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Marihuana Tax Stamp Mystery 2005

Marihuana Tax Stamp Mystery 2005

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Published by Warren Klofkorn
2005 article concerning historical and philatelic aspects of Marihuana Tax Act revenue stamps issued by the US government.
2005 article concerning historical and philatelic aspects of Marihuana Tax Act revenue stamps issued by the US government.

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Published by: Warren Klofkorn on Sep 29, 2011
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Marihuana tax stamps: behind the mystery

RON LESHER
here are few subjects in the world of taxation that are more shrouded in mystery and misinformation than the 1937 tax on marijuana. Revenue stamps (overprinted with the alternate spelling "MARIHUANA") were created to comply with tax laws that applied to the intoxicating herb, but until recently the stamps have not been listed in the Scott Specialized Catalogue o f Uniied States Stamps & Covers, possibly because of their rarity in collectors' hands. The just-released 2006 Scott U.S. specialized catalog lists the marihuana tax stamps for the first time, but no values have been assigned. Until Februarv 2005, onlv six mari, , huana tax stamps were recorded in collector hands. All carried $1 denominations: two overprinted "MARIHUANA TAX ACT OF 1937" on the 191 7 " penera1 documentary stamp, and four similarly overprinted on undated red documentary stamps. The degree of rarity of the marihuana tax stamps was greatly changed when a large number of these stamps were deaccessioned by the National Postal Museum and sold in February 2005 by the auction firm Matthew Bennett International. Beyond their rarity, the marihuana tax

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stamps have been poorly understood and their use has been shrouded in mystery. By reexamining the tax legislation and its antecedents we can clear away some of the misinformation surrounding the legal transfer of marijuana for experimental and medicinal use, and better understand the stamps that paid the tax on those legal tmsfers. The Harrison Narcotic Act of 1914 established a system to register individuals involved in the importation, production, manufacture, sale, study and prescribing of narcotic substances. The law further required that all orders for narcotics be entered on government-printed order forms, a copy of which was filed with the government agency. The Revenue Act of 1918 had imposed a nominal tax on narcotics. Marijuana was not included in the Harrison Narcotic Act of 1914 nor was it included in the 1918 Act. However, the regulation and taxation of marijuana in 1937 followed those two models. In the case of marijuana, those involved in handling the substance were required to register annually and pay an occupational tax. The tax was applied in five different categories: producer ($1 tax); prac-

titioner prescribing ($1); laboratory ($1); dealer ($3); and importer, manufacturer or compounder ($24). So-called special tax stamps resembling licenses served as the receipts for the payments of these annual taxes. Examples are reported in collector hands, although I have only seen the special tax stamps for producer and dealer (Figure 1). From their inception in fiscal year 1938 through the end of fiscal year 1953 (June 30, 1953), these special tax stamps were printed for the Bureau of Internal Revenue by the Bureau of Engraving and Printing. They remain unlisted in the Scott U.S. specialized catalog. The most commonly seen of these special tax stamps are for the "producer of marihuana." They were issued in substantial numbers during World War 11, as they were required by farmers who raised hemp (a plant that contains small amounts of cannabis) for the manufacture of hawsers for the U. S. Navy. Figure 2 shows a government hemp fact0r.y in Rockford, Iowa. In addition to the annual occupational taxes, the law provided for special government order forms (one original and two copies) to be filed with Internal Revenue. The Internal Revenue district collector kept one copy and returned

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Figure 1. Special tax stamps for producers and dealers in marijuana, two of the five legal categories that were taxed by the federal government.
36 1 Scott Stamp Monthly

December 2005

the original and one copy to the person who proposed acquiring the marijuana. The original was forwarded to the proposed vendor. Figure 3 shows the three similar forms. Each had to retain their forms on file for two years. The government charge for the forms was 24.Throughout the period of time that the order forms were used, they were also printed by the BEP. The tax on the transfer of marijuana among registered individuals was at the rate of $1 per ounce, and stamps had to be applied to the original order form. This accounts for the issuance of $1, $5, and $10 stamps following the effective date of the act, October 1, 1937. In the case that the transfer was to any person who had not registered and paid the special occupational tax, the transfer tax was a punitive $100 per ounce. This accounts for the issuance of the $100 denomination, although there is no reason why this stamp could not have been used for a large transfer of marijuana between registered individuals. In cases where hemp was being sold to a government factory for the manufacture of hemp rope or hawsers for the U. S. Navy, no tax was imposed on the transaction.

