Strange American Tax Laws

The Weird Ways that States and the Federal Government Earn Money

Feb 12, 2010
Nicole Fravel

Stacks of Money - Jane M Sawyer

From a playing card tax to taxing criminal activities to a taxing definition of candy, the government finds bizarre ways to collect money from citizens.

“In this world nothing can be said to be certain, except death and taxes.” Benjamin Franklin’s words are often quoted around tax season, but the fact is they are true year round. State and federal governments believe so strongly in this proverb, that they have devised weird and interesting ways to collect taxes from unsuspecting citizens. Here are some of the strangest.

Alabama’s Playing Card Tax

According to the Tax Foundation, a non-profit group organization that seeks to educate taxpayers, the state of Alabama charges a 10 cent tax on all decks of cards, as long as they contain no more than 54 cards. In addition, retailers must obtain a license for the privilege of selling – and taxing – these cards.

Defining Illinois’s Candy Tax

In September 2009, the state of Illinois decided to tax candy at a higher rate than other food. The Illinois Department of Revenue carefully explains that “if an item contains flour or requires refrigeration,” it is not considered candy and is taxed at the same lower rate as other food. This explanation legally classifies yogurt covered raisins as candy, but yogurt covered pretzels as food; Baby Ruth bars as candy, but Twix bars as food; Milky Way Midnight bars as candy, but original Milky Way bars as food.

Taxing Criminal Endeavors

Several states, and even the federal government, paradoxically require citizens to voluntarily claim income generated from criminal activities so that it can be appropriately taxed. The IRS’s 2009 Individual Tax Guide reminds tax payers that if they receive a bribe, they must declare it as income so it can be taxed.

Not just bribes, but all “income from illegal activities, such as money from dealing illegal drugs,” must be declared, and can be categorized as self-employment income. However, the federal government seems to provide an incentive for returning stolen property when it creates a tax loophole. On page 95, the Guide states that, “If you steal property, you must report its fair market value in your income in the year you steal it, unless in the same year, you return it to its rightful owner.”

Seventeen states, including North Carolina, tax illegal drugs. According to North Carolina’s Unauthorized Substance Tax law, within 48 hours of the purchase of drugs or an illegal quantity of alcohol, buyers must purchase stamps from the government to affix to said substances. Needless to say, not many citizens have come forward to voluntarily pay this tax, but the state government has collected millions by fining folks who were caught in possession of illegal substances without the required tax stamps on the products.

For upstanding American citizens who would like to avoid such taxes, while also avoiding tax evasion charges, these strange tax laws present a bit of a challenge. The moral of this tax story is to be an honest criminal, ingest only food and candy that contains flour, and play lots of games with dice.