                     IN THE SUPREME COURT OF TENNESSEE
                                AT KNOXVILLE
                                          May 7, 2008 Session

     STEVEN WATERS ET AL. v. REAGAN FARR, COMMISSIONER OF
            REVENUE FOR THE STATE OF TENNESSEE

               Appeal by Permission from the Court of Appeals, Eastern Section
                             Chancery Court for Loudon County
                       No. 10710   Frank V. Williams, III, Chancellor


                         No. E2006-02225-SC-R11-CV - Filed July 24, 2009


Effective January 1, 2005, the Tennessee General Assembly enacted a tax on the possession of
unauthorized substances for the purpose of generating revenues to assist state and local law
enforcement agencies in their efforts to combat drug crimes. Subsequently, Steven Waters was
assessed with taxes, penalty, and interest in the total amount of $55,316.84 by the Tennessee
Department of Revenue after purchasing nearly a kilogram of cocaine from a confidential informant.
In a declaratory judgment suit in the Chancery Court of Loudon County, Waters challenged the
constitutionality of the statute on grounds of self-incrimination, double jeopardy and due process.
The chancellor declared the statute unconstitutional and set aside the assessment. On direct appeal,
the Court of Appeals affirmed, holding that the enactment exceeded the General Assembly’s taxing
power under article II, section 28 of the Tennessee Constitution. Initially, we hold that the statute
imposing the tax on unauthorized substances does not violate the constitutional protections against
self-incrimination and double jeopardy or abridge the guarantee of procedural due process. Because,
however, the tax cannot be classified as either a tax on merchants, a tax on peddlers or a tax on
privileges, as authorized by our state constitution, the judgment of the Court of Appeals is affirmed.

  Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Affirmed

GARY R. WADE , J., delivered the opinion of the court, in which JANICE M. HOLDER, C.J., and
WILLIAM M. BARKER, J., joined. WILLIAM C. KOCH , JR., J. filed a separate opinion concurring in
part and dissenting in part, in which CORNELIA A. CLARK, J., joined.

Robert E. Cooper, Jr., Attorney General and Reporter; Michael E. Moore, Solicitor General; and
Brad H. Buchanan, Assistant Attorney General, for the appellant, Reagan Farr, Commissioner of
Revenue for the State of Tennessee.1



        1
         In accordance with Tennessee Rule of Appellate Procedure 19(c), Reagan Farr, the current Commissioner of
Revenue, has been substituted as a party in this appeal in the place of his predecessor, Loren L. Chumley.
A. Philip Lomonaco, Knoxville, Tennessee, for the appellee, Steven Waters.

                                                 OPINION

                                                Facts
        On April 25, 2005, Steven Waters (“Waters”), a fifty-one-year-old resident of Loudon
County, was arrested after purchasing nearly a kilogram of cocaine from a confidential informant
as part of a “reverse sting” conducted by officers in the Narcotics Unit of the Knox County Sheriff’s
Office. Based upon Waters’ possession of the cocaine, the Tennessee Department of Revenue
(“Department of Revenue”) subsequently issued an assessment under the newly enacted tax on
unauthorized substances.2 Waters then challenged the constitutionality of the tax by filing a
declaratory judgment action against the Commissioner of Revenue of Tennessee (“Commissioner”).

        By the time of his arrest, Waters, a carpenter specializing in trim and interior work in new
homes, had worked in and around Loudon County for twenty of his thirty-five years in the trade. The
evidence in the record indicates that at some point during this period of time, Waters began to use
cocaine on a “[w]eekend basis.” He claimed that the substance “[k]ind of made [him] feel better,”
and gave him “a little burst” to make him “feel better about work.” While explaining that he
regularly purchased his cocaine in an area “down off of Western Avenue” in Knox County, he
insisted that he had never sold the drug to anyone. He believed that until his arrest, his wife, Naomi
Waters, had been unaware of his use of the illegal substance.

        On the morning of April 25, 2005, Waters received a telephone call from an individual he
had known for about a year and a half, and with whom he had used cocaine in the past. The
individual informed Waters that she had nine kilograms of “nearly pure” cocaine from Miami and
that she was “trying to move it and get out of town fast.” She offered to sell the cocaine at a price
of $17,000 per kilogram and arranged to meet Waters in the parking lot of a bakery in Knoxville.
After trying a small amount of the cocaine as a sample, Waters acknowledged the high quality of the
drug but declined to purchase. Later that evening, the woman telephoned again and offered the
cocaine at a reduced price of $12,000 per kilogram. Waters, believing that the street value was far
greater than the price, consented to the terms. At the hearing, he explained that he had planned to
use the cocaine “a little at a time” and claimed that he had no intention to either sell the substance
or give it to anybody else.

        Unbeknownst to Waters, the individual from whom he had agreed to purchase cocaine was
a confidential informant working in cooperation with the Narcotics Unit of the Knox County
Sheriff’s Office (“Sheriff’s Office”). Captain Bernie Lyon, a twenty-seven-year veteran of the
Sheriff’s Office, testified that he had been acquainted with the informant for approximately twenty
years, that he had known her to use drugs in the past, and that he had instructed her to try to sell the
cocaine to Waters. Captain Lyon further testified that the “going price” for a gram of cocaine “on


        2
          2004 Tenn. Pub. Acts 1840 (codified at Tenn. Code Ann. §§ 67-4-2801 to -2811 (Supp. 2004)). The tax on
unauthorized substances became effective on January 1, 2005, less than four months prior to W aters’ arrest.

                                                      -2-
the street” was about $100 per gram.3 After Waters had agreed on the purchase price, Captain Lyon
and Sergeant James Hammond, the supervisor of the Narcotics Unit, provided the informant with
a brick of cocaine from the drug vault at the Sheriff’s Office. The package weighed 999.2 grams,
indicating that the estimated street value of the cocaine Waters had agreed to purchase for $12,000
could have been as high as $99,200.

        The officers followed the informant to the parking lot of a restaurant near the intersection of
Walker Springs Road and Kingston Pike in Knoxville, where Waters paid $12,000 for the drugs.
When the informant and Waters drove their respective vehicles away from the scene, Captain Lyon
followed the informant to retrieve the money as Sergeant Hammond and several other officers
followed Waters. After about a quarter of a mile, the officers apprehended Waters, searched his
truck, and recovered the cocaine. Waters was then arrested and taken to jail. At trial, both Captain
Lyon and Sergeant Hammond acknowledged that there was no evidence suggesting that Waters had
ever sold drugs or intended to sell any drugs, including the cocaine he had purchased from the
informant.

        In accordance with a policy developed in January of 2005, Karen Phillips, the drug technician
at the Sheriff’s Office, completed a form for the Department of Revenue documenting the arrest and
the amount of cocaine seized. The form provided that 75% of the money collected from the tax on
the cocaine that Waters had possessed was to be distributed to the Sheriff’s Office, with the
remaining 25% payable to the Department of Revenue.4 On or about May 20, 2005, Eugene Johnson
of the Department of Revenue’s Unauthorized Substance Tax Reports office in Knoxville hand-
delivered to the Waters residence a Notice of Assessment and Demand for Payment (“Assessment”)
in the sum of $55,316.84, which included $49,940 in tax liability5 plus $5,376.84 in penalty and
interest. One week later, the Department of Revenue notified Waters by mail that it had filed a lien
against the residence he owned jointly with his wife in order to secure payment of the tax. Further,
the Department of Revenue sent a Levy Notification and Notice of Levy to several banks in East
Tennessee in an attempt to recover any assets that those banks might have been holding for Waters.




         3
           Captain Lyon explained that street dealers often dilute the cocaine “so they can stretch their powder out a little
bit further.” He also stated that he had no knowledge of the purity level of the cocaine sold to W aters, and that the
substance was not tested by the Tennessee Bureau of Investigation other than to prove that it was, in fact, cocaine.
W aters testified that the informant told him the cocaine was “nearly pure.”

         4
             See Tenn. Code Ann. § 67-4-2809(b)(2) (Supp. 2004).

         5
            “An excise tax is levied on unauthorized substances possessed, either actively or constructively, by dealers
at the following rates: . . . (3) Fifty dollars ($50.00) for each gram, or fraction thereof, of cocaine.” Tenn. Code Ann.
§ 67-4-2803(a) (Supp. 2004) (codified as amended at Tenn. Code Ann. § 67-4-2803(a)(4) (2006)). Although the cocaine
that W aters purchased weighed 999.2 grams, the amount of the Assessment was apparently based on the 998.8 grams
that Phillips had written on the drug tax registration form that she faxed to the Department of Revenue.

                                                            -3-
Afterwards, the Department of Revenue received approximately $3,800 from the checking account
Waters had at First Tennessee Bank.6

                                        Procedural History
         On July 12, 2005, Waters and his wife, who was subsequently dismissed as a party to the
litigation, filed suit in the Chancery Court for Loudon County against the Commissioner, seeking
declaratory and injunctive relief.7 The Office of the Attorney General was served with a copy of the
complaint, appeared on behalf of the Commissioner, and represented the Commissioner throughout
the course of these proceedings.8 Waters alleged that Tennessee’s tax on unauthorized substances
violated the state and federal constitutional protections against self-incrimination and double
jeopardy and also failed to afford due process of law.

        At the conclusion of the proceeding, the trial court abated the assessment, ruling that the tax
on unauthorized substances violated the state and federal constitutional prohibitions against
compelled self-incrimination, imposed a criminal rather than a civil penalty, and authorized a tax far
in excess of the amount Waters paid for the illegal drugs. The trial court further held that the
Department of Revenue’s procedures for assessment and collection of the tax on unauthorized
substances failed to satisfy the procedural due process requirements of the state and federal
constitutions. Because a jury had not been empaneled in Waters’ criminal prosecution, the trial court




         6
           W aters testified that the Tennessee Department of Safety took possession of his truck and gave him the option
of purchasing it back from the state for its value of $5,000. Counsel for the Commissioner stated that any taking of
W aters’ truck “was not to satisfy this tax assessment,” and that the Department of Revenue had no knowledge of such
taking. No representative of the Department of Safety testified.

         7
           The Commissioner asserts that the procedure outlined in Tennessee Code Annotated § 67-1-1801(a)(1)(B)
(2006) provides an individual with a fair opportunity to challenge an assessment for possession of unauthorized
substances. See Tenn. Code Ann. § 67-4-2807 (2006 & Supp. 2008). W hile we agree, a taxpayer also has the option
of presenting a facial challenge to the constitutionality of a tax statute by filing a declaratory judgment action. Colonial
Pipeline Co. v. Morgan, 263 S.W .3d 827, 840 (Tenn. 2008).

         8
           Nothing in this opinion casts doubt upon the long-standing requirement in this state that parties who challenge
a statute’s constitutionality through a declaratory judgment action must serve notice of their suit on the Office of the
Attorney General. Tenn. Code Ann. § 29-14-107(b) (2000); Cummings v. Shipp, 3 S.W .2d 1062, 1063 (Tenn. 1928);
see also Tenn. R. Civ. P. 24.04 (expanding the notice requirement beyond declaratory judgment actions). W aters
complied with this requirement and gave proper notice of his federal and state constitutional challenges by serving a copy
of his complaint on the Attorney General’s Office. Brad H. Buchanan, an attorney in the Office’s Tax Division, filed
the answer to the complaint and appeared on the Commissioner’s behalf at trial and during this appeal. Thus, the
people’s interests have been ably represented throughout this proceeding. Moreover, the Attorney General’s Office,
perhaps in an effort to facilitate a ruling on the merits of the claim rather than any procedural deficiency, has not
challenged the lack of joinder as a party. See Cummings v. Beeler, 223 S.W .2d 913, 916 (Tenn. 1949) (indicating that
the Attorney General be named “a party defendant in any proceeding where the constitutionality of the Act of the
legislature is before the Court on declaratory judgments proceeding”). Under all of these circumstances, any issue as
to joinder has been waived. See Tenn. R. App. P. 36(a).

                                                            -4-
found that Waters had not yet been exposed to double jeopardy. An allegation of entrapment was
not addressed.9

         On direct appeal, the Court of Appeals affirmed the trial court but based its ruling upon
different grounds. The Court of Appeals unanimously held that the tax on unauthorized substances
exceeded the Tennessee General Assembly’s power to impose a privilege tax as provided in article
II, section 28 of the Tennessee Constitution.10 Waters v. Chumley, No. E2006-02225-COA-R3-CV,
2007 WL 2500370, at *2 (Tenn. Ct. App. Sept. 6, 2007). In an opinion written by Judge (now
Justice) Sharon G. Lee, the Court of Appeals described the legislature’s power to tax privileges as
“extremely broad” but not entirely unlimited, observing that the General Assembly may not levy a
privilege tax that is “arbitrary, capricious, or wholly unreasonable.” Id. (quoting Hooten v. Carson,
209 S.W.2d 273, 274 (Tenn. 1948)). “Because [the Legislature] seeks to levy a tax on the privilege
to engage in an activity that . . . has [been] previously declared to be a crime, not a privilege,” the
Court of Appeals “necessarily conclude[d] that the Drug Tax is arbitrary, capricious, and
unreasonable, and therefore, invalid under the Constitution of this state.” Id. at *3. The Court of
Appeals also determined that a tax on unauthorized substances was not “consistent with the rationale
supporting the imposition of a privilege tax, which holds that such a tax recompenses the state for
the secure and nurturing environment it has provided the activity or occupation upon which the tax
is levied.” Id. The opinion characterized the state’s proper role as one of deterrence, rather than one
of protection or sustenance, of individuals in Tennessee who possess illegal substances. Id.

        The Court of Appeals, while holding that the tax on unauthorized substances violated the
legislature’s taxing powers under our state constitution, did not address self-incrimination or due
process protections, the grounds upon which the trial court had relied. Because this case involves
important questions of constitutional authority and statutory interpretation, this Court granted the
Commissioner’s application for permission to appeal.

                                         Standard of Review
         When called upon to construe a statute, we must first ascertain and then give full effect to
the General Assembly’s intent and purpose. Waldschmidt v. Reassure Am. Life Ins. Co., 271
S.W.3d 173, 176 (Tenn. 2008). Our chief concern is to carry out the legislature’s intent without
either broadening or restricting the statute beyond its intended scope. Houghton v. Aramark Educ.

         9
           Based upon the events of April 25, 2005, a Knox County grand jury indicted W aters for possession of more
than three hundred grams of cocaine with intent to deliver, a Class A felony providing for a prison sentence of between
fifteen and sixty years and a fine of up to $500,000. Tenn. Code Ann. § 39-17-417(j)(5) (Supp. 2004); Tenn. Code Ann.
§ 40-35-111(b)(1) (2003). W hile W aters pursued his declaratory judgment action in the trial court, the criminal
proceedings were held in abeyance. On January 29, 2008, W aters pleaded guilty to the lesser-included offense of
possession with intent to deliver cocaine, a Class B felony, Tenn. Code Ann. § 39-17-417(a)(4), (b) (Supp. 2004); he
was placed on probation for a term of eight years and ordered to pay $3,427 in fines, court costs, and fees.

         10
            “Review generally will extend only to those issues presented for review,” but an appellate court “may in its
discretion consider other issues in order, among other reasons: (1) to prevent needless litigation, (2) to prevent injury
to the interests of the public, and (3) to prevent prejudice to the judicial process.” Tenn. R. App. P. 13(a). W e believe
that this was an appropriate circumstance for the Court of Appeals to exercise such discretion.

                                                           -5-
Res., Inc., 90 S.W.3d 676, 678 (Tenn. 2002) (quoting Owens v. State, 908 S.W.2d 923, 926 (Tenn.
1995)). Every word in a statute “is presumed to have meaning and purpose, and should be given full
effect if so doing does not violate the obvious intention of the Legislature.” In re C.K.G., 173
S.W.3d 714, 722 (Tenn. 2005) (quoting Marsh v. Henderson, 424 S.W.2d 193, 196 (Tenn. 1968)).
When the statutory language is clear and unambiguous, we apply its plain meaning without
complicating the task. Eastman Chem. Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn. 2004). When
a statute is ambiguous, however, we may reference the broader statutory scheme, the history of the
legislation, or other sources to discern its meaning. Colonial Pipeline, 263 S.W.3d at 836. We
presume that the General Assembly was aware of its prior enactments and knew the state of the law
at the time it passed the legislation. Owens, 908 S.W.2d at 926.