MARIHUANA TAX STAMPS: THE ISSUE OF 1937

Because there are two issues of marihuana tax stamps, we will refer to them by the year of first issue. The earlier set, p r o d ~ ~ c eby overd printing four of the then-current 1917 documentary stamps, is the lssue of 1937. The new Scott listings identify these stamps as Scott RIM1-RIM4 (Figure 4). The rarity of these stamps in public hands prior to February 2005 is well established, with only two confirmed examples in collections, plus a few other sightings. A single used copy of the $1 stamp was seen in the 1970s, in the collection of a member of the New York chapter of the American Revenue Association. Figure 3. Marijuana order forms: original, To the best of my knowledge this ex- duplicate and triplicate. Stamps were affixed to the lower left comer of the original copy. ample remains in the same collection. lmage courdesy of National Posizll Museum. A second used copy (light man~~script, cut cancels, and facial scrapes), with a resided in a university. At present its 1980 Philatelic Foundation certificate, whereabouts is unknown. appeared in a Michael Aldrich sale in A photocopy showing a block of nine 1980. This example i s currently being stamps on a marijuana order form was offered by a dealer for $1 5,000. pictured in an article in the September Several other sightings of lssue of 1997 issue of American Philatelist. t h e 1937 marihuana tax stamps have been order form indicates an order for 36 made, but these are not known to be ounces, so presumably this same docuin philatelic hands. Sherwood Springer ment had an additional 27 $1 stamps photocopied a document bearing 18 of on the reverse of the document. t h e the $1 stamp; at the time the document author of the article, research scier~tist Alexander T. Shulgin of California, explained that the original form bearing the stamps was submitted to the government. It must be assumed that this order form is either in government files or has been destroyed. Four documentary stamps were overprinted for use as marihuana tax stamps. t h e $1, $5 and $10 Liberty Head stamps (Scott R240, R244 and R245) were overprinted in sheets of 300 and issued in panes of 100 to the Bureau of Internal Revenue. They were printed on the familiar double-line USlR watermarked paper, and perforated gauge 11 (common practice for flat plate printed stamps). When the sheets were cut into panes of 100, the top and bottom rows of 20 were left with straight edges at either the top or bottom, so only 60 stamps Figure 2. A government hemp factory in Rockford, Iowa. Hemp manufacturers were regulated by in each sheet were perforated on four sides. the marijuana tax laws, but their transactions were not taxed. Image courdesy ofKen T~tb'n,
December 2005 Scott Stamp Monthly 137

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MARIHUANA f TAI ACT " S OF 1937 ;

Figure 4. The 1937 set of four marihuana tax stamps, Scott RJM1-RJM4.
Image courtesy of Matthew Bennett International,

The National Postal Museum has announced that additional "marked" copies of the stamps will be sold. The marking will consist of a horizontal and a vertical straight line drawn in indelible black ink. Given the historically negative view that collectors have of straight-edged copies of stamps and also of "remainders," it is indeed curious that the original sale of these stamps did not consist only of fully perforated stamps. There i s currently one stamp being offered that has a straight edge plus several seriously shortened perforations along the right side, a stamp that collectors would normally called damaged. If the National Postal Museum was trying to maximize its revenue from the sale of these stamps, it is hard to see why so many straightedged copies and a damaged stamp were included. The $1 00 stamps (created by over-

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Consists of Scott 1 -28 lncludlng 3a, 8a, 15a, 1 9a, 21 a (Michel 1 -30 including 17a, b; 21 a, b; 23a, b) all F-VF with several belng NH and better ones expertised.

+

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m--: m2

Richbard

&
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Eastern Auctions Ltd.

P.O. Box 250 - Bathurst NB - E2A 322 - Canada - Tel(800) 667-8267 Fax (888) 867-8267- Email easternauctions@nb.aibncom

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38 1 Scott Stamp Monthly

December 2005

Figure 4. The 1937 set of four marihuana tax stamps, Scott RJMl-RJM4.
Image courtesy of Matthew Bennett International.

The National Postal Museum has announced that additional "marked" copies of the stamps will be sold. The marking will consist of a horizontal and a vertical straight line drawn in indelible black ink. Given the historically negative view that collectors have of straight-edged copies of stamps and also of "remainders," it is indeed curious that the original sale of these stamps did not consist only of fully perforated stamps. There is currently one stamp being offered that has a straight edge plus several seriously shortened perforations along the right side, a stamp that collectors would normally called damaged. If the National Postal Museum was trvine to maximize its rev" enue from the sale of these stamps, it is hard to see why so many straightedged copies and a damaged m is t p were included. The $100 stamps (created by overI

printing Scott R248) were produced in panes of four, serir;lly numbered, and assembled in booklets of 16 stamps (four panes of 4). The $100 stanips include an attached numbered receipt tab with spaces labeled "Issued to," "At," "By," "Collector," "Dist.," and a line for the date. The booklets were delivered to 111ternal Revenue in just two fiscal years: 1 937 and 1958. In 1937 booklets I through 57 were delivered, a total of 912 stamps serially numbered 1 througli 912. I he remaining booklets, numbered 59 through 198, with stamps serially numbercd 929 through 3,168, were delivered in fiscal year 1958. Booklet 5 8 is not accounted for in the preceding description. That bookIct was stamped SPECIMEN in 1946. Three panes from that booklet, with serial numbers 913 through 920 and 925 through 928, plus booklets 59

through 198, all eventually wound up i n the inventory of the National Postal Museum. The third pane from the booklet, numbered 925 through 928, was stolen from the museum and has not been recovered. It was part of the theft that involved a total of 3 7 marihuana tax stamps. Only three stamps have ever been recovered, one each of the $1, $5 and $1 0 stamps. It was reported in the March 5, 1990, Linn's Slarnp News, that a Seattle resident pleaded guilty to two misdemeanor counts of receiving stolen mint marihuana tax stamps. The case arose when the three now-recovered marihuana tax stamps were sold to a prominent revenue stamp dealer. Their origin came to light when the stamps were submitted to the Philatelic Foundation for certificatcs of authenticity and they were determined to be among the missing stamps.

