Commissioner of Revenue v. Mullins

• Citation: 428 Mass. 406,702 N.E.2d 1
• Parties: COMMISSIONER OF REVENUE v. Robert MULLINS.
• Decision Date: 19 November 1998
• Court: United States State Supreme Judicial Court of Massachusetts

Page 1

702 N.E.2d 1

428 Mass. 406

COMMISSIONER OF REVENUE v. Robert MULLINS.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued Oct. 8, 1998.

Decided Nov. 19, 1998.

Pierce O. Cray, Assistant Attorney General, for Commissioner of Revenue.

William B. VanLonkhuyzen, Boston, for the taxpayer.

Before WILKINS, C.J., and ABRAMS, LYNCH, GREANEY, FRIED, MARSHALL and IRELAND, JJ.

GREANEY, Justice.

This is an appeal by the Commissioner of Revenue (commissioner), pursuant to G.L. c. 58A, § 13, from a decision of the Appellate Tax Board (board), abating a controlled substances tax (CST) assessed against Robert Mullins (taxpayer) pursuant to G.L. c. 64K. Relying primarily on the United States Supreme Court's decision in Department of Revenue of Mont. v. Kurth Ranch, 511 U.S. 767, 114 S.Ct. 1937, 128 L.Ed.2d 767 (1994) (Kurth Ranch), the board determined that the assessment constituted a "punishment" for purposes of the double jeopardy clause of the Fifth Amendment to the United States Constitution. Because the assessment had been imposed separately from proceedings leading to the taxpayer's conviction under G.L. c. 94C, the board concluded that it constitutes a separate punishment barred by the double jeopardy clause, and must be abated. ¹ We granted the parties' joint application for direct appellate review, and we now affirm. ²

1. General Laws c. 64K, inserted by St.1993, c. 110, § 127, imposes a CST on "dealers" of marihuana and other controlled substances referenced in G.L. c. 94C. See G.L. c. 64K, § 1. A "dealer" is defined as "a person who, in violation of Massachusetts law, manufactures, produces, ships, transports, or imports into the commonwealth or in any manner acquires or possesses more than forty grams of marihuana," or other specified amounts of controlled substances. Id. The statute prohibits possession by a dealer of any marihuana or controlled substance on which a tax is imposed unless the tax has been paid as evidenced by stamps. G.L. c. 64K, § 4. The rate of tax, established in § 8 of the statute, is $3.50 per gram of marihuana. Measurements are based on the entire quantity "in the dealer's possession," without adjustment for impurities or dilutions of the marihuana or other controlled substance. G.L. c. 64K, § 7.

The commissioner is charged with enforcing the statute, G.L. c. 64K, § 2, and the requisite payments are to be made by dealers through utilization of a form developed by the commissioner, subject to the proviso that "[d]ealers shall not be required to give their name, address, social security number or other identifying information on such form." Id.

Additional features of the statute include that persons lawfully in possession of marihuana or a controlled substance are explicitly exempted from payment of the CST, G.L. c. 64K, § 6; payment of the tax does not provide immunity from prosecution pursuant to Massachusetts law, G.L. c. 64K, § 5; a one hundred per cent penalty is imposed on a dealer's failure voluntarily to pay the CST immediately on acquisition or possession of the threshold quantity of contraband, G.L. c. 64K, § 9; and failure to pay the tax is a felony, id.

2. The board found the following facts. ³ The taxpayer was arrested on December 30, 1993, while he was attempting to sell to an undercover State police informant roughly fifty pounds of marihuana, a class D controlled substance, for approximately $1,600 a pound. After an additional forty pounds of marihuana were discovered at the taxpayer's home, the Commonwealth charged him with trafficking in marihuana in a quantity over fifty pounds and under one hundred pounds, G.L. c. 94C, § 32E(a )(1), and conspiracy to traffic in marihuana, G.L. c. 94C, § 40. The taxpayer ultimately entered a guilty plea on April 18, 1996, to the lesser charge of possession with intent to distribute marihuana (less than fifty pounds), G.L. c. 94C, § 32C(a ). He was sentenced to a term of imprisonment.

The taxpayer also settled related civil forfeiture actions by forfeiting to the office of the district attorney for the Norfolk district approximately $120,000 in bank account deposits, his automobile, and cash in his home.

In February, 1994, the district attorney's office advised the criminal investigation bureau of the Department of Revenue department) that the confiscated marihuana did not have CST stamps affixed. Following an investigation by a departmental criminal investigator, the commissioner issued to the taxpayer a notice of assessment in the amount of $272,092, representing the tax deficiency calculated pursuant to G.L. c. 64K, § 8, and the one hundred per cent penalty added by G.L. c. 64K, § 9. The tax period referenced on the notice of assessment was identified only by the date of arrest. The taxpayer did not possess the marihuana at any time during the department's preassessment investigation or at the time of assessment.

