized that a goal of the law "is to deter the sale of controlled substances and to make law breaking less profitable," and that "the amount of revenue to be realized [from the tax] is probably negligible," Gallup, 500 N.W.2d at 445, these factors also are not dispositive of the question whether the tax is punitive for double jeopardy purposes.
        Unlike the law at issue in Kurth Ranch, the tax under 453B.3 is due "immediately upon . . . possession by a dealer," rather than after the dealer is arrested.  Furthermore, taxpayers need not identify themselves when buying tax stamps, records regarding the taxes are kept confidential, and information from the records is not used in criminal prosecutions except for those under the tax act, unless obtained from independent sources.  Iowa Code 453B.10; Iowa Admin. Code 701-91.2(421A); see also Covelli, 668 P.2d at 705-06 (confidential tax payment); Gulledge, 896 P.2d at 381 (same); Maurello, 932 P.2d at 853 (distinguishing Colorado law as lacking confidentiality provision); Ballenger, 472 S.E.2d at 575 (confidential tax payment).  Also unlike the law at issue in Kurth Ranch, Iowa Code Chapter 453B does not oblige police officers to report arrests or persons subject to the tax to the department of revenue and finance.  Although other courts have ruled that a tax due immediately upon a transaction involving an unlawful substance is, in practice, no different than conditioning the tax on the commission of a crime, this court respectfully disagrees with their reasoning.  Likewise, the court also finds unpersuasive petitioner's argument that the tax is not a legitimate excise tax.


        Petitioner's tax assessment was not punishment for purposes of the Double Jeopardy Clause.  Consequently, petitioner's rights under the Double Jeopardy Clause were not violated when he later was convicted for possession with intent to deliver marijuana and for failure to affix a drug tax stamp.   Petitioner's remaining arguments are without merit.
        The petition for habeas corpus is denied and dismissed.  Respondent's request to revisit the ruling on the exhaustion issue is denied.
        Dated this 21st day of November, 1997.