         Issues of constitutional interpretation are questions of law, which we review de novo without
any presumption of correctness given to the legal conclusions of the courts below. Colonial Pipeline,
263 S.W.3d at 836. It is well-settled in Tennessee that “courts do not decide constitutional questions
unless resolution is absolutely necessary to determining the issues in the case and adjudicating the
rights of the parties.” State v. Taylor, 70 S.W.3d 717, 720 (Tenn. 2002) (citing Owens, 908 S.W.2d
at 926). Our charge is to uphold the constitutionality of a statute wherever possible. State v. Pickett,
211 S.W.3d 696, 700 (Tenn. 2007). “In evaluating the constitutionality of a statute, we begin with
the presumption that an act of the General Assembly is constitutional.” Id. (quoting Gallaher v.
Elam, 104 S.W.3d 455, 459 (Tenn. 2003)); see also Vogel v. Wells Fargo Guard Servs., 937 S.W.2d
856, 858 (Tenn. 1996) (“A statute comes to a court ‘clothed in a presumption of constitutionality
[since] the Legislature does not intentionally pass an unconstitutional act.’” (quoting Cruz v.
Chevrolet Grey Iron, Div. of Gen. Motors Corp., 247 N.W.2d 764, 766 (Mich. 1976)) (alteration in
original)). The presumption of constitutionality applies with even greater force when a party brings
a facial challenge to the validity of a statute. Gallaher, 104 S.W.3d at 459. In such an instance, the
challenger must establish that no set of circumstances exists under which the statute, as written,
would be valid. Lynch v. City of Jellico, 205 S.W.3d 384, 390 (Tenn. 2006) (quoting Davis-Kidd
Booksellers, Inc. v. McWherter, 866 S.W.2d 520, 525 (Tenn. 1993)); United States v. Salerno, 481
U.S. 739, 745 (1987).

                         History of Taxes on Unauthorized Substances
       Waters challenges the constitutionality of Tennessee’s taxing statute on unauthorized
substances, both as to its facial validity and as to the application of the statute to these specific
circumstances. In considering his claims, it is helpful to examine the history of legislation imposing
taxes on unauthorized substances.

                 I. Taxes Levied by the Federal Government and Other States
         The taxing of illegal activities, including the possession and sale of illegal substances, has
a long history at both the federal and state level. Over 150 years ago, the United States Supreme
Court held that Congress could require licenses for businesses that were otherwise forbidden by the
laws of the states in which they were located and could impose penalties for the failure to purchase
such licenses. License Tax Cases, 72 U.S. 462 (1866). Throughout the years, our highest Court has
consistently upheld the principle that gains from unlawful activities are taxable. See James v. United


                                                  -6-
States, 366 U.S. 213, 221-22 (1961) (overruling Comm’r of Internal Revenue v. Wilcox, 327 U.S.
404 (1946), to hold that embezzled funds are income taxable to the embezzler); Rutkin v. United
States, 343 U.S. 130, 137-38 (1952) (concluding that money obtained by extortion is taxable income,
and observing that “[t]here has been a widespread and settled administrative and judicial recognition
of the taxability of unlawful gains of many kinds under [the Internal Revenue Code]”); United States
v. Sullivan, 274 U.S. 259, 263 (1927) (holding that the federal government may tax income from a
business that is illegal under federal law). While “[t]he Court has repeatedly indicated that the
unlawfulness of an activity does not prevent its taxation,” Marchetti v. United States, 390 U.S. 39,
44 (1968), it also has established that this principle may reach its limits when either the tax itself or
the governmental procedures to collect the tax collides with the taxpayer’s constitutional rights.
Haynes v. United States, 390 U.S. 85, 100 (1968) (holding that “the constitutional privilege against
self-incrimination provides a full defense” to alleged violations of a firearm registration requirement
directed primarily at people who possessed the firearm illegally); Grosso v. United States, 390 U.S.
62, 65-67 (1968) (holding that a federal occupational tax on wagering, which required a gambler to
provide, upon threat of criminal prosecution, information that he might reasonably have supposed
would be made available to prosecuting authorities, violated the gambler’s Fifth Amendment
privilege against self-incrimination); Marchetti, 390 U.S. at 48-49 (same).

         The taxation of illegal drugs at the federal level has followed a path similar to that of taxes
on other unlawful activities. In fact, “most domestic drug regulations prior to 1970 generally came
in the guise of revenue laws, with the Department of the Treasury serving as the Federal
Government’s primary enforcer.” Gonzales v. Raich, 545 U.S. 1, 10 (2005). The leading statute in
this area was the Harrison Narcotic Act of 1914, 38 Stat. 785 (repealed 1970), which sought “to exert
control over the possession and sale of narcotics, specifically cocaine and opiates, by requiring
producers, distributors, and purchasers to register with the Federal Government, by assessing taxes
against parties so registered, and by regulating the issuance of prescriptions.” Gonzales, 545 U.S.
at 10-11. Congress later passed the Marihuana Tax Act of 1937, 50 Stat. 551 (repealed 1970), which
“[l]ike the Harrison Act . . . did not outlaw the possession or sale of marijuana outright” but imposed
similar registration and reporting requirements for individuals who produced, imported, distributed,
sold, or dealt marijuana and “required the payment of annual taxes in addition to transfer taxes
whenever the drug changed hands.”11 Gonzales, 545 U.S. at 11. The United States Supreme Court,
citing the cases preserving taxes on other types of illegal activities, upheld the constitutionality of
both the Harrison Act and the Marihuana Tax Act. United States v. Sanchez, 340 U.S. 42, 44-45
(1950) (upholding Marihuana Tax Act and noting that “[i]t is beyond serious question that a tax does
not cease to be valid merely because it regulates, discourages, or even definitely deters the activities
taxed”); United States v. Doremus, 249 U.S. 86 (1919) (upholding Harrison Act).

      Both the Harrison Act and the Marihuana Tax Act were repealed by the Comprehensive Drug
Abuse Prevention and Control Act of 1970, Pub. L. No. 91-513, 84 Stat. 1236 (1970). Prior to the


         11
          “[W ]hile the Marihuana Tax Act did not declare the drug illegal per se, the onerous administrative
requirements, the prohibitively expensive taxes, and the risks attendant on compliance practically curtailed the marijuana
trade.” Gonzales, 545 U.S. at 11.

                                                           -7-
repeal of the Marihuana Tax Act, however, the Supreme Court had the opportunity to once again
consider its constitutional ramifications. Dr. Timothy Leary, a former Harvard professor and
notorious advocate for psychedelic drugs, was convicted of knowingly transporting, concealing and
facilitating the transportation and concealment of marijuana without paying the transfer tax required
by the Marihuana Tax Act. Leary v. United States, 395 U.S. 6, 11 (1969). Leary challenged his
conviction, and the Court concluded that “read according to its terms, the Marihuana Tax Act
compelled [Leary] to expose himself to a ‘real and appreciable risk’ of self-incrimination, within in
the meaning of our decisions in Marchetti, Grosso and Haynes.” Leary, 395 U.S. at 16. Because
Leary’s invocation of the privilege against self-incrimination was proper and constituted a complete
defense to the charge of violating the Marihuana Tax Act, the Court reversed his conviction. Id. at
29. Although the 1970 Act was intended to replace the drug tax laws with “a comprehensive regime
to combat the international and interstate traffic in illicit drugs,” Gonzales, 545 U.S. at 12, the shift
in federal policy was also, at least in part, a response to the Supreme Court’s rejection in the Leary
case of the federal taxation scheme for illegal drugs. Id. at 11-12; Frey v. United States, 558 F.2d
270, 271 (5th Cir. 1977) (noting that although Leary did not hold the Marihuana Tax Act to be
unconstitutional, it “dealt the . . . Act a crippling blow in holding its order form requirement
amounted to self-incrimination”). Since the 1970 Act became effective, the federal government has
used the criminal laws, rather than the tax code, to regulate the possession and trade of illegal drugs.

        Although the taxation of illicit substances has fallen out of favor at the federal level, a
number of states have passed drug stamp taxes, so named for the stamps that individuals who
possess or sell an unauthorized substance are required to purchase from their state’s revenue
department and affix to the substance.12 Unlike the federal drug tax laws, which were the primary
method of enforcement against the drug trade, the state drug stamp taxes co-exist with criminal
statutes that punish the possession and sale of drugs through the penal system. The state drug stamp
taxes, however, do share one significant characteristic with their federal counterparts, in that their
constitutionality has been challenged repeatedly in the courts.

        Thirty of the other forty-nine states have passed statutes that tax the possession or sale of
unauthorized substances. Twenty-one of these thirty states have drug stamp taxing statutes that are
still codified,13 while nine of the states have subsequently repealed legislation requiring drug

         12
             States, like the federal government, have taxed illegal activities for many years. This Court has held that
illegal activity may be taxed, Foster v. Speed, 111 S.W . 925, 925-26 (Tenn. 1908), and that the taxation of an illegal
activity does not give the taxpayer a license to violate the criminal laws of this state. Blaufeld v. State, 53 S.W . 1090,
1091-92 (Tenn. 1899); Palmer v. State, 13 S.W . 233, 235 (Tenn. 1890). The decision in Foster drew upon a treatise on
taxation written by noted constitutional scholar and Michigan Supreme Court Justice Thomas M. Cooley. See Thomas
M. Cooley, A Treatise on the Law of Taxation 242 (3d ed. 1903) (noting that “one purpose of taxation sometimes is to
discourage a business, and perhaps put it out of existence”). See also Youngblood v. Sexton, 32 Mich. 406, 422 (1875)
(Cooley, J.).

         13
           Ala. Code §§ 40-17A-1 to -16 (2003); Conn. Gen. Stat. §§ 12-650 to -660 (2008); Ga. Code Ann. §§ 48-15-1
to -11 (2005); Idaho Code Ann. §§ 63-4201 to -4211 (2007) (as amended by 1990 Idaho Sess. Laws, ch. 179, § 1); 35
Ill. Comp. Stat. 520/1-520/26 (2006); Ind. Code §§ 6-7-3-1 to -20 (2007); Iowa Code Ann. §§ 453B.1-.16 (2006); Kan.
                                                                                                          (continued...)

                                                           -8-
stamps.14 Of the twenty-three other state drug stamp taxes that have been considered by state
appellate courts, eleven have been upheld as constitutional.15 Twelve of the state drug stamp taxes,
however, have been found to violate federal and state constitutional protections, most commonly the
Fifth Amendment rights against self-incrimination or double jeopardy and their state equivalents.16
Four states have recently considered, but rejected, the idea of a tax on unauthorized substances,17


         13
              (...continued)
Stat. Ann. §§ 79-5201 to -5212 (1997 & Supp. 2008); Ky. Rev. Stat. Ann. §§ 138.870-.889 (2006); La. Rev. Stat. Ann.
§§ 47:2601-:2610 (Supp. 2009); Mass. Gen. Laws ch. 64K, §§ 1-14 (2001); Minn. Stat. §§ 297D.01-.13 (2007); Neb.
Rev. Stat. §§ 77-4301 to -4316 (2003); Nev. Rev. Stat. §§ 372A.010-.130 (1997); N.C. Gen. Stat. §§ 105-113.105 to
.113 (2007) (as amended by 1995 N.C. Sess. Laws, ch. 340, § 1, eff. Oct.1, 1995; 1997 N.C. Sess. Laws ch. 292, § 1,
eff. Oct. 1, 1997; 1998 N.C. Sess. Laws ch. 218, eff. Oct. 31, 1998); Okla. Stat. tit. 68, §§ 450.1-.9 (2001); R.I. Gen.
Laws §§ 44-49-1 to -16 (2005); S.C. Code Ann. §§ 12-21-5010 to -6050 (2000); Tex. Tax Code Ann. §§ 159.001-.301
(2008); Utah Code Ann. §§ 59-19-101 to -107 (2008); W is. Stat. §§ 139.87-.96 (2009) (as amended by 1997 W is. Sess.
Laws 27, § 2979m, eff. Jan. 1, 1998).

         14
             Ariz. Rev. Stat. § 42-3401 to -3406 (repealed by 1998 Ariz. Sess. Laws 1998, Ch. 1, § 157, eff. Jan. 1, 1999);
Colo. Rev. Stat. §§ 39-28.7-101 to -109 (repealed by 1996 Colo. Sess. Laws 1996, S.B. 96-133, § 2, eff. Mar. 25, 1996);
Fla. Stat. § 212.0505 (repealed by 1995 Fla. Laws 1995, c. 95-140, § 7, eff. July 10, 1995); Me. Rev. Stat. Ann. tit. 36,
§§ 4433-4436 (repealed by 1995 Me. Laws 1995, c. 281, § 24, eff. June 21, 1995); Mich. Comp. Laws §§ 335.301-.307
(repealed by 1978 Mich. Pub. Acts 1978, No. 368, § 25101, eff. Sept. 30, 1978); Mont. Code Ann. §§ 15-25-101 to -123
(repealed by 1995 M ont. Laws Sec. 74, Ch. 18; Sec. 4, Ch. 446); N.M. Stat. §§ 7-18A-1 to -7 (repealed by 1995 N.M.
Laws 1995, ch. 101, § 1, eff. July 1, 1995); N.D. Cent. Code §§ 57-36.1-01 to -16 (repealed by 1995 N.D. Laws, ch. 545,
§ 2, eff. Aug. 1, 1995); S.D. Codified Laws § 10-50A (repealed by 1987 S.D. Sess. Laws 1987, ch 111, §§ 1-15).

         15
             See M ilner v. State, 658 So.2d 500 (Ala. Civ. App. 1994); Covelli v. Comm’r of Revenue Servs., 668 A.2d
699 (Conn. 1995), vacated, Covelli v. Crystal, 518 U.S. 1031, aff’d on remand, Covelli v. Comm’r of Revenue Servs.,
683 A.2d 737 (Conn. 1996), cert. denied, Covelli v. Crystal, 520 U.S. 1174 (1997); State v. Lange, 531 N.W .2d 108
(Iowa 1995); State v. Gulledge, 896 P.2d 378 (Kan. 1995); Commonwealth v. Bird, 979 S.W .2d 915 (Ky. 1998); Sisson
v. Triplett, 428 N.W .2d 565 (Minn. 1988); State v. Stubblefield, 543 N.W .2d 743 (Neb. 1996); State v. Ballenger, 472
S.E.2d 572 (N.C. Ct. App. 1996), aff’d per curiam, 481 S.E.2d 84 (N.C. 1997); W hite v. State, 900 P.2d 982 (Okla.
Crim. App. 1995); McMullin v. S.C. Dep’t of Revenue & Taxation, 469 S.E.2d 600 (S.C. 1996); Ex parte W ard, 964
S.W .2d 617 (Tex. Crim. App. 1998).

         16
            See State v. Maurello, 932 P.2d 851 (Colo. Ct. App. 1997) (double jeopardy); Fla. Dep’t of Revenue v. Herre,
634 So.2d 618 (Fla. 1994) (self-incrimination); State v. Smith, 813 P.2d 888 (Idaho 1991) (self-incrimination); Wilson
v. Dep’t of Revenue, 662 N.E.2d 415 (Ill. 1996) (double jeopardy); Bryant v. State, 660 N.E.2d 290 (Ind. 1995) (double
jeopardy); Comm’r of Revenue v. Mullins, 702 N.E.2d 1 (Mass. 1998) (double jeopardy); Dep’t of Revenue v. Kurth
Ranch, 511 U.S. 767 (1994) (double jeopardy); Desimone v. State, 996 P.2d 405 (Nev. 2000) (double jeopardy); N.M.
Taxation & Revenue Dep’t v. W hitener, 869 P.2d 829 (N.M. Ct. App. 1993) (double jeopardy); State v. Roberts, 384
N.W .2d 688 (S.D. 1986) (self-incrimination); Brunner v. Collection Div., 945 P.2d 687 (Utah 1997) (double jeopardy);
State v. Hall, 557 N.W .2d 778 (W is. 1997) (self-incrimination).