No "dealer" has voluntarily complied with the G.L. c. 64K taxing scheme. In fact, the tax assessment at issue is one of only two assessments of tax deficiencies made pursuant to G.L. c. 64K since its enactment. In both instances, assessments were made against "dealers" who previously had been arrested for controlled substances offenses. Moreover, in each instance the matter was brought to the department's attention by law enforcement personnel, and the tax applied to the specific contraband seized in connection with the criminal matter.

The commissioner is not otherwise engaged in administrative enforcement activity to improve compliance with the tax, independent of criminal law enforcement. Voluntary compliance is the only available mechanism for tax collection apart from post-arrest assessments.

3. The double jeopardy clause of the Fifth Amendment to the United States Constitution prevents multiple punishments for the same offense. Powers v. Commonwealth, 426 Mass. 534, 537, 694 N.E.2d 324 (1998). See Luk v. Commonwealth, 421 Mass. 415, 419, 658 N.E.2d 664 (1995), citing North Carolina v. Pearce, 395 U.S. 711, 717, 89 S.Ct. 2072, 23 L.Ed.2d 656 (1969). ⁴ In determining whether there is a double jeopardy violation, the particular sanction's label of "criminal" or "civil" is not controlling, and simply because the Legislature has designated the sanction a "tax" does not immunize it from double jeopardy scrutiny. Kurth Ranch, supra at 779, 114 S.Ct. 1937. See United States v. Ursery, 518 U.S. 267, 282, 116 S.Ct. 2135, 135 L.Ed.2d 549 (1996). "[T]here comes a time in the extension of the penalizing features of the so-called tax when it loses its character as such and becomes a mere penalty with the characteristics of regulation and punishment." Kurth Ranch, supra, quoting A Magnano Co. v. Hamilton, 292 U.S. 40, 46, 54 S.Ct. 599, 78 L.Ed. 1109 (1934).

The United States Supreme Court, considering a Montana drug tax similar to the CST imposed under G.L. c. 64K, delineated the analysis for determining whether a tax is a punishment in Kurth Ranch. The Court expressly rejected reliance on the mode of analysis otherwise applied in determining whether a civil penalty is remedial or punitive, id. at 777, 114 S.Ct. 1937, noting that "tax statutes serve a purpose quite different from civil penalties." Id. at 784, 114 S.Ct. 1937. The Court agreed with that part of Chief Justice Rehnquist's dissent in which he stated that the approach, at that time prescribed in United States v. Halper, 490 U.S. 435, 109 S.Ct. 1892, 104 L.Ed.2d 487 (1989), "simply does not work in the case of a tax statute." Id. at 784, 114 S.Ct. 1937; id. at 787, 114 S.Ct. 1937 (Rehnquist, C.J., dissenting). Although in Hudson v. United States, 522 U.S. 93, ----, 118 S.Ct. 488, 491, 139 L.Ed.2d 450 (1997), the Court "disavow [ed] ... [the] method of analysis" used in United States v. Halper, supra at 448, 109 S.Ct. 1892, it did not retreat from its earlier conclusion that a different analytical approach is appropriate for examining tax statutes, and nothing in the Court's Hudson decision indicates that the mode of examination employed in Kurth Ranch is no longer appropriate in the tax context. ⁵ Indeed, the Hudson Court acknowledged, with apparent approval, that Kurth Ranch engaged in the proper analysis where the Court had determined that "the presence of a deterrent purpose or effect is not dispositive," and applied a "Kennedy-like test ... before concluding that Montana's dangerous drug tax was 'the functional equivalent of a successive criminal prosecution.' " Hudson v. United States, supra at ----, 118 S.Ct. at 495 n. 6 (referring to the seven-factor analysis utilized in Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168-169, 83 S.Ct. 554, 9 L.Ed.2d 644 [1963] ). See United States v. Ursery, supra at 282, 116 S.Ct. 2135 (discussing Kurth Ranch with approval); Lynn v. West, 134 F.3d 582 (4th Cir.), cert. denied, --- U.S. ----, 119 S.Ct. 47, 142 L.Ed.2d 36 (1998). ⁶

In Kurth Ranch, the Montana department of revenue sought to assess a tax on the illegal possession of marihuana pursuant to Montana's Dangerous Drug Tax Act after the State had imposed a criminal penalty for the same conduct. Kurth Ranch, supra at 769-770, 114 S.Ct. 1937. Under Montana's statute, the taxpayer had no obligation to pay any tax unless and until he was arrested. Id. at 771, 114 S.Ct. 1937. In determining whether the tax had "punitive characteristics that subject[ed] it to the constraints of the Double Jeopardy Clause," id. at 778-779, 114 S.Ct. 1937, the Court examined four factors. The first factor was the "high rate of taxation" provided for in the statute, id. at 780-781, 114 S.Ct. 1937, and the second was the "obvious deterrent purpose" of the tax. Id. The Court observed that, while these features of the tax may support the conclusion that the tax is a punishment, "in and of themselves, [they] do not necessarily render the tax punitive." Id. at 781, 114 S.Ct. 1937. See Hudson v. United States, supra at ----, 118 S.Ct. at 495 n. 6.

In concluding that a...