Figure 5. An imperforate pair of the $10 marihuana tax stamps, Image courtesy of
Matthew Bennett International.

The National Postal Museum's recent deaccession also inclucled some imperforate examples (pairs and larger multiples) of the $1, $5 and $10 stamps. As illustrated in the auction catalog these stamps were cut from unperforated sheets, one of whose rows was stamped SPECIMEN. It is clear that these stamps are not illustrative of stamps that were distributed for use to its district offices by Internal Revenue. They simply are specimens of unfinished stamps. An imperforate pair of the $1 0 stamps is shown in Figure 5.

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MARIHUANA TAX STAMPS: THE ISSUE OF 1962
In addition to Issue of 1937 marihuana tax stamps, four denominations of undated documentdry stamps ($1, Scott R667; $5, Scott R676; $1 0 , Scott R677; and $50, Scott R727) were overprinted and delivered to Internal Revenue beginning in fiscal year 1962. Figure 6 shows the four Issue of 1962 marihuana tax stamps, Scott RJM5-RJM8. Prior to February 2005, only a used block of four of the $1 denomination had been reported to be in philatelic hands. A cropped image of the block was pictured on the cover of the September 1997 American Philatelist. The stamps were actually affixed to a marijuana order form and were manuscript canceled April 27, 1971, just three days before the tax on marijuana expired. Continued on page 97

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Figure 6. The 1962 set of four marihuana tax stamps, Scott RJM5-RJM8.
Image courtesy of Matthew Bennett International.

Fruit Tvoe of 2004 , 2005, Aug. 25 Wmk. 373 1042 A165 lc Hog plum .20 .20
1043 1044 1045 1046 1047 A165 A165 A165 A165 A165 I0c 25c 60c 7% $1

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.20 .20 .50 .SO 1.25 1.25 1.50 1.50 2 00 2.00 3 00 3.00 20.00 20.00 28.65 28.65

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1040 A165 61 50 Guava 1049 A165 $10 Passion fruit Nos. 1042-1049 (8)

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New stamp issues listed in the Scott
New Issues Update will appear in future volumes of the Scott Standard Postage Stamp Catalogue and the Scott Specialized Catalogue of United States S t ~ r n p s Covers. &

Continuedfrom page 40 The $50 stamps were not serially numbered, but did come in Danes of four. ~ n c again, the high \;slue ink cludes a receipt tab. There is no evidence that they were assembled into booklets as the earlier $100 denomination and the regularly issued $50 documentary stamps were. Why did Internal Revenue order a $50 stamp? Given that the Bureau of Internal Revenue apparently used few of the $100 stamps of the lssue of 1937 for the punitive tax (more than half were sent to the National Postal Museum), the most logical explanation is that these were intended for larger orders of marijuana for laboratory use. The lssue of 1962 marihuana tax stamps were delivered in only four fiscal years: 1962, 1969, 1970 and 1971. The 1971 delivery consisted of 7,000 stamps with a face value of $50,100. The National Postal Museum census of the lssue of 1962 stamDs consisted of 2,500 each of the $1, $5 and $10 stamps, and 200 of the $50 denomination. That adds up to 7,700 stamps and $50,000, just 100 stamps and $100 shy of the reported fiscal 1971 delivery. Assuming that the stamps sent to the National Postal Museum were from

this delivery, we should conclude that the remainder of the 1971 delivery was a sheet of $1 stamps. Given the block of four of the $1 stamp cancelled April 27, 1971, one i s tempted to think that the final sheet in the fiscal 1971 delivery might have been the source of . these stamps pictured in the American Philatelist article. We will probably never know. There are persistent stories that the tax on marijuana was invalidated by the U.S. Supreme Court in a 1969 case that involved activist Timothy Leary, a prominent proponent of hallucinogenic drug use. I find nothing in that decision that invalidated the tax; the case of Leary's conviction for possession was remanded to the lower courts. The Department of Justice notes in the March 21, 2003, Federal Register that the 1970 Controlled Substances Act "repealed and superseded the 1937 Marihuana Tax Act." The strongest evidence against a 1969 invalidation of the tax on marijuana is the two 1971 orders with stamps on them that were illustrated in the 1997 article in the American Philatelist. It is clear that the use of both narcotic and marihuana tax stamps ceased on April 30, 1971.

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