         17
            These four states are Arkansas, see Arkansas News Bureau, Bill to Tax Illegal Drugs Stalls in House
Committee (Mar. 21, 2007), http://www.mpp.org/states/arkansas/news/bill-to-tax-illegal-drugs-stalls.html; Mississippi,
see Tennessee Drug Dealers Required to Buy Tax Stamps (July 13, 2005), http://www.redorbit.com/news/health/173172/
tennessee_drug_dealers_required_to_buy_tax_stamps/; New York, see Keith B. Richburg, New York ‘Crack Tax’
Proposal Is Derided, W ashington Post, Feb. 17, 2008, at A05; and Virginia, see Bad Bills: Drug Tax Dies in Virginia
Legislature, 472 Drug W ar Chronicle (Feb. 9, 2007), available at http://stopthedrugwar.org/chronicle/472/
                                                                                                          (continued...)

                                                           -9-
while the remaining fifteen states and the District of Columbia do not appear to have proposed such
legislation.18

                         B. Tennessee’s Tax on Unauthorized Substances
        It was in this legislative environment that the Tennessee General Assembly considered and
passed a tax on unauthorized substances in 2004.19 The statute is codified in Chapter 4 of Title 67
of the Tennessee Code Annotated, which is entitled “Privilege and Excise Taxes.” The stated
purpose of the statute is “to generate revenue for state and local law enforcement agencies for use
by those agencies to investigate, combat, prevent and reduce drug crimes, and for the general fund.”
Tenn. Code Ann. § 67-4-2801 (2006). The statute levies “[a]n excise tax . . . on unauthorized
substances possessed, either actually or constructively, by dealers” at specified rates for a variety of
enumerated substances, including marijuana stems and stalks, marijuana plants, cocaine, “any other
controlled substance or low-street-value drug,” and illicit alcoholic beverages. Tenn. Code Ann. §
67-4-2803. “Dealer” is defined in the statute as “any of the following: (A) A person who actually
or constructively possesses more than [the prescribed amounts of the enumerated unauthorized
substances]; or (B) A person who . . . possesses an illicit alcoholic beverage for sale.” Tenn. Code
Ann. § 67-4-2802(3) (2006). Significantly, the statute defines “dealer” only in terms of possession
and levies the tax only on unauthorized substances possessed.

        The enactment prescribes a clear procedure for compliance. Those in possession of the
illegal drugs are required to purchase tax stamps issued by the Department of Revenue and
permanently affix those stamps to the unauthorized substances in their possession in order to verify
that they have paid the necessary tax. Tenn. Code Ann. §§ 67-4-2805(a), -2806 (2006). “The tax
is payable within forty-eight (48) hours after the dealer acquires actual or constructive possession
of a non-tax-paid unauthorized substance”; otherwise, “the tax will become delinquent and shall
accrue penalty and interest.” Tenn. Code Ann. § 67-4-2806 (2006). The Department of Revenue
will assess a tax against any “dealer who possesses an unauthorized substance to which a stamp has
not been affixed.” Tenn. Code Ann. § 67-4-2807. “The dealer may seek review of the assessment
as provided in” Tennessee Code Annotated section 67-1-1801, et seq. Id. If a local or state law
enforcement agency in Tennessee seizes an unauthorized substance to which a tax stamp has not
been affixed, the agency must make a report to the Commissioner within forty-eight hours. Tenn.


         17
              (...continued)
drug_tax_bill_dies_in_virginia_legislature.

         18
            The states that apparently have not formally proposed or otherwise considered legislation to tax the possession
or sale of unauthorized drugs include Alaska, California, Delaware, Hawaii, Maryland, Missouri, New Hampshire, New
Jersey, Ohio, Oregon, Pennsylvania, Vermont, W ashington, W est Virginia and W yoming.

         19
            Both the House sponsor, Charles Curtiss (D-Sparta) and the Senate sponsor, Randy McNally (R-Oak Ridge),
stressed that similar taxes had been enacted in “twenty-seven other states” and that the language of the Tennessee
legislation was patterned after the existing tax in North Carolina. See, e.g., Statement of Rep. Curtiss, House Session,
May 19, 2004; Statement of Sen. McNally, Senate Session, May 10, 2004. Senator McNally also observed that “the
reason for . . . the threshold figures that trigger the tax [are] that’s what was used in the North Carolina statute that had
been successfully defended in court.” Statement of Sen. McNally, Senate Session, May 20, 2004.

                                                           -10-
Code Ann. § 67-4-2805(b). The “state or local law enforcement agency that conducted the
investigation of a dealer that led to the assessment” will receive 75% of the tax proceeds when such
a report is made, with the remaining 25% to be paid into the general fund. Tenn. Code Ann. § 67-4-
2809(b)(2).

       According to a spokesperson for the Department of Revenue, the enactment of the tax on
unauthorized substances required the creation of a ten-person tax agency at a one-time cost of $1.2
million. Cruz, Tennessee Targets Dealers, Users with New Levy, The Tennessean, Dec. 29, 2004,
at 1A. The Department of Revenue forecast the annual costs of enforcement to be $800,000. Id.
Data from the Department of Revenue indicates that the total collections made under Tennessee’s
unauthorized substances tax were $298.30 in fiscal year (“FY”) 2005,20 $884,851.49 in FY 2006,
$1,578,182.26 in FY 2007, $1,794,808.47 in FY 2008, and $756,819.59 through the first half of FY
2009. See Collections Summaries for June 2005, June 2006, June 2007, June 2008 & Dec. 2008,
available at http://www.tennessee.gov/revenue/statistics/archives.htm#summariesarch. The total
amount of collections over the first four years of the tax’s existence was, therefore, just over $5
million.21 Of this $5 million in total collections, $3,070.67, or 0.06%, came from the voluntary
purchase of tax stamps. Id. The remaining 99.94% of collections came about after law enforcement
agencies seized unauthorized substances and the Department of Revenue subsequently levied
assessments, penalties and interest. Id.

                                                 Analysis
         Some initial commentary is in order before we begin our analysis. The use, possession, and
sale of illegal drugs place an enormous burden upon our state and nation. The Office of National
Drug Control Policy estimated that between 1988 and 2000, Americans spent between $54 billion
and $154 billion annually on illicit drugs.22 In an effort to deter crime, our General Assembly has
prescribed lengthy sentences and hefty fines for individuals convicted of manufacturing, delivering,
or selling illegal drugs, or possessing illegal drugs for the purpose of manufacture, delivery, or sale.
Tenn. Code Ann. § 39-17-417(b)-(j) (2006 & Supp. 2008). For example, the possession of 300 or
more grams of cocaine with the intent to sell is a Class A felony with a fine of up to $500,000. Tenn.
Code Ann. § 39-17-417(j)(5). The possession of twenty-six grams or more of cocaine with the intent
to sell is a Class B felony, subjecting the offender to a fine of up to $200,000. Tenn. Code Ann. §
39-17-417(I). The possession of 0.5 grams or more of cocaine with the intent to sell is a Class B


        20
            Tennessee’s fiscal year begins on July 1 and extends through June 30 of the following year. Because the tax
on unauthorized substances became effective on January 1, 2005, the Department of Revenue made collections under
the tax for only the last six months of FY 2005.

         21
           The fiscal note on the Senate version of the legislation (S.B. 2419) projected that annual collections under
the unauthorized substances tax would be approximately $3.6 million. Statement of Sen. McNally, Senate Finance, W ays
& Means Committee, Apr. 6, 2004; see also Cruz, Tennessee Targets Dealers, Users with New Levy, The Tennessean,
Dec. 29, 2004, at 1A .

         22
          Office of National Drug Control Policy, W hat America’s Users Spend on Illegal Drugs: 1988-2000, at 3 (Dec.
2001), available at http://www.whitehousedrugpolicy.gov/publications/pdf/american_users_spend_2002.pdf.

                                                         -11-
felony with a fine of as much as $100,000. Tenn. Code Ann. § 39-17-417(c)(1). The cost for jails,
prisons, and law enforcement is substantial, and the expense of health care and social services is
enormous, but the real tragedy lies in the waste or loss of human life and its inevitably deleterious
effect upon family and friends. In this context, our legislature is worthy of commendation for its
effort to defray the costs incident to the struggle against illegal drugs. Even under these
circumstances, however, it is our duty to dispassionately apply the rule of law in a fair and impartial
manner, unswayed by genuine public concerns, partisan interests, or fear of criticism. Tenn. Sup.
Ct. R. 10, Canon 3(B)(2).

                             I. Federal and State Constitutional Issues
         Waters’ complaint contested the constitutionality of the unauthorized substances tax in light
of the right against self-incrimination, the protection against double jeopardy, and the guarantee of
procedural due process. The trial court ruled on each of these issues, but the Court of Appeals did
not address them. As a means of avoiding any delay occasioned by further litigation involving the
same issues, we will consider these constitutional challenges.

                                       A. Self-Incrimination
        Waters contends that the tax on unauthorized substances violates his right against compelled
self-incrimination under the federal and state constitutions. The trial court agreed, holding that the
tax “requires that [Waters] expose himself. It requires that he take some action to say in some way
that I am in the process or have committed a crime.” As indicated, the Court of Appeals did not
address the issue.

          The Fifth Amendment to the United States Constitution provides, in part, that “[n]o person
. . . shall be compelled in any criminal case to be a witness against himself.” U.S. Const. amend. V.
The Fifth Amendment privilege against self-incrimination applies to the states through the
Fourteenth Amendment. State v. Rogers, 188 S.W.3d 593, 605 n.4 (Tenn. 2006) (citing Malloy v.
Hogan, 378 U.S. 1, 6 (1964)). The Tennessee Constitution similarly guarantees “[t]hat in all
criminal prosecutions, the accused . . . shall not be compelled to give evidence against himself.”
Tenn. Const. art. I, § 9. With regard to self-incrimination, this Court has “traditionally interpreted
article I, § 9 to be no broader than the Fifth Amendment.” State v. Martin, 950 S.W.2d 20, 23 (Tenn.
1997). Both the federal and state provisions “protect the accused from being compelled to provide
evidence of a testimonial or communicative nature” that might later be used against him in a criminal
case. Id.; see also Fisher v. United States, 425 U.S. 391, 408 (1976); State v. Walton, 41 S.W.3d 75,
87 (Tenn. 2001). Where the evidence is not of a testimonial or communicative nature, the protection
against self-incrimination is inapplicable. State v. Cole, 155 S.W.3d 885, 898-99 (Tenn. 2005).

        As noted, the United States Supreme Court has previously found certain taxes on illegal
activity to violate the Fifth Amendment protection against self-incrimination. In Marchetti, the
Court addressed the applicability of the privilege in the context of an extensive registration
requirement related to a federal occupational tax on wagering. The statutory scheme required
bookmakers to submit a registration form to the Internal Revenue Service (“IRS”), which also served
as a tax return, indicating that they were engaged in the business of accepting wagers and including


                                                 -12-
both their personal information and that of their agents and employees. Marchetti, 390 U.S. at 42.
The IRS made this information available to state and federal law enforcement authorities, who
regularly used it in criminal prosecutions for gambling offenses. Id. at 47-48. Further, bookmakers
were required to post a revenue stamp, which denoted payment of the tax, “‘conspicuously’ in their
principal places of business, or . . . on their persons.” Id. at 47.

        In Marchetti, the high Court ruled that the “central standard for the privilege’s application
has been whether the claimant is confronted by substantial and ‘real,’ and not merely trifling or
imaginary, hazards of incrimination.” Id. at 53. Although the Court reiterated that the government
may generally tax illegal activities, it held that “every portion of [the statutory] requirements” of the
tax on wagering “had the direct and unmistakable consequence of incriminating” the individuals who
paid the tax. Id. at 49. Because registrants could “reasonably expect that registration and payment
of the occupational tax [would] significantly enhance the likelihood of their prosecution for future
acts, and [would] readily provide evidence which [would] facilitate their convictions,” the
registration requirements violated the privilege against self-incrimination. Id. at 54; see also Grosso,
390 U.S. at 65-67.23 Similarly, in Leary, the Court held that the transfer tax provisions of the
Marihuana Tax Act “created a ‘real and appreciable’ hazard of incrimination” because compliance
with those provisions would have required Dr. Leary to identify himself as a member of a “selective
group inherently suspect of criminal activities.” 395 U.S. at 18.

        In reviewing the constitutionality of their states’ drug stamp taxes, other state courts have
determined that Marchetti created three “criteria for determining the constitutionality of a tax statute
challenged on fifth amendment grounds.” Sisson v. Triplett, 428 N.W.2d 565, 571 (Minn. 1988);
see also Briney v. State Dep’t of Revenue, 594 So.2d 120, 122 (Ala. Civ. App. 1991); White v. State,
900 P.2d 982, 988-89 (Okla. Crim. App. 1995); State v. Hall, 557 N.W.2d 778, 784 (Wis. 1997).
The three Marchetti “prongs” are as follows:

         (1) whether the regulated activity is in an area “permeated with criminal statutes,”
         and the tax aimed at individuals “inherently suspect of criminal activities”[;]

         (2) whether an individual is required, under pain of criminal prosecution, to provide
         information which the individual might reasonably suppose would be available to
         prosecuting authorities[; and]




         23
           “Taking its cue from the language” in Marchetti and Grosso, Congress made several changes to the federal
tax on wagering in 1974, including: (1) deleting the requirement that registrants conspicuously display their tax stamp
or produce it upon demand; (2) no longer requiring local IRS offices to provide wagering tax information to local law
enforcement agencies; and (3) enacting specific restrictions upon the disclosure and use of wagering tax information.
United States v. Sahadi, 555 F.2d 23, 25 (2d Cir. 1977). “The 1974 revisions of the federal wagering tax laws and the
concomitant change in Treasury Department practices . . . eliminated the ‘real and appreciable’ hazards of
self-incrimination that existed under the prior law.” United States v. U.S. Currency, 626 F.2d 11, 13 (6th Cir. 1980)
(quoting Sahadi, 555 F.2d at 27) .

                                                         -13-
         (3) whether such information would prove a significant link in a chain of evidence
         tending to establish guilt.

Sisson, 428 N.W.2d at 571 (quoting Marchetti, 390 U.S. at 47-48). When applying either these three
specific elements or the broader “central standard” of whether compliance with the tax creates
substantial and real hazards of incrimination, some state courts have held that the information
taxpayers were required to provide under their states’ drug stamp taxes violated the privilege against
self-incrimination. See, e.g., Fla. Dep’t of Revenue v. Herre, 634 So.2d 618, 620 (Fla. 1994)
(holding that the confidentiality provisions of the drug tax statute were undermined by a provision
allowing the Department of Revenue to release taxpayers’ information “to state and federal law
enforcement officials as long as those officials present a subpoena”); State v. Roberts, 384 N.W.2d
688, 691 (S.D. 1986) (“We believe the clear import of [the drug stamp tax statute] is to incriminate,
and thus the chapter is unconstitutional.”); Hall, 557 N.W.2d at 787 (holding that the statute’s
purchase and affixation requirements both unconstitutionally compelled self-incrimination).
Conversely, other courts have upheld state drug stamp taxes in the face of constitutional challenges
based on the privilege against self-incrimination after determining that the information obtained by
revenue authorities as a result of the payment of the tax (1) was confidential, (2) could not be
divulged to the law enforcement authorities, and (3) could not be used in subsequent criminal
prosecutions except those for violations of the tax statute itself. See, e.g., Briney, 594 So.2d at
122-23 (observing that the statute contained “nothing less than an absolute exclusionary rule,
whereby any information that the Department improperly discloses is inadmissible unless it is
obtained from another source”); State v. Durrant, 769 P.2d 1174, 1183 (Kan. 1989); Sisson, 428
N.W.2d at 574 (Minn. 1988); State v. Garza, 496 N.W.2d 448, 455 (Neb. 1993); White, 900 P.2d
at 988-91; Zissi v. State Tax Comm’n, 842 P.2d 848, 857 (Utah 1992).

        The Tennessee General Assembly included specific language in this state’s tax on
unauthorized substances in an effort to avoid a process violative of the privilege against self-
incrimination. By the terms of the legislation, all information regarding possession of unauthorized
substances that is obtained in connection with the voluntary payment of the tax must remain
“confidential and, unless independently obtained, may not be used in a criminal prosecution.” Tenn.
Code Ann. § 67-4-2808 (Supp. 2004).24 Either disclosure or the improper inspection of tax
information by a Department of Revenue employee constitutes a criminal offense. Tenn. Code Ann.
§§ 67-1-1709(a), (c) (2006). Finally, “[d]ealers are not required to give their name, address, social
security number, or other identifying information on the form” they fill out to request the stamps,
and “[t]axes may be paid and stamps may be issued either by mail or in person.” Tenn. Code Ann.
§ 67-4-2805(a). Our comparison of these provisions with those enacted in other states leads us to


         24
            The trial court expressed concerns about the phrase “unless independently obtained,” stating that “the
argument that [W aters] can do this and suffer no consequences, unless the information about what he has done is
independently obtained, always runs the risk that . . . it’s obtained by someone who’s not . . . an employee of the state
or engaged in law enforcement, but obtained from some private person, perhaps in his own home or a friend or someone
in the community, who then reports it.” Of note is that the General Assembly removed this exception to the
confidentiality requirement in 2007 by deleting the phrase from the statute. 2007 Tenn. Pub. Acts 977 (codified at Tenn.
Code Ann. § 67-4-2808 (Supp. 2008)).

                                                          -14-
conclude that Tennessee’s drug stamp tax is more closely aligned with those statutory provisions that
have survived constitutional challenges grounded in the privilege against self-incrimination.

         Waters relies upon the Wisconsin Supreme Court’s opinion in Hall as support for his
contention that Tennessee’s tax on unauthorized substances violates his right against self-
incrimination. In that case, Wisconsin’s highest court held that both the act of purchasing the tax
stamps and the requirements that the stamps be affixed to and displayed upon the illegal drugs
violated the privilege against self-incrimination. Hall, 557 N.W.2d at 785-87. Wisconsin’s law, “on
its face, only provide[d] a dealer with protection from direct–not derivative–use of information
obtained by the [Department of Revenue] through compliance with the statute.25 Id. at 787. In our
view, Tennessee’s tax is different. Most significantly, Wisconsin’s taxing statute contained no
protections against the disclosure of the taxpayer’s information, either to law enforcement officers
or in subsequent criminal proceedings unrelated to the payment of the tax. In contrast, the provisions
of Tennessee Code Annotated section 67-4-2808 do contain such safeguards. Further, although the
Tennessee statute requires that the stamps be affixed, our statute provides that “[s]tamps issued
pursuant to this part may not be used in a criminal prosecution other than a prosecution for a
violation of this part.” Tenn. Code Ann. 67-4-2808. Thus, while a possessor of illegal drugs in
Tennessee is required to purchase and affix the revenue stamp, the state may not use the presence
of the stamp as evidence in a criminal prosecution for the possession or sale of illegal drugs. Contra
Hall, 557 N.W.2d at 786 (characterizing Wisconsin’s affixation requirement as “an incriminating
testimonial communication that the dealer knowingly and intentionally possesses a particular
quantity of unlawful drugs”).

         In summary, Tennessee’s tax on unauthorized substances ensures that the acquisition of drug
stamps is anonymous, that any information obtained by the Department of Revenue must remain
confidential and cannot be disclosed to law enforcement, and that the possession or use of drug
stamps may not be used as part of criminal investigation or prosecution. Thus, the payment of the
tax under these circumstances does not create a substantial, real and appreciable hazard of self-
incrimination. Moreover, although the tax is aimed at individuals “inherently suspect of criminal
activities,” the confidentiality provisions of the statute ensure that the information is not to be used
in a criminal prosecution, will not be made available to law enforcement or prosecuting authorities,
and cannot become a significant link in a chain of evidence tending to establish a violation of the
criminal laws prohibiting drug possession and sale. In consequence, the imposition of the tax on



         25
            Notably, the W isconsin legislature followed the suggestion of its state’s supreme court in Hall and adopted,
“almost verbatim,” the confidentiality provisions in the drug tax statute of its neighbor, Minnesota. State v. Jones, 651
N.W .2d 305, 315 (W is. Ct. App. 2002) (citing Hall, 557 N.W .2d at 791; 1997 W is. Sess. Laws 27, § 2979m, eff. Jan.
1, 1998). The Court of Appeals of W isconsin subsequently held that the amended language should be construed
consistently with the W isconsin legislature’s intent for it to “remedy the compelled self-incrimination problem identified
in Hall.” Jones, 651 N.W .2d at 315. The Idaho legislature likewise added a confidentiality provision to its drug tax
statute in order to pass constitutional muster. State v. Smith, 813 P.2d 888, 890 (Idaho 1991) (holding that the
amendments of 1990 Idaho Sess. Laws, ch. 179, § 1 cured the self-incrimination deficiencies in the original statute);
Harms v. Conway, No. CV06-34-S-LMB, 2007 W L 2265116, at *6 (D. Idaho Aug. 6, 2007) (same).

                                                          -15-
Waters does not violate his privilege against self-incrimination under either the United States or
Tennessee Constitution.

                                         B. Double Jeopardy
        Waters also asserted that Tennessee’s tax on unauthorized substances violated state and
federal constitutional protections against double jeopardy. At the conclusion of the hearing on the
declaratory judgment suit, the trial court determined that the statute imposed a criminal penalty rather
than a civil sanction and assessed a tax far in excess of the amount Waters paid for the illegal drugs,
both of which are key components in a double jeopardy analysis. Because, however, a jury had not
been empaneled in a criminal prosecution, the trial court held that Waters had not yet been exposed
to double jeopardy.

        Jeopardy attaches when a guilty plea is unconditionally accepted by a trial court. State v.
Todd, 654 S.W.2d 379, 383 (Tenn. 1983). Here, Waters entered a guilty plea to the criminal charge
on January 29, 2008, well after the assessment of the tax. Because it is undisputed that Waters was
eventually exposed to criminal punishment for his misdeeds, however, principles of judicial
efficiency suggest that we address the double jeopardy claim.

         Both the Fifth Amendment to the United States Constitution and article I, section 10 of the
Tennessee Constitution provide that no person shall, “for the same offence . . . be twice put in
jeopardy of life or limb.” “Three fundamental protections are encompassed in the principle of
double jeopardy: ‘(1) protection against a second prosecution after an acquittal; (2) protection against
a second prosecution after conviction; and (3) protection against multiple punishments for the same
offense.’” State v. Thompson, __ S.W.3d __, __, 2009 WL 1228309, at *6 (Tenn. 2009) (quoting
State v. Denton, 938 S.W.2d at 373, 378 (Tenn. 1996)). As to the third of these protections, the one
that might apply in this case, the United States Supreme Court has “long recognized that the Double
Jeopardy Clause does not prohibit the imposition of all additional sanctions that could, ‘in common
parlance,’ be described as punishment.” Hudson v. United States, 522 U.S. 93, 98-99 (1997)
(quoting United States ex rel. Marcus v. Hess, 317 U.S. 537, 549 (1943)); see also Moore v. Illinois,
55 U.S. 13, 19 (1852). Instead, “[t]he Clause protects only against the imposition of multiple
criminal punishments for the same offense, and then only when such occurs in successive
proceedings.” Hudson, 522 U.S. at 99 (internal citations omitted); see also State v. Conley, 639
S.W.2d 435, 436 (Tenn. 1982) (“[N]ot every deprivation visited upon one who violates the state’s
laws is to be considered ‘punishment’ for purposes of applying the double jeopardy clause.”); Metro.
Gov’t of Nashville & Davidson County v. Miles, 524 S.W.2d 656, 660 (Tenn. 1975) (“[O]nly actions
intended to authorize criminal punishment as distinguished from remedial actions subject the
defendant to ‘jeopardy.’” (quoting Cushway v. State Bar, 170 S.E.2d 732, 736 (Ga. Ct. App. 1969))).

       The key issue for our consideration, therefore, is whether the imposition of the tax on
unauthorized substances qualifies as a “civil” or “criminal” penalty. If the latter, Waters could not
lawfully have been subjected to a second “prosecution.” To answer this question, we will employ
two similar and overlapping tests that were developed by the United States Supreme Court and



                                                 -16-
applied recently to the unauthorized substances tax by our Court of Criminal Appeals. See State v.
Shields, No. W2007-01861-CCA-R9-CD, 2008 WL 4491739 (Tenn. Crim. App. Oct. 7, 2008).

          The first of these tests is a two-pronged, multi-factored analysis used to determine whether
any action by the state is criminal or civil in nature. This determination is, “at least initially, a matter
of statutory construction.” That is, we must ascertain “whether the legislature, ‘in establishing the
penalizing mechanism, indicated either expressly or impliedly a preference for one label or the
other.’” Hudson, 522 U.S. at 99 (quoting United States v. Ward, 448 U.S. 242, 248 (1980)). If the
legislature intended to establish a criminal punishment, then the inquiry ends, because the
punishment qualifies as a criminal penalty for purposes of double jeopardy. If, however, the
legislature intended to establish a civil penalty, our duty is to review the statutory scheme to ensure
that it is not “so punitive[,] either in purpose or effect,” as to turn the intended civil sanction into a
criminal punishment. Hudson, 522 U.S. at 99 (quoting Ward, 448 U.S. at 248-49). The following
factors guide our consideration:

        (1) “[w]hether the sanction involves an affirmative disability or restraint”;

        (2) “whether it has historically been regarded as a punishment”;

        (3) “whether it comes into play only on a finding of scienter”;

        (4) “whether its operation will promote the traditional aims of punishment -
        retribution and deterrence”;

        (5) “whether the behavior to which it applies is already a crime”;

        (6) “whether an alternative purpose to which it may rationally be connected is
        assignable for it”; and

        (7) “whether it appears excessive in relation to the alternative purpose assigned.”

Hudson, 522 U.S. at 99-100 (quoting Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168-69 (1963));
see also Shields, 2008 WL 4491739, at *2. No one of these guideposts should be considered
dispositive, “as they ‘may often point in different directions.’” Hudson, 522 U.S. at 101 (quoting
Kennedy, 372 U.S. at 169). However, “‘only the clearest proof’ will suffice to override legislative
intent and transform what has been denominated a civil remedy into a criminal penalty.” Hudson,
522 U.S. at 100 (quoting Ward, 448 U.S. at 249).26




        26
            The two-pronged Hudson/Kennedy analysis is analogous to the test for determining whether forfeiture
constitutes criminal punishment that was set forth in United States v. Ursery, 518 U.S. 267, 288 (1996), and applied
under Tennessee law by this Court in Stuart v. State Dep’t of Safety, 963 S.W .2d 28, 32-34 (Tenn. 1998).

                                                       -17-
         Our analysis does not end with our consideration of the Hudson/Kennedy factors. Our tax
on unauthorized substances must be compared with the taxing statute that was at issue in Department
of Revenue v. Kurth Ranch, 511 U.S. 767 (1994). In Kurth Ranch, the United States Supreme Court,
for the first time, invalidated a tax statute on the grounds that it abridged the Fifth Amendment right
against double jeopardy. Id. at 780-83. The Court observed that Montana’s Dangerous Drug Tax
Act27 had a “remarkably high” tax rate and was intended, “beyond question,” to deter the possession
of marijuana. Id. at 780-81. The Montana statute also exhibited two “unusual features” that “set [it]
apart from most taxes” and, the Court ruled, crossed the line between a civil tax and criminal
punishment. Id. at 781. First, Montana’s drug stamp tax “not only hinge[d] on the commission of
a crime,” but also was exacted only after the arrest of the taxpayer “for the precise conduct that gives
rise to the tax obligation in the first place.” Id. Second, the tax was imposed “on ‘possession’ of
goods that no longer exist[ed] and that the taxpayer never lawfully possessed.” Id. at 783. While
none of the four features was necessarily dispositive, their combination created a tax that was “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.

        After the Kurth Ranch opinion, several state courts ruled that their state drug stamp taxes,
when considered along with the criminal laws prohibiting possession and sale of unauthorized
substances, violated double jeopardy principles. See, e.g., Wilson v. Dep’t of Revenue, 662 N.E.2d
415, 419-21 (Ill. 1996); Bryant v. State, 660 N.E.2d 290, 296-97 (Ind. 1995); Comm’r of Revenue
v. Mullins, 702 N.E.2d 1, 5-8 (Mass. 1998); Desimone v. State, 996 P.2d 405, 410-11 (Nev. 2000);
Brunner v. Collection Div., 945 P.2d 687, 689-91 (Utah 1997). Other state courts, however,
concluded that their tax on illegal drugs did not contain the “unusual features” of the Montana tax
and rejected double jeopardy challenges based upon Kurth Ranch. See, e.g., Milner v. State, 658
So.2d 500, 502 (Ala. Civ. App. 1994); Covelli v. Comm’r of Revenue Servs., 668 A.2d 699, 703-07
(Conn. 1995), vacated, Covelli v. Crystal, 518 U.S. 1031 (1996), aff’d on remand, Covelli v.
Comm’r of Revenue Servs., 683 A.2d 737 (Conn. 1996), cert. denied, Covelli v. Crystal, 520 U.S.
1174 (1997); State v. Lange, 531 N.W.2d 108, 116-17 (Iowa 1995); State v. Gulledge, 896 P.2d 378,
389 (Kan. 1995); Commonwealth v. Bird, 979 S.W.2d 915, 917 (Ky. 1998); State v. Stubblefield,
543 N.W.2d 743, 748 (Neb. 1996); State v. Ballenger, 472 S.E.2d 572, 575 (N.C. Ct. App. 1996),
aff’d per curiam 481 S.E.2d 84 (N.C. 1997); McMullin v. S.C. Dep’t of Revenue and Taxation, 469
S.E.2d 600, 602-03 (S.C. 1996).

        The Hudson case, which was decided after Kurth Ranch, overruled United States v. Halper,
490 U.S. 435 (1989), a decision relied upon by the Kurth Ranch majority. Nevertheless, the Hudson
Court reaffirmed the vitality of Kurth Ranch, indicating by footnote that “a Kennedy-like test” had
been applied in Kurth Ranch before striking down the drug tax as “the functional equivalent of a
successive criminal prosecution.” Hudson, 522 U.S. at 102 n.6 (quoting Kurth Ranch, 511 U.S. at
784); see also Shields, 2008 WL 4491739, at *2 n.1. Moreover, while Hudson dealt with the civil
or criminal nature of state actions in general, Kurth Ranch considered the propriety of the very type
of law–a state drug stamp tax–that is at issue here. We will, therefore, consider both whether


       27
            Mont. Code Ann. §§ 15-25-101 to -123 (repealed by 1995 Mont. Laws § 74, ch. 18; § 4, ch. 446) .

                                                       -18-
Tennessee’s tax on unauthorized substances is a civil sanction rather than a criminal penalty under
the Hudson/Kennedy factors and whether the tax is sufficiently distinguishable from the Montana
drug stamp tax that the Supreme Court invalidated in Kurth Ranch.

                                    1. Hudson/Kennedy Analysis
        As stated, under Hudson, the threshold inquiry is whether our General Assembly
characterized the tax on unauthorized substances as civil rather than criminal in nature. In our view,
the statute passes this qualifying standard. Initially, the terms of Tennessee Code Annotated section
67-4-2801 specifically provide that the purpose of the taxing statute is “to generate revenue for state
and local law enforcement agencies for use by those agencies to investigate, combat, prevent and
reduce drug crimes, and for the general fund.” Secondly, the tax is payable within forty-eight hours
of the acquisition of the unauthorized substance, whether actual or constructive. Tenn. Code Ann.
§ 67-4-2806. Thirdly, the legislation includes a statement that the enforcement of the tax shall not
interfere with criminal prosecutions. See Tenn. Code Ann. § 67-4-2801 (“Nothing in this part may
in any manner provide immunity from criminal prosecution for a person who possesses an illegal
substance.”); Tenn. Code Ann. § 67-4-2810 (2006) (“The provisions of this part shall not be
construed to confer any immunity from criminal prosecution or conviction for a violation of title 39,
chapter 17, part 4, upon any person who voluntarily pays the tax imposed by this part or who
otherwise complies with the provisions of this part.”). Finally, the legislative history buttresses the
plain language of the statute by indicating that the General Assembly intended to create a civil
sanction.28

        Next, we shall consider each of the seven Hudson/Kennedy guideposts. The first two factors
are related: “[w]hether the sanction involves an affirmative disability or restraint” and “whether it
has historically been regarded as a punishment.” From a historical perspective, money penalties
have not been viewed as punishment. Hudson, 522 U.S. at 104 (citing Helvering v. Mitchell, 303
U.S. 391, 400 (1938)). “[A]ffirmative disability or restraint,” in the ordinary use of the term, is
something akin to “the ‘infamous punishment’ of imprisonment.” Hudson, 522 U.S. at 104 (quoting
Flemming v. Nestor, 363 U.S. 603, 617 (1960)). As our Court of Criminal Appeals has concluded,
“[p]ayment of a tax bears little resemblance to the deprivation of one’s liberty when incarcerated.”
Shields, 2008 WL 4491739, at *3. The first two factors, therefore, weigh in favor of the tax being
classified as a civil remedy rather than a criminal penalty.

        The third factor is whether the tax on unauthorized substances comes into play only on a
finding of scienter, or knowledge of wrongdoing. If so, the legislation is more likely to implicate
double jeopardy principles. Tennessee’s taxing statute does not contain a scienter requirement. To
the contrary, it imposes strict liability on “dealers,” who are defined only in terms of their possession




        28
           In response to a query from Representative Bob McKee (R-Niota) as to whether the proposed tax on
unauthorized substances “just adds another level of punishment,” Rep. Curtiss responded that the tax would be “going
at them from the civil side . . . .” Statement of Rep. Curtiss, House Finance, W ays & Means Committee, May 18, 2004.

                                                        -19-
of certain specified amounts of unauthorized substances. Tenn. Code Ann. § 67-4-2801. This
supports a finding that the tax qualifies as a civil sanction.29

        The fourth Hudson/Kennedy guidepost addresses whether the operation of the tax on
unauthorized substances “will promote the traditional aims of punishment,” namely retribution and
deterrence. This presents a more difficult question for this Court. On one hand, the stated purpose
of the tax is to generate revenue for state and local law enforcement agencies in order to reduce the
costs of combating illegal drugs. Tenn. Code Ann. § 67-4-2801. This would suggest that the
purpose of the tax is neither deterrence nor retribution. On the other hand, deterrence is “[t]he act
or process of discouraging certain behavior, particularly by fear,” Black’s Law Dictionary 481 (8th
ed. 2004), and by this definition, the imposition of tax on unauthorized substances has a deterrent
purpose on the possession of those substances that is similar to that of other “sin taxes” that
governments enact.30 Importantly, however, the Supreme Court has expressly indicated that
“deterrence ‘may serve civil as well as criminal goals.’” Hudson, 522 U.S. at 105 (quoting Ursery,
518 U.S. at 292). Based upon this directive, we believe that the fourth factor is either neutral or
mildly retributive, which would suggest a purpose more criminal in nature in the double jeopardy
analysis.

         Because possession of the amount of the controlled substances prescribed in Tennessee Code
Annotated section 67-4-2802(3) is a crime in Tennessee, the fifth factor is more clearly an indication
that the taxing statute imposes a criminal penalty. Of course, the United States Supreme Court held
in Hudson that the fact that the conduct for which money penalties and debarment sanctions were
imposed was already a crime was “insufficient to render [them] criminally punitive particularly in
the double jeopardy context.” 522 U.S. at 105 (citations omitted). Even though both the fourth and
fifth factors were suggestive of a criminal penalty in Hudson, the Court nevertheless concluded that
“there simply [was] very little showing, to say nothing of the ‘clearest proof’ required by Ward,” that
the penalties and sanctions in question were more criminal than civil, thereby implicating double
jeopardy. Id.

       The sixth factor considers whether there exists an alternative purpose to which the tax on
unauthorized substances may rationally be connected. We have already observed that the tax is both


         29
             The dissent’s proposed construction of the taxing statute would attach an inference of scienter–an intent to
sell or distribute controlled substances–to the possession of certain quantities of those substances. Such a reading would
suggest that the tax is more a criminal punishment than a civil penalty, at least with regard to this third factor of the
Hudson/Kennedy test.

         30
            See, e.g., Samantha K. Graff, State Taxation of Online Tobacco Sales: Circumventing the Archaic Bright Line
Penned By Quill, 58 Fla. L. Rev. 375, 379 (2006) (noting that sin taxes “deter buyers from indulging in harmful products
by making those products more expensive to obtain”); Eduardo Moisés Peñalver, Regulatory Takings, 104 Colum. L.
Rev. 2182, 2203 n.94 (2004) (“Because the activities covered by sin taxes are typically frowned upon (often, though not
always, because of their perceived harmful effects), sin taxes are often aimed as much at discouraging the targeted
behavior by making it more expensive as they are at raising revenue.”); see also Kurth Ranch, 511 U.S. at 791
(Rehnquist, C.J., dissenting) (arguing that “[w]hen compared to similar types of ‘sin’ taxes on items such as alcohol and
cigarettes,” the Montana drug stamp tax was not “so high that it can only be explained as serving a punitive purpose”).

                                                          -20-
a civil taxing measure contributing to the general revenue fund and a civil remedial measure
designed to mitigate against the enormous costs of law enforcement related to drug control for state
and local government. In fact, these dual purposes appear to be the driving forces behind the tax.
When a law enforcement agency conducts an investigation that leads to a tax assessment, the agency
receives 75% of the revenue regardless of whether any criminal charges are filed. The remaining
25% becomes a part of the State’s general fund. Tenn. Code Ann. § 67-4-2809(b)(2). All of the
funds voluntarily paid under Tennessee’s tax on unauthorized substances go directly into the general
fund. Tenn. Code Ann. § 67-4-2809(c). Because the generation of revenue is a legitimate,
alternative purpose, this sixth factor weighs in favor of the tax being classified as civil in nature.

        The seventh and final Hudson/Kennedy guidepost is whether the tax on unauthorized
substances appears excessive in relation to the civil purpose assigned to it. Waters asserts that the
tax is excessive because he paid $12,000 for the kilogram of cocaine and was then assessed with a
tax, penalties and interest totaling over $55,000. The trial court agreed, holding that the tax was “an
attempt to force him to pay an amount of money . . . far in excess of value of the item that he
obtained, . . . a kilo of cocaine, for which he paid $12,000.”

        Initially, the amount of that Waters paid for the cocaine, $12,000, was not the “value of the
item that he obtained.” The unrefuted testimony at the hearing established the street value for the
cocaine at approximately $100 per gram. The “retail” market value of the kilogram of cocaine, then,
approximated $100,000.31 Thus, the tax rate of $50 per gram set by section 67-4-2803(a)(4)
translates to approximately 50% of the market value of the product.

        In our view, a tax of $50 per gram of cocaine is not excessive when compared to its civil
purpose – generating revenue to fund the drug control efforts of law enforcement. In her dissenting
opinion in Kurth Ranch, Justice O’Connor wrote that “[t]he State and Federal Governments spend
vast sums on drug control activities,” and that the state “has a legitimate nonpunitive interest in
defraying the costs of such activities.” 511 U.S. at 794 (O’Connor, J., dissenting). Governmental
expenditures for drug control at the time of Kurth Ranch were significant. Id. (observing that the
Bureau of Justice Statistics at the United States Department of Justice estimated that approximately
$27 billion was spent on drug control in 1991). Today, we can safely speculate that law enforcement
costs attributable to drug control are even greater.32 Given the enormity of these costs, Waters has


         31
           The wholesale price of powder cocaine in December 2006 in Knoxville was between $20,000 and $24,000
per kilogram, or $20 to $24 per gram. U.S. Dep’t of Justice, National Illicit Drug Prices: December 2006, Table 3:
Powder Cocaine, at 10 (Feb. 2007), available at http://www.methadonesupport.org/DrugPrices.pdf. This wholesale value
is approximately double the price of $12,000, or $12 per gram, that W aters paid for the drugs.

         32
            For example, the federal executive branch has requested over $15 billion to support its National Drug Control
Strategy in FY 2010, approximately $3.5 billion of which is targeted towards domestic law enforcement. These figures
represent an increase from the final budget of $13.3 billion for the entire program and $3.5 billion for domestic law
enforcement in FY 2008. Office of National Drug Control Policy, National Drug Control Strategy: FY 2010 Budget
Summary, T able 1: Federal D rug Control Spending by Function, available at
                                                                                                        (continued...)

                                                          -21-
failed to clearly establish that the amount of the tax on unauthorized substances is excessive. Thus,
the seventh factor weighs in favor of the classification of the legislation as a civil remedy.

        Having considered the Hudson/Kennedy guideposts, we have determined that five of the
factors weigh in favor of the tax on unauthorized substances being classified as a civil sanction, one
factor weighs toward the tax being a criminal penalty, and one factor is either neutral or marginally
on the side of the statute qualifying as a criminal penalty. As the Court of Criminal Appeals ruled
in Shields, we hold “that the legislative intent that the tax is civil rather than criminal in nature has
not been overcome by . . . ‘the clearest proof,’” as is required under law. 2008 WL 4491739, at *7.
By application of the Hudson/Kennedy standard, Tennessee’s tax on unauthorized substances does
not, therefore, qualify as a criminal punishment.

                                     2. Kurth Ranch Analysis
        We now turn to whether Tennessee’s tax on unauthorized substances is sufficiently
distinguishable from the Montana tax that the Supreme Court invalidated in Kurth Ranch. If our
taxing statute contains the “unusual features” present in the Montana tax, then the assessment
qualifies as criminal for double jeopardy purposes.

        In Kurth Ranch, the Supreme Court observed that Montana had enacted a rate of taxation
of more than 400% of the market value of marijuana and 800% of the value of “shake” (the stems,
leaves, and other loose parts of the marijuana plant). 511 U.S. at 774 & n.12, 780 & n.17. It
characterized the tax rate as “remarkably high” and as “unrivaled” by any other jurisdiction. Id. at



         32
           (...continued)
http://www.whitehousedrugpolicy.gov/publications/policy/10budget/index.html (last visited June 9, 2009). In FY2006,
total federal criminal justice expenditures exceeded $36 billion. That amount was dwarfed by state and local spending
on law enforcement in 2006, which was approximately $69 billion and $104 billion, respectively. U.S. Department of
Justice, Office of Justice Programs, Bureau of Justice Statistics, Direct Expenditure by Level of Government,
1982-2006, available at http://www.ojp.usdoj.gov/bjs/glance/tables/expgovtab.htm (last visited June 9, 2009).

The State of Tennessee and its local communities have not been immune from these high costs. In 2000, the expenditures
of the Tennessee Department of Safety were nearly $140 million. In addition, the combined expenditures of the Shelby
County Sheriff’s Department and Memphis Police Department exceeded $233 million, the expenditures of the
Nashville/Davidson County Metropolitan Police Department exceeded $101 million, the combined expenditures of the
Knox County Sheriff’s Department and Knoxville Police Department exceeded $50 million, and the combined
expenditures of the Hamilton County Sheriff’s Department and Chattanooga Police Department were nearly $47 million.
Brian A. Reaves & Matthew J. Hickman, Bureau of Justice Statistics, Law Enforcement Management and Administrative
Statistics, 2000: Data for Individual State and Local Agencies with 100 or More Officers 58-59, 245 (2004), available
at http://www.ojp.usdoj.gov/bjs/pub/pdf/lema002a.pdf and http://www.ojp.usdoj.gov/bjs/pub/pdf/lema002b.pdf. “State
and local government expenditures for drug enforcement are substantial but more difficult to determine with precision.”
Juan R. Torruella, The “W ar on Drugs”: One Judge’s Attempt at a Rational Discussion, 14 Yale J. on Reg. 235, 242
(1997).

As noted, the total amount of revenues from the tax on unauthorized substances over the first four years of the tax's
existence was just over $5 million.

                                                         -22-
780 & n.17. The Court also found it to be “beyond question” “[t]hat the Montana Legislature
intended the tax to deter people from possessing marijuana.” Id. at 780.

        Of note is that the 50% tax rate on cocaine imposed by our legislation is far less than the rates
of taxation considered by the high court in Kurth Ranch. Further, as we have observed, the
Tennessee General Assembly passed the tax on unauthorized substances, at least in part, to deter the
possession of illegal drugs. We do not find these facts to be dispositive, however, because the Court
expressly indicated that “neither a high rate of taxation nor an obvious deterrent purpose
automatically marks this tax as a form of punishment.” In fact, “many taxes that are presumed valid,
such as taxes on cigarettes and alcohol, are also both high [in amount] and motivated to some extent
by an interest in deterrence.”33 Id. at 780-81. “Thus, while a high tax rate and deterrent purpose lend
support to the characterization of the drug tax as punishment, these features, in and of themselves,
do not necessarily render the tax punitive.” Id. at 781.

        The two “unusual features” that led the Court to invalidate the Montana Dangerous Drug Tax
as violative of the right against double jeopardy are of even greater significance that the rate of
taxation or any deterrent purposes. First, the Montana tax “not only hinge[d] on the commission of
a crime,” but also was “exacted only after the taxpayer ha[d] been arrested for the precise conduct
that g[ave] rise to the tax obligation in the first place.” Kurth Ranch, 511 U.S. at 781. That is, the
Montana taxpayer had “no obligation to file a return or pay any tax unless and until he [was]
arrested,” id. at 771, meaning that those “arrested for possessing marijuana constitute[d] the entire
class of taxpayers subject to the Montana tax.” Id. at 782. The second “unusual feature” of the
Montana tax was that it only applied to drugs that had been seized after an arrest. In consequence,
the tax was levied only upon goods that the taxpayer neither owned nor possessed at the time it was
imposed. Id. at 783. The Court observed that “[a] tax on ‘possession’ of goods that no longer exist
and that the taxpayer never lawfully possessed has an unmistakable punitive character.” Id. The
Court also found it “curious” that one of the two alternative measures of the Montana tax was the
market value of marijuana, a substance that, of course, could not be lawfully sold. Id. at 783 n.23.




         33
             By way of comparison, Tennessee raised its state excise tax on cigarettes from $0.20 to $0.62 per pack
effective July 1, 2007. 2007 Tenn. Pub. Acts 488-89. Considering all such state taxes as of July 1, 2009, Tennessee’s
tax ranks thirty-ninth among the fifty states and the District of Columbia, and is less than half of the average state excise
tax of $1.27 per pack. Campaign for Tobacco-Free Kids, State Cigarette Excise Tax Rates & Rankings (updated May
28, 2009), available at http://www.tobaccofreekids.org/research/factsheets/index.php?CategoryID=18. The average retail
price per pack of cigarettes in Tennessee with all taxes included, including the $1.01 per pack federal tax, is $4.36.
Campaign for Tobacco-Free Kids, State Excise and Sales Taxes Per Pack of Cigarettes: Total Amounts and State
Rankings (updated May 28, 2009), available at http://www.tobaccofreekids.org/research/factsheets/index.php?
CategoryID=18. Thus, even Tennessee’s comparatively small cigarette excise tax amounts to over 14% of the average
retail price per pack. W hen one takes into account the Tennessee sales tax of 8.5%, which also applies to cigarettes, see
id., state taxes are responsible for 22% of the average retail price per pack of cigarettes in Tennessee.

                                                           -23-
        Because Tennessee’s tax on unauthorized substances was modeled after the drug stamp tax
in our neighboring state of North Carolina,34 that state’s experience with its statute in the wake of
Kurth Ranch is particularly instructive. The North Carolina drug stamp tax was first enacted in
1989. The Fourth Circuit Court of Appeals, invoking Kurth Ranch, held that the original version
of North Carolina’s drug tax statute was a criminal penalty rather than a civil tax. Lynn v. West, 134
F.3d 582, 589-93 (4th Cir. 1998), cert. denied 525 U.S. 813 (1998).35 The tax has since been
amended three times.36 Moreover, North Carolina’s courts have distinguished their state’s drug
stamp tax from the Montana tax invalidated in Kurth Ranch:

         The North Carolina Controlled Substance Tax, as it was in effect at all times
         pertinent to this case . . . contains neither of the “unusual features” upon which the
         Supreme Court relied in Kurth Ranch to conclude that Montana’s dangerous drug tax
         constituted punishment for double jeopardy purposes. The North Carolina
         Controlled Substance Tax is not predicated upon whether the taxpayer in possession
         of the controlled substance has been arrested or charged with criminal conduct, nor
         is it assessed on property that necessarily has been confiscated or destroyed. . . . The
         tax obligation is not contingent upon the dealer’s arrest which, in the normal course
         of events, would result in the confiscation and destruction of the substance. The
         dealer can satisfy his tax obligation by paying the tax upon acquisition of the
         substance and by then permanently affixing thereto stamps issued by the Secretary
         of Revenue to indicate payment. So long as the stamps remain affixed, no additional
         tax is thereafter due even though the substance may be handled by other dealers.
         Because the North Carolina tax becomes payable within forty-eight hours after the
         taxpayer comes into possession of the substance, it is not a tax on confiscated goods,


         34
           Supra note 19; Bonna de la Cruz, Tennessee Targets Dealers, Users with New Levy, The Tennessean, Dec.
29, 2004, at 1A.

         35
           Lynn addressed North Carolina’s drug stamp tax in the context of a suit claiming a deprivation of civil rights
under 42 U.S.C. § 1983. 134 F.3d at 583-84. The Fourth Circuit’s ultimate holding was that because North Carolina’s
drug tax is a criminal penalty, all proceedings to enforce it must include the constitutional safeguards that attach to
criminal proceedings. Id. at 593.

         36
           N.C. Gen. Stat. §§ 105-113.105 to .113 (as amended by 1995 N.C. Sess. Laws, ch. 340, § 1, eff. Oct.1, 1995;
1997 N.C. Sess. Laws ch. 292, § 1, eff. Oct. 1, 1997; 1998 N.C. Sess. Laws ch. 218, eff. Oct. 31, 1998). The North
Carolina General Assembly designed amendments to the statute in both 1995 and 1998 specifically to address the
concerns of the Supreme Court and the Fourth Circuit and to make the statute less punitive for double jeopardy purposes.
The preamble to the 1998 amendments to the law states, in part:

         W hereas, upon further challenge in the federal courts, the controlled substance tax was found in 1998
         to be a criminal penalty, and the United States Supreme Court let the federal ruling stand . . . it is,
         therefore, the intent of the North Carolina General Assembly to modify the tax in accordance with the
         recent federal court ruling, so that the tax may continue to be assessed in a manner consistent with the
         law as interpreted by the federal courts.

N.C. Sess. Laws 1998-218.

                                                          -24-
         as was the case with the Montana tax, which became due only upon the taxpayer’s
         arrest for possession of the substance. . . .

         *     *    *

         We hold that the North Carolina Controlled Substance Tax does not have such
         fundamentally punitive characteristics as to render it violative of the prohibition
         against multiple punishments for the same offense contained in the Double Jeopardy
         Clause.

Ballenger, 472 S.E.2d at 574-75 (emphasis added) (internal citations omitted); see also Shields, 2008
WL 4491739, at *6 (discussing the interpretation of the North Carolina tax). Subsequent opinions
have reaffirmed Ballenger and indicated that the Fourth Circuit’s characterization of the North
Carolina drug stamp tax as a criminal penalty is not binding on their state’s courts.37 Most recently,
a federal district court held that the amended North Carolina statute is a civil tax, not a criminal
penalty. Hough v. Mozingo, No. 1:04 CV 609, 2005 WL 1168462, at *7-8 (M.D.N.C. Apr. 29,
2005); see also Nivens v. Gilchrist, 319 F.3d 151, 155-58 (4th Cir. 2003) (discussing at length the
amendments to North Carolina’s drug stamp tax and holding that Lynn was not controlling in a case
involving the post-1995 version of the tax).

        The unauthorized substances tax in Tennessee contains the same provisions that have
distinguished the North Carolina drug stamp tax from the invalidated Montana tax. Like the North
Carolina law, those “dealers” in Tennessee who acquire actual or constructive possession of an
unauthorized substance on which taxes have not been paid are required to purchase tax stamps from
the Department of Revenue within forty-eight hours and permanently affix those stamps to the
unauthorized substances in their possession. Compare Tenn. Code Ann. § 67-4-2806 with N.C. Gen.
Stat. § 105-113.109. Thus, unlike the Montana tax, Tennessee’s statutory scheme requires prompt
payment of the tax upon coming into possession of the unauthorized substance. Tennessee’s tax,
therefore, is not contingent on an arrest. To the contrary, a “dealer” owes the tax even if he or she
is never arrested.38 In fact, the Department of Revenue may assess the tax even if no criminal

         37
          N.C. Sch. Bds. Ass’n v. Moore, 614 S.E.2d 504, 515-16 (N.C. 2005) (reaffirming Ballenger); State v. Creason,
473 S.E.2d 771, 772 (N.C. Ct. App. 1996), aff’d per curiam 484 S.E.2d 525 (N.C. 1997) (same); State v. Adams, 513
S.E.2d 588, 589 (N.C. Ct. App. 1999) (affirming Ballenger and Creason in light of the Fourth Circuit’s decision in Lynn,
which is not binding on North Carolina state courts); Milligan v. State, 522 S.E.2d 330, 331-32 & n.2 (N.C. Ct. App.
1999) (reiterating that the drug tax is not a criminal penalty and Lynn is not binding) .

         38
            The legislative history establishes that the bill’s sponsors did not anticipate that many drug dealers would pay
the tax ahead of arrest and prosecution. Moreover, Department of Revenue statistics reveal that only a very small
fraction of collections stem from the voluntary purchase of drug stamps. However, the fact that “many dealers refuse
to pay the tax does not transform the tax into one assessed only upon criminal prosecution.” Simpson v. Bouker, 249
F.3d 1204, 1211 (10th Cir. 2001) (addressing Kansas’s drug stamp tax in the context of a petition for writ of habeas
corpus and holding that State v. Jensen, 915 P.2d 109 (Kan. 1996), which upheld the tax in light of Kurth Ranch, was
also consistent with the analysis in Hudson). “The practicalities surrounding the imposition of the tax . . . merely reflect
                                                                                                           (continued...)

                                                           -25-
prosecution is forthcoming.39 Furthermore, Tennessee’s tax on unauthorized substances does not
apply, as the Montana tax did, only to items that have already been seized and are no longer in the
taxpayer’s possession. Instead, the tax is imposed upon dealers who are in possession of more than
a certain specified amount of an unauthorized substance, regardless of whether that substance has
been seized. See Tenn. Code Ann. § 67-4-2803. The amounts prescribed under section 67-4-2803
also are not based, as Montana’s tax on marijuana was in part, on the “market value” of those illegal
substances. In short, our statute taxing unauthorized substances contains neither of the “unusual
features” that were present in the Montana drug stamp tax considered in Kurth Ranch. It may,
therefore, be properly classified as a civil measure rather than a criminal punishment.

        After careful consideration of the tests set forth by the United States Supreme Court in both
Hudson and Kurth Ranch, our conclusion is that Tennessee’s tax on unauthorized substances is not
a criminal punishment for purposes of the double jeopardy clause of the federal and state
constitutions.40 The trial court’s conclusion that the tax is a criminal penalty was erroneous. Thus,
Waters’ plea of guilty to the criminal charges against him, which occurred subsequent to the
imposition of the tax by the Department of Revenue, did not implicate double jeopardy principles.

                                      C. Procedural Due Process
         Because Waters’ assets were “seized without notice or opportunity to object,” the trial court
held that the Department of Revenue’s procedures for assessment and collection of the tax on
unauthorized substances failed to satisfy the procedural due process requirements of the state and
federal constitutions. Our next consideration, therefore, is whether the Department of Revenue’s
procedure violates the due process clauses of the Fourteenth Amendment to the United States
Constitution and article I, section 8 of the Tennessee Constitution. Initially, because the taxing
statute qualifies as civil in nature rather than criminal, the enforcement of the tax does not trigger
the constitutional safeguards that accompany criminal proceedings. Contra Lynn, 134 F.3d at 593.
In consequence, we will consider only whether the tax meets the procedural due process
requirements for a civil tax.

       In proceedings challenging the imposition of a tax, the government must allow the taxpayer
to be heard in a meaningful way. Specifically, “[t]o satisfy the requirements of the Due Process
Clause . . . the State must provide taxpayers with, not only a fair opportunity to challenge the

         38
              (...continued)
the reality of attempting to tax an illegal activity. The taxpayer’s voluntary choice to ignore his or her tax obligations
should not be the determinative factor in evaluating whether [the] tax constitutes punishment in the double jeopardy
context.” Covelli, 668 A.2d at 706. But see Lynn, 134 F.3d at 591 (“The theoretical possibility that a drug dealer could
voluntarily pay the Drug Tax does not take the tax out of the criminal penalty category.”).

         39
          During the legislative debate, Representative Tommy Head (D-Clarksville) stated that “it is a possibility that
you cannot convict someone of a drug offense but can collect the tax.” Statement of Rep. Head, House Finance, W ays
& Means Committee, May 18, 2004.

         40
           Our holding also disposes of any substantive due process claim that W aters has made based upon the tax being
a criminal punishment rather than a civil remedy.

                                                          -26-
accuracy and legal validity of their tax obligation, but also a ‘clear and certain remedy’ for any
erroneous or unlawful tax collection to ensure that the opportunity to contest the tax is a meaningful
one.” McKesson Corp. v. Div. of Alcoholic Beverages and Tobacco, 496 U.S. 18, 39 (1990)
(quoting Atchison, Topeka & Santa Fe Ry. Co. v. O’Connor, 223 U.S. 280, 285 (1912)) (footnotes
omitted). This opportunity to contest, however, need not precede the assessment and collection of
the tax:

       [I]t is well established that a State need not provide predeprivation process for the
       exaction of taxes. Allowing taxpayers to litigate their tax liabilities prior to payment
       might threaten a government’s financial security, both by creating unpredictable
       interim revenue shortfalls against which the State cannot easily prepare, and by
       making the ultimate collection of validly imposed taxes more difficult.

McKesson, 496 U.S. at 37; accord Harper v. Va. Dep’t of Taxation, 509 U.S. 86, 100-01 (1993).
This Court has applied similar principles, holding that

       the state has the power to assess taxes and fix methods for the collection thereof, and
       it does not matter if these remedies be summary in their nature, so long as the
       taxpayer is in some way, at some stage of the proceedings, given an opportunity to
       be heard and have his rights determined before some competent tribunal.

E. Tenn. Brewing Co. v. Currier, 150 S.W. 541, 544 (Tenn. 1912).

         The tax on unauthorized substances is assessed in the same manner as other taxes in
Tennessee, and dealers may seek review of an assessment for possession of unauthorized substances
as provided in Tennessee Code Annotated section 67-1-1801, et seq. Tenn. Code Ann. § 67-4-2807.
“[I]f the taxpayer against whom the assessment is made believes the assessment to be unjust, illegal
or incorrect,” his remedies are to either “pay the tax and file a claim for refund of the tax” or “file
suit against the commissioner . . . challenging all or any portion of the assessment of such tax,
including any interest and penalty associated with the tax.” Tenn. Code Ann. § 67-1-1801(a)(1)(A)-
(B). Because he presented a facial challenge to the constitutionality of the tax on unauthorized
substances, Waters also had the option, which he exercised, of filing a declaratory judgment action
in the chancery court. Colonial Pipeline, 263 S.W.3d at 840.

        Waters does not dispute the State’s argument that the process for challenging an assessment
under Tennessee Code Annotated sections 67-4-2807 and 67-1-1801 complies with the due process
requirements outlined in McKesson, East Tennessee Brewing Co., and their progeny. To the
contrary, his procedural due process argument relies entirely on a holding that the the tax constitutes
a criminal penalty. Having already rejected the foundation for his argument, we hold that the
statutory procedure for appealing an imposition of the tax on unauthorized substances does not
violate the due process clauses of the federal and state constitutions.




                                                 -27-
         While we have concluded that the tax on unauthorized substances does not violate Waters’
rights against self-incrimination and double jeopardy and is otherwise compliant with procedural due
process, this does not fully resolve the question of constitutionality. We must also determine, as the
Court of Appeals did, whether the tax exceeds the General Assembly’s taxing power under article
II, section 28 of the Tennessee Constitution.

            II. The General Assembly’s Taxing Power Under Article II, Section 28
        The power to tax belongs to the State in its sovereign capacity, and the exercise of the taxing
power is exclusive to the legislature. Waterhouse v. Bd. of President & Dirs. of Cleveland Pub.
Schs., 68 Tenn. 398, 400 (1876); see also Sears, Roebuck & Co. v. Woods, 708 S.W.2d 374, 383
(Tenn. 1986); Bank of Commerce & Trust Co. v. Senter, 260 S.W. 144, 146 (Tenn. 1924). Because
taxes produce the revenue by which the government operates, the legislature has wide discretion in
the adoption of tax measures, and its judgment must be accorded great respect. Genesco, Inc. v.
Woods, 578 S.W.2d 639, 641 (Tenn. 1979), superseded on other grounds by 1980 Tenn. Pub. Acts
1278 (codified at Tenn. Code Ann. § 67-1-801(a)(2) (2006)); see also Vertrees v. State Bd. of
Elections, 214 S.W. 737, 740 (Tenn. 1919) (“[A] constitutional limitation upon the power of taxation
will never be inferred or implied. . . . [T]he legislative power in this respect can only be restrained
by a distinct and positive expression in the fundamental law.”). The legislature’s power to tax,
however, is not altogether unrestrained, as courts may invalidate a tax statute if it runs afoul of the
federal or state constitution. Sears, Roebuck & Co., 708 S.W.2d at 383; Evans v. McCabe, 52
S.W.2d 159, 160 (Tenn. 1932).

                                  A. History of Article II, Section 28
        Before determining whether the tax on unauthorized substances is a valid exercise of the
General Assembly’s taxing power, we must first review the history and scope of the power granted
by article II, section 28 of the Tennessee Constitution, and specifically the provision in that section
pertaining to merchants, peddlers, and privileges:

        The Legislature shall have power to tax merchants, peddlers, and privileges, in such
        manner as they may from time to time direct, and the Legislature may levy a gross
        receipts tax on merchants and businesses in lieu of ad valorem taxes on the
        inventories of merchandise held by such merchants and businesses for sale or
        exchange. The portion of a Merchant’s Capital used in the purchase41 of merchandise
        sold by him to non-residents and sent beyond the State, shall not be taxed at a rate
        higher than the ad valorem tax on property.

Tenn. Const. art. II, § 28. This language finds its origin in the earliest days of our statehood, when
the legislature first perceived commerce as a potential source of revenue. In 1803, the General
Assembly imposed a tax upon, inter alia, “retail stores, pedlers and hawkers within this state.” 1803
Tenn. Pub. Acts 28. Before selling “any article of merchandize,” these taxpayers were required to


        41
          The version of article II, section 28 that appears in the 2007 Replacement of the Tennessee Code Annotated
erroneously substitutes the word “purpose” for the word “purchase.”

                                                       -28-
pay twenty-five dollars for a one-year license to the clerk of the county in which they were doing
business. Id. at 28-29. In 1819, the General Assembly increased the license tax on “any hawker or
pedlar” to fifty dollars and determined that they should pay the same fifty-dollar tax for each wagon
or carriage they used in their business.42 1819 Tenn. Pub. Acts 61-62.

         By the beginning of the 1830s, controversy over taxation was brewing in Tennessee. Article
I, section 26 of the Tennessee Constitution of 1796 required land to be taxed in a uniform manner
based on acreage.43 As a result, productive and fertile farmland could be taxed at no higher rate than
non-arable land. The Constitutional Convention of 1834 fundamentally altered the structure of
taxation in Tennessee. Specifically, article II, section 28 of the Tennessee Constitution of 1834
provides as follows:

         All lands liable to taxation, held by deed, grant, or entry, town lots, bank stock, slaves
         between the ages of twelve and fifty years, and such other property as the Legislature
         may from time to time deem expedient, shall be taxable. All property shall be taxed
         according to its value; that value to be ascertained in such manner as the Legislature
         shall direct, so that the same shall be equal and uniform throughout the State. No
         other species of property from which a tax may be collected, shall be taxed higher
         than any other species of property of equal value. But the Legislature shall have
         power to tax merchants, pedlars, and privileges, in such manner as they may, from
         time to time, direct. A tax on white polls shall be laid, in such manner and of such
         an amount, as may be prescribed by law.

Journal of the Convention of the State of Tennessee, Convened for the Purpose of Revising And
Amending the Constitution Thereof 396 (Nashville, W. Hasell Hunt & Co. 1834) (“1834 Convention
Journal”) (emphasis added). The change to taxation of real property based upon its value, instead
of its acreage, was not the only significant modification to Tennessee’s approach to taxation in the
1834 Constitution. An amendment offered by John A. McKinney44 expressly authorizing the
legislature to “tax merchants, pedlars, and privileges, in such manner as they may, from time to time,
direct” reflected the growing economic diversity in this state.45 The 1834 Constitution made the


         42
           Three years later, the General Assembly reduced the tax on peddlers to twenty-five dollars per wagon or
carriage. 1822 Tenn. Pub. Acts 10-11.

         43
           W illiam Lyons et al., Government and Politics in Tennessee 30 (2001); Robert E. Corlew, Tennessee: A
Short History 165 (2d ed. 1990) (“For many years the taxation clause – which provided for equal taxation of all land
(except town lots, for which taxes might be as high as those for 200 acres of land) – had been a thorn in the flesh of small
farmers who occupied land less valuable than that of others, especially in the valley and basin areas.”) .

         44
           McKinney, a delegate from Hawkins County, was also a driving force in the debate over modifying the
taxation of land from acreage-based taxation to value-based taxation. 1834 Convention Journal, at 4; 1 Stanley J.
Folmsbee et al., History of Tennessee 302 (1960).

         45
              Lewis L. Laska, The Tennessee State Constitution 7 (1990).

                                                           -29-
“[c]ontinuance of the practice of taxing ‘merchants, peddlers, and privileges’ . . . permissive,”46
rather than subject to the requirement elsewhere in the section that property be taxed at an equal rate
based upon value.

       Although taxation was not one of the driving forces for the Constitutional Convention of
1870, that convention did modify the General Assembly’s taxing power in article II, section 28.
Several delegates, representing the concerns of commercial interests, aggressively challenged the
exemption from the principle of equality in taxation that was embodied in article II, section 28 of
the Constitution of 1834. Their concerns are reflected by the arguments of Joseph B. Heiskell:47

        We think that the principles of constitutional government require that every class of
        men shall be entitled to the same protection against oppression and against unequal
        burthens which are guaranteed to other classes. The provision inserted by the
        Convention, borrowed from the Constitution of 1834, declares that all men shall be
        taxed equally except merchants and peddlers. Why they should be singled out and
        subjected to a rule of taxation absolutely prohibited as to any other citizen, the
        subscribers cannot well perceive.

Journal of the Proceedings of the Convention of Delegates 300 (Nashville, Jones, Purvis & Co.,
1870) (“1870 Convention Journal”) (emphasis added). See also Friedman Bros. v. Mathes, 55 Tenn.
(8 Heisk.) 488, 493 (1872) (“[T]his proviso was intended as a palpable discrimination against the
occupations and classes therein mentioned, and [] the power of taxation as to them, is left to the
sound discretion of the legislative department.”); Adams v. Mayor of Somerville, 39 Tenn. (2 Head)
363, 365-66 (1859) (noting the key distinction in the 1834 Constitution between taxation of property
and taxation of privileges).

        The 1870 Convention declined to extend the principle of equality to the taxation of
merchants, peddlers, and privileges. See Logan’s Supermarkets, Inc. v. Atkins, 304 S.W.2d 628, 630
(Tenn. 1957) (citing cases for the proposition that “the Legislature is not bound by the rule of
uniformity prescribed in cases of taxes on property”). It did, however, propose to amend article II,
section 28 to address the concerns expressed by Heiskell and others. 1870 Convention Journal, at
369-70. As finally adopted and ratified, article II, section 28 empowered the General Assembly to

        tax Merchants, Peddlers, and privileges, in such manner as they may from time to
        time direct. The portion of a Merchant’s Capital used in the purchase of
        Merchandise sold by him to non-residents and sent beyond the State, shall not be
        taxed at a rate higher than the ad valorem tax on property.



        46
             W allace McClure, State Constitution-Making W ith Especial Reference to Tennessee 53 (1916).

        47
             Heiskell was a delegate from Shelby County. He served as Attorney General and Reporter of Tennessee from
1870 to 1878. Riley C. Darnell, Secretary of State, Tennessee Blue Book 2007-2008 508.

                                                         -30-
1870 Convention Journal, at 421-22. A mere two years after the Convention of 1870 completed its
work, this Court addressed the significance of the amendments to article II, section 28:

         There was in the Convention of 1870, a very energetic opposition to engrafting upon
         the New Constitution, the clause of the Old Constitution which seemed to operate so
         harshly and invidiously against the commercial community. We refer to that clause
         which excludes merchants, peddlers, and privileges, from the protection of the
         principle of equality. When, however, it was finally adopted, a solemn protest was
         presented against it by the representatives of large commercial constituencies. And
         shortly thereafter, the clause now in question was brought forward and adopted. And
         this was intended as a limitation upon the general power conferred by the
         Constitution of 1834, and was regarded as a great triumph in behalf of the merchant.

Friedman Bros., 55 Tenn. at 496-97 (emphasis added).

        Although article II, section 28 remained unchanged for over one hundred years, it was
amended in 1972, 1982 and 2006. The amendment ratified in 1972 slightly altered the language
regarding the taxation of merchants, peddlers, and privileges. The Journal and Debates of the
Constitutional Convention 854 (1971). As noted, the current version of article II, section 28
explicitly empowers the General Assembly to tax “merchants, peddlers, and privileges, in such
manner as they may from time to time direct.” In the past, this Court has observed that the inclusion
of the phrase “in such manner as they may from time to time direct” reflected the framers’ intent to
give the General Assembly broad discretion to tax merchants, peddlers, and privileges. Kelly v.
Dwyer, 75 Tenn. 180, 188-89 (1881); Friedman Bros., 55 Tenn. at 493; Jenkins v. Ewin, 55 Tenn.
(8 Heisk.) 456, 479 (1872). The question presented in this case, of course, is whether the tax on
unauthorized substances falls within the legislature’s taxing power as defined by our state
constitution.48

                                B. Taxes on Merchants and Peddlers
        The Commissioner argues that the Court of Appeals erred by focusing only on a lack of
constitutional authority to tax possession of unauthorized substances as a privilege, thereby failing
to address the possibility that the General Assembly, by the enactment of the tax, properly exercised
its corresponding power to tax merchants and peddlers.49 The Commissioner equates the statutory
definition of “dealers” in Tennessee Code Annotated section 67-4-2802(3) with the “merchants” and

         48
           Because Tennessee’s tax on unauthorized substances was based upon the existing tax in North Carolina, it
is worth noting that none of the decisions upholding that tax law address whether it exceeds the North Carolina General
Assembly’s taxing power under that state’s constitution. Neither article II of the North Carolina Constitution, which
concerns the powers of legislature, nor article V of that document, which addresses finance and taxes, include the
“merchants, peddlers and privileges” provision that is a part of article II, section 28 of the Tennessee Constitution.

          49
             The Commissioner raises this argument for the first time in this Court. As noted, the trial court’s order was
based upon the self-incrimination and due process issues, and the Court of Appeals, without requesting either party to
fully brief the article II, section 28 issue, based its decision upon the legislature’s power to tax privileges described in
that section.

                                                           -31-
“peddlers” language of article II, section 28 as those terms are commonly defined or have been
interpreted by the prior decisions of this Court. He further claims that the legislative purpose was
to target those merchants and peddlers who traffic in illicit substances and “ensure that this
unfortunately expansive sector of commerce is taxed and thus does not escape the sort of tax burden
that is placed on and borne by legitimate commerce.”

        Indeed, the legislature has an authority to tax merchants and peddlers that is separate and
distinct from its power to tax privileges. Article II, section 28 recognizes the legislature’s authority
to tax merchants, even if those merchants are not exercising a privilege. Jenkins, 55 Tenn. at 474.
In Jenkins, this Court made the following observation:

       Upon well settled principles of construing constitutional or statutory provisions, the
       enumeration of “merchants” and “peddlers” as distinct objects of taxation, would
       generally be taken as excluding the intention of embracing them under the term
       “privileges,” which is also designated as a distinct subject for taxation. The power
       to tax “merchants” and “peddlers” is as distinctly recognized by these terms as
       objects of taxation as in the term “privileges,” and the fact that the framers of the
       Constitution specified merchants and peddlers as distinct objects, would seem to
       indicate that they did not use the word “privileges” as including in its definition,
       either “merchants” or “peddlers,” but that they intended they might be taxed as
       merchants and peddlers, and not as privileges.

Id. at 473-74. Later, in Kelly, 75 Tenn. at 189-90, the Court held that a merchant who sells groceries
at retail and alcoholic beverages at wholesale may be taxed as a merchant, or for the privilege of
having a wholesaler’s license to sell alcoholic beverages, or both. The unauthorized substances tax,
therefore, falls within the General Assembly’s taxing power under article II, section 28 if it can be
classified as either a merchants and peddlers tax or a tax on privileges.

        Traditionally, merchants and peddlers have been treated as two distinct classes of traders,
“the one stationary, the other migratory.” State v. Sprinkle, 26 Tenn. (7 Hum.) 36, 39 (1846). A
“merchant” is “[o]ne whose business is buying and selling goods for profit.” Black’s Law Dictionary
1008 (8th ed. 2004). “[I]t seems the business of buying and selling should be the pursuit and
avocation of a party, by which he makes his living, in order that he shall be regarded as a merchant.”
State v. Smith, 24 Tenn. (5 Hum.) 394, 396 (1844); see also Tenn. Club of Memphis v. Dwyer, 79
Tenn. 452, 462 (1883); Simons v. Lovell, 54 Tenn. (7 Heisk.) 510, 517 (1872). Peddlers have an
occupation similar to merchants, with the chief difference being that a merchant sells goods at a
fixed and permanent place of business, while a peddler has a more itinerant mode of doing business.
Sprinkle, 26 Tenn. at 38-39; Greer v. Bumpass, 8 Tenn. (1 Mart. & Yer.) 94, 98 (1827) (describing
“the stationary merchant, with merchandise on his shelves” and “the hawker or pedler, with them
in his pack”). A peddler is a person who travels from place to place for the purpose of selling his
goods. 1819 Tenn. Pub. Acts. 61-62 (referring to “itenerant pedlars”); Swift & Co. v. State, 55
S.W.2d 267, 268 (Tenn. 1932) (“[T]he distinctive feature of peddling is the concurrence of selling
and delivering.”); Woolman v. State, 32 Tenn. (2 Swan) 353, 354 (1852) (“By the term ‘peddler,’
we understand one who travels about the country, on foot or in some kind of vehicle, or in any other

                                                 -32-
manner, and sells goods or small commodities by retail.”); Black’s Law Dictionary 1131 (6th ed.
1990).

        Given the ordinary meaning of the terms “merchant” and “peddler,” we cannot fault the Court
of Appeals for failing to consider whether the tax on unauthorized substances is a tax on merchants
and peddlers, because such an interpretation runs counter to the taxing statute’s definition of
“dealer.” The legislation defines “dealer” only in terms of actual or constructive possession, and not
in terms of the purchase and sale of goods. Tenn. Code Ann. § 67-4-2802(3). Moreover, the statute
levies a tax only “on unauthorized substances possessed.” Tenn. Code Ann. § 67-4-2803 (emphasis
added). The plain language of the statute, therefore, places a tax only upon the control or possession
of illegal substances and not upon their transfer or sale. There is no reference in the statute to either
the sale of those substances or the intent to sell, whether at a fixed location or in an itinerant
capacity. Thus, the term “dealer,” as defined by the legislation, does not fall within the traditional
meaning of a merchant or a peddler and, therefore, exceeds the broad taxing authority afforded the
General Assembly.

        We have carefully reviewed the legislative history associated with the passage of the
unauthorized substances tax. As suggested by the dissent, some members of the General Assembly
did express a desire to impose a tax on illicit drug transactions as opposed to mere possession;
however, a cardinal rule of statutory interpretation precludes the consideration of legislative
commentary to interpret statutory language when that language is clear and unambiguous. See, e.g.,
Waldschmidt, 271 S.W.3d at 176. In this instance, the specific terms of the statute levy a tax only
upon the possession of the unauthorized substances and not upon a seller or one who possesses with
the intent to sell. Moreover, the specific purpose of the statute is to raise revenue for law
enforcement, not to tax the illegal drug trade. Unlike the dissent, we do not believe the “pivotal
question” in this statutory analysis “is whether among all the individuals possessing a substantial
quantity of cocaine there are any individuals who sell, barter, or trade or intend to sell, barter, or
trade the cocaine.” Instead, the dispositive issue under this section of the Tennessee Constitution
is whether there is any credible interpretation of the plain language of the statute that could sustain
the tax on possession as a merchants and peddlers tax. Although we are required to make every
presumption in favor of the statute’s constitutionality, the language employed in section
67-4-2802(3) defining those subject to the tax requires us to answer this question in the negative.

         By readily acknowledging that the statute “fails to expressly anticipate that an individual in
possession of a large quantity of an unauthorized substance might not be a merchant or peddler of
the substance” under article II, section 28, the dissent concedes the conflict between the statute and
our state constitution. The dissent would remedy this problem by effectively amending the statute
to create a rebuttable presumption that individuals who possess the quantities of unauthorized
substances specified in section 67-4-2802(3) do so for purposes of barter, sale or trade. The dissent’s
rationale is that section 67-4-2807, which permits the taxpayer to seek review of the assessment as
provided in Tennessee Code Annotated section 67-1-1801, et seq., requires the taxpayer to either to
pay the tax and file a claim for refund or file suit against the Commissioner in chancery court. A
showing that the taxpayer merely possessed the unauthorized substances for personal use, the dissent
argues, would indicate that the taxpayer is neither a merchant nor a peddler and that the statute is

                                                  -33-
unconstitutional as applied. This approach would ignore traditional principles of statutory
construction, which prohibit “amendments” to a statute by judicial directive. Under Tennessee Code
Annotated section 67-1-1801(a)(1), the objective in a challenge to an assessment is to determine
whether it is “unjust, illegal, or incorrect.” The dissent’s approach would open the door for a slew
of as-applied challenges, in which courts would be required to consider whether taxpayers, including
those who are clearly in violation of the statute’s plain language, should avoid assessment based
upon a lack of evidence of either a sale or an intent to sell. In summary, any remedy for the taxing
statute’s constitutional deficiency is for the legislature, not the judicial branch, to develop.

        Our opinion today is solely based upon well-established principles of statutory construction,
not the facts of this case. Nevertheless, the record below does illustrate the difficulty with
classifying the unauthorized substances tax as a proper levy under the merchants and peddlers
provision. The proof introduced at trial established Waters’ livelihood as carpentry, and not, absent
inferences from his possession of a large amount of the drug, as a “merchant” or “peddler” of
cocaine.50 Waters was subject to tax liability, however, upon his possession of the requisite amount
of cocaine to qualify as a “dealer” as the term is defined in the legislation. An individual may be
subject to the unauthorized substances tax, as written, even if the evidence does not establish that
he or she qualifies as a merchant or a peddler of the substances.

         Our analysis of the applicability of the merchants and peddlers provision of article II, section
28 might be different if the legislature had statutorily defined “dealers” as those who sell or intend
to sell unauthorized substances, rather than those in possession of the illegal drugs.51 As written,
however, the statute does not authorize a tax on persons who sell, barter, or exchange unauthorized
substances for value. Instead, the plain language places a tax on those who merely possess illegal
drugs. In consequence, the tax does not fall within the merchants and peddlers classification under
article II, section 28.

                                         C. Privilege Taxes
       Because it is not a tax on merchants and peddlers, the tax on unauthorized substances may
only be sustained, if at all, as a tax on privileges under article II, section 28. Indeed, the tax on


         50
             Although W aters pleaded guilty in January 2008 to the Class B felony of possession of cocaine with intent
to deliver, this plea was entered thirty-two months after W aters was assessed with the tax and seventeen months after the
hearing on his declaratory judgment action.

         51
           Unlike Tennessee, a number of other states have included individuals who sell or transfer drugs as among
those subject to the tax. See, e.g., Ala. Code § 40-17A-1(3) (defining “dealer” as “[a] person who . . . manufactures,
produces, ships, sells, uses, distributes, transports, or imports . . . or in any manner acquires or possesses” marijuana or
a controlled substance); Ky. Rev. Stat. Ann. § 138.870(4) (defining “taxable activity” as “producing, cultivating,
manufacturing, importing, transporting, distributing, acquiring, purchasing, storing, selling, using, or otherwise
possessing” marijuana or a controlled substance). Other states appear to have focused their drug stamp tax statutes
exclusively on the sale or transfer of the drugs. See 35 Ill. Comp. Stat. 520/2 (defining “dealer” as “a person who . . .
manufactures, produces, ships, transports, imports, sells or transfers or possesses with intent to deliver to another person”
the cannabis or controlled substance); Nev. Rev. Stat. § 372A.070(1) (imposing tax on those who “sell, offer to sell or
possess with intent to sell a controlled substance” without first registering as a dealer and paying the prescribed tax).

                                                           -34-
unauthorized substances, as written, is more defensible as a tax on privileges than as a tax on
merchants and peddlers. The language of the statute suggests that the legislature intended the tax
to be one on privileges.52 First, the statute was codified under Title 67, Chapter 4; that chapter of
the Tennessee Code Annotated is entitled “Privilege and Excise Taxes.” The designation is
significant because we have used the terms “privilege tax” and “excise tax” interchangeably. Senter,
260 S.W. at 148 (“Whether the tax be characterized in the statute as a privilege tax or an excise tax
is but a choice of synonymous words, for an excise tax is an indirect or privilege tax.”); see also
Foster & Creighton Co. v. Graham, 285 S.W. 570, 573 (Tenn. 1926). Secondly, section 67-4-2803
of the statute is entitled “Excise tax – Methods of measuring quantities.” Further, there also are
internal references in the legislation to the unauthorized substances tax as an “excise tax.”53 In our
view, the use of the term “excise tax” is a strong indication that the General Assembly intended to
tax the “privilege” of possessing unauthorized substances as empowered by article II, section 28 of
our constitution.

        As an initial matter, privileges designate a larger and more indefinite class of objects of
taxation than merchants and peddlers. Phillips v. Lewis, 3 Tenn. Cases 230, 240 (1877). The “fixed
legislative and judicial definition” of the term “privilege” as adopted in the 1870 Constitution was
set forth by Chief Justice A.O.P. Nicholson in Jenkins:

         What are privileges, is a question of construction dependent upon the general law.
         We have defined it in several cases to be, the exercise of an occupation or business,
         which require a license from some proper authority, designated by a general law, and
         not open to all, or any one, without such license. It is a power of the Legislature
         alone to create privileges, and forbid their exercise without license.

55 Tenn. at 475 (quoting Mayor of Columbia v. Guest, 40 Tenn. (3 Head) 413, 414 (1859)); see also
Wiltse & Pratt v. State, 55 Tenn. (8 Heisk.) 544, 547 (1873) (noting “that the word privileges was
adopted and retained in the Constitution of 1870, in the sense in which it was used in the
Constitution of 1834, as ascertained and settled by judicial interpretation”). The earliest cases to
consider the topic defined a “privilege” as any activity or occupation that could not be enjoyed
without legal authority, which is conferred by way of a license from the state that requires payment.
See, e.g., Cate v. State, 35 Tenn. (3 Sneed) 120, 121-22 (1855); Mabry v. Tarver, 20 Tenn. (1 Hum.)
93, 98 (1839) (holding that a privilege “is the license or permission, upon the specified terms, to do
that which in general is prohibited”).

        Numerous opinions of this Court from the nineteenth and early twentieth centuries suggested
that the legislature’s power to tax privileges under article II, section 28 was virtually without
limitation. In one case, for example, this Court held that “[t]he power of the Legislature to declare


        52
             By contrast, neither the word “merchant” nor the word “peddler” appears anywhere in the statute.

        53
           See Tenn. Code Ann. § 67-4-2801 (“The purpose of this part is to levy an excise tax to generate revenue for
state and local law enforcement agencies . . . .”); Tenn. Code Ann. § 67-4-2803(a) (“An excise tax is levied on
unauthorized substances possessed, either actively or constructively, by dealers . . . .”).

                                                         -35-
and tax privileges is unlimited,” and “[i]ts discretion in this regard cannot be restrained or controlled
by the courts.” H.G. Hill Co. v. Whitice, 258 S.W. 407, 409 (Tenn. 1924); see e.g., Kurth v. State,
5 S.W. 593, 594 (Tenn. 1887) (“A privilege is whatever the legislature choose to declare a privilege,
and to tax as such.”); Jenkins, 55 Tenn. at 479 (“[T]he power of the Legislature to tax merchants,
peddlars, and privileges, was unlimited and unrestricted, and might be exercised in any manner and
mode in their discretion.”). Certainly, the legislature has taxed manifold activities and occupations
through the privilege tax. See, e.g., Madison Suburban Util. Dist. of Davidson County v. Carson,
232 S.W.2d 277, 280 (Tenn. 1950) (use tax); Hooten, 209 S.W.2d at 275 (sales tax); Humphries v.
Carter, 112 S.W.2d 833, 834 (Tenn. 1938) (license to operate nursery or greenhouse); Corn v. Fort,
95 S.W.2d 620, 623-24 (Tenn. 1936) (tax on corporate capital); Foster & Creighton Co., 285 S.W.
at 573 (tax on storage and sale of gasoline); Senter, 260 S.W. at 147 (corporate excise tax);
Knoxville & Ohio R.R. Co. v. Harris, 43 S.W. 115, 119-20 (Tenn. 1897) (tax on operation of
railroads).54

         Given the vast discretion that the legislature has historically enjoyed in taxing privileges, the
question naturally arises as to whether there exists any outer boundary on its power to classify
activities or occupations as proper subjects of taxation. More recent cases have defined the term
“privilege” with greater precision and, in our assessment, have established perimeters on the taxing
authority of the state.

       While earlier decisions described a privilege merely as a license by the legislature to do that
which is otherwise prohibited, our more recent cases have considered the privilege tax as
compensation from the taxpayers to the state in return for the protective environment that the state
has provided for the activity or occupation in question. In Senter, the Court upheld an excise tax on
corporate income. In so doing, it stressed the fact that corporations operating in Tennessee do so
under the state’s protection:

         Taxation of the privilege is upon the occupation or activity carried on amid the social,
         economic, and industrial environment, under protection of the state. Without the
         opportunity and protection afforded by the state, none of those classed and taxed as
         privileges could exist; every element that enters into the composition of a civilized
         state supplies them sustenance and strength; and it is often true that the visible
         property attendant upon the exercise of the privilege is inconsequential as compared
         to the earnings or profits flowing from the licensed activity or occupation.

         Excising the result of an occupation or activity in the modern state may be likened
         to the ancient custom of huntsmen sharing with the dispensing gods of bounty a small
         portion of the captured game.


         54
          W e also have made clear that the privilege tax can apply to a single act or transaction, Seven Springs W ater
Co. v. Kennedy, 299 S.W . 792, 793 (Tenn. 1927); State ex rel. Ormes v. Tenn. Finance Co., 269 S.W . 1119, 1119-20
(Tenn. 1925), and is not limited to a business or pursuit of an occupation. Knoxtenn Theatres v. Dance, 208 S.W .2d 536,
538 (Tenn. 1948) (purchase of theater tickets); Ogilvie v. Haley, 210 S.W . 645, 647 (Tenn. 1919) (operation of
automobiles for pleasure).

                                                         -36-
Senter, 260 S.W. at 146 (internal citation omitted). Similarly, in upholding a tax on corporate
capital, this Court has further observed as follows:

         Since a corporation can exist only subject to the will of the sovereign, its right to
         exist or to do business in corporate form is subject to such terms and restrictions as
         the state may place upon the right, including the payment of such taxes as the
         sovereign may exact for the privilege of existing or of doing business.

Corn, 95 S.W.2d at 623. The power to tax privileges, therefore, is restricted to those activities and
occupations to which the state affords some measure of protection and support. In other words, “the
Legislature cannot name something to be a taxable privilege unless it is first a privilege.” Jack Cole
Co. v. MacFarland, 337 S.W.2d 453, 455 (Tenn. 1960). A second significant limitation is that the
legislature may not impose a privilege tax that is “arbitrary, capricious or wholly unreasonable.”
Hooten, 209 S.W.2d at 274; see, e.g., Corn, 95 S.W.2d at 624 (imposition of privilege tax “on a
simple partnership, composed of individuals, and excepting the single individuals, who may,
perhaps, be engaged in the same kind of business as the partnership . . . is arbitrary and
capricious”).55

        By enacting the tax on illegal substances, the legislature did not tax an activity or occupation
to which Tennessee has provided “sustenance and strength.” Nor does the tax compensate the state
for an activity that occurs under its protection.56 To the contrary, the General Assembly has strictly
prohibited the possession of all of the substances included in the definition of “unauthorized
substances” in Tenn. Code Ann. § 67-4-2802(10). The legislature’s wholesale prohibition on the
possession of unauthorized substances cannot be reconciled with the classification of the same
activity as a privilege. There is a sound basis for the pronouncement by the Court of Appeals that
the General Assembly may not, even under its broad taxing power in article II, section 28, impose
a privilege tax on conduct that is wholly prohibited.

        Despite the inarguable logic in the proposition that an unlawful act does not qualify as a
privilege, the Commissioner contends that our century-old decision in Foster v. Speed, 111 S.W. 925
(Tenn. 1908), provides a basis for upholding the tax on unauthorized substances as a privilege tax.


         55
            Other cases have found the General Assembly’s ability to tax privileges to be limited for reasons not
applicable to the tax on unauthorized substances. As such, we need not address them here. See Evans v. McCabe, 52
S.W .2d at 162 (holding that “[a] restraint upon the power to tax incomes . . . is inevitably implicit in section 28 of article
2,” specifically the clause taxing income derived from stocks and bonds that are not taxed ad valorem); Gallagher v.
Butler, 378 S.W .2d 161,167 (Tenn. 1964) (reaffirming Evans); see also Jack Cole, 337 S.W .2d at 456 (“Since the right
to receive income or earnings is a right belonging to every person, this right cannot be taxed as privilege.”).

         56
             The legislative history supports this proposition. During debate on the House floor, when Representative
Susan Lynn (R-Mt. Juliet) wanted it “said for the record” that the General Assembly was not “recognizing . . . or
legitimizing this industry” by taxing it, Representative Curtiss responded that it was “certainly not the intention of this
legislation to legitimize drug trafficking or the sale of any illegal substance in the State of Tennessee.” Statement of Rep.
Curtiss, House Session, May 19, 2004.

                                                            -37-
Foster operated a retail liquor store in a location in Shelby County where, due to the proximity to a
school, it was illegal to sell liquor. The clerk of court issued a distress warrant against Foster’s
business because he had failed to pay the tax on the retail sale of liquor imposed by the general
revenue law of 1903. Foster paid the tax but then filed suit to recover the amount paid, arguing that
“the Legislature did not intend to license and tax a business which could not be conducted lawfully.”
Foster, 111 S.W. at 925. The Court unanimously upheld the taxation of Foster’s business even
though its location was unlawful. Id. at 925-26; see also Carpenter v. State, 113 S.W. 1042 (Tenn.
1908) (reaffirming Foster).

         Our ruling in Foster is distinguishable on the facts. While Foster’s business was operating
unlawfully because of its location, the retail sale of liquor was not, per se, an illegal activity. On the
other hand, the possession of an unauthorized substance as defined in Tennessee Code Annotated
section 67-4-2802(10) violates the general law regardless of its location. Our extensive research
confirms that this Court has never upheld the constitutionality of a statute taxing completely illegal
acts under the privilege powers. Because the General Assembly may not impose a privilege tax on
an activity that it has otherwise declared to be unlawful, the tax on unauthorized substances exceeds
even the broad taxing authority of the General Assembly under article II, section 28.

         Our charge, as stated, is to uphold the constitutionality of a statute whenever possible, and
to that end we have held that if a statute is partially unconstitutional, “it would be our duty to elide
the provision objected to rather than to strike down the taxing statute.” Int’l Harvester Co. v. Carr,
466 S.W.2d 207, 212-13 (Tenn. 1971). These circumstances, however, have generally involved
broad, omnibus taxing statutes in which one provision is unconstitutional, but the remainder of the
statute is sound. Id. at 213 (citing cases). In these situations, courts typically have chosen not to
invalidate the entire statute, but have taken “a more reasonable view . . . that the part of the law
providing for the improper exemption should be declared void.” Id. In this instance, however, there
is no way for us to strike down any particular offending provision within the statute without
invalidating the entire tax. We cannot transform a tax on possessors of substances into a tax on
merchants and peddlers, or classify an illegal activity to be a privilege, absent “amending” the statute
by judicial fiat.57 In our view, it is just such an “amendment” by the judiciary that would realize the
dissent’s fear of “short-circuiting the democratic process.” Our only principled alternative, therefore,
is to declare the entire statute unconstitutional.

                                             Conclusion
        The statute taxing the possession of unauthorized substances does not violate the federal and
state constitutional protections against self-incrimination and double jeopardy or abridge the
guarantee of procedural due process. For different reasons, however, the statutory scheme cannot
be characterized as imposing either a tax on merchants, a tax on peddlers, or a tax on privileges, as
authorized under our state constitution. Obviously, this state prohibits the possession of cocaine.

          57
             The dissent suggests that a “delicate operation” might save the legislation from the state constitution’s
limitations on the legislature’s broad taxing powers. Nowhere, however, does the dissent identify any specific,
objectionable portion of the statute that might be removed in order to bring the statute within the boundaries of article
II, section 28.

                                                          -38-
As observed by our Court of Appeals, the possession of an illegal substance is no privilege. Further,
the legislation at issue taxes only possessors and makes no reference to one who sells or, by virtue
of the quantity of the cocaine or other factors, displays the intent to sell. Finally, we are not inclined
to augment a statute in an effort to make it fit within the framework of the constitution. That
responsibility falls within the capable hands of the General Assembly.

        The judgment of the Court of Appeals is affirmed. Costs are taxed to Reagan Farr in his
capacity as the Commissioner of Revenue for the State of Tennessee, for which execution may issue
if necessary.




                                                         ____________________________
                                                         GARY R. WADE, JUSTICE




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