Marihuana tax stamps: behind the mystery RON LESHER

T here are few subjects in the world of taxation that are more shroud- ed 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 val- ues have been assigned.

Until Februarv 2005, onlv six mari- , ,

huana tax stamps were recorded in col- lector hands. All carried $1 denomina- tions: two overprinted "MARIHUANA TAX ACT OF 1937" on the 191 7 pen- " era1 documentary stamp, and four simi- larly overprinted on undated red docu- mentary 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 Inter- national.

Beyond their rarity, the marihuana tax

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 191 4 established a system to register indi- viduals 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 govern- ment-printed order forms, a copy of which was filed with the government agency.

The Revenue Act of 1918 had im- posed a nominal tax on narcotics. Marijuana was not included in the Harrison Narcotic Act of 191 4 nor was it included in the 191 8 Act.

However, the regulation and taxa- tion of marijuana in 1937 followed those two models. In the case of mari- juana, 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, manu- facturer or compounder ($24).

So-called special tax stamps resem- bling licenses served as the receipts for the payments of these annual tax- es. 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 "produc- er 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 manufac- ture of hawsers for the U. S. Navy.

Figure 2 shows a government hemp fact0r.y in Rockford, Iowa.

In addition to the annual occupation- al 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

THIS OTAMC L X P l R L S JUNE S0.1.40 .11\IP I I Ym I U I B V U I I I L I ON CHAM88 1 0 1 # 1 1 1 M # P 01 7"s NYD

,""I0 .O" OH. r... PRODUCER OF MARIHUANA

YOUR REOISTRY NUMBER IS- UPOH CHAWOC OF OWHtlSMlP. CONTROL OR AODRCIS. NOTIFY COLLECTOR IMMEDIATCLY

UEAIER IN YUIIUANA, JULY, IW I DUUU IN YMUIUANA, AVO., lQ@

MALU IN NARIIIUANA. m., IW I DEALER IN YMINUANA. OCT.. m1 'Dirrw1 In rrriwurnr nov.. I- DEALER IN MARINUANA. JAN., 1049

DEALER IN IARIHUAHA, MR., IW I DEALER IN MMUA~A, WR., 10491

WLER IN UARIHUANA, M Y , lW I DULR IN YMIHUANA, JUNE, I049 ]

Xagaese Dhg Do. Victor 5. lagals 939 E. lltb A n Denver, Colorado

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 pro- posed 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 $1 0 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 $1 00 denomination, although there is no reason why this stamp could not have been used for a large transfer of marijuana between regis- tered individuals.

In cases where hemp was being sold to a government factory for the manu- facture 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 mari- huana tax stamps, we will refer to them by the year of first issue.

The earlier set, prod~~ced by over- printing four of the then-current 191 7 documentary stamps, is the lssue of 1937. The new Scott listings identify these stamps as Scott RIM1 -RIM4 (Fig- ure 4).

The rarity of these stamps in public hands prior to February 2005 is well es- tablished, with only two confirmed ex- amples 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. To the best of my knowledge this ex- ample remains in the same collection. A second used copy (light man~~script, cut cancels, and facial scrapes), with a 1980 Philatelic Foundation certificate, appeared in a Michael Aldrich sale in 1980. This example i s currently being offered by a dealer for $1 5,000.

Several other sightings of lssue of 1937 marihuana tax stamps have been made, but these are not known to be in philatelic hands. Sherwood Springer photocopied a document bearing 18 of the $1 stamp; at the time the document

Figure 2. A government hemp factory in Rockford, Iowa. Hemp manufacturers were regulated by the marijuana tax laws, but their transactions were not taxed. Image courdesy ofKen T~tb'n,

Figure 3. Marijuana order forms: original, duplicate and triplicate. Stamps were affixed to the lower left comer of the original copy. lmage courdesy of National Posizll Museum.

resided in a university. At present its whereabouts is unknown.

A photocopy showing a block of nine stamps on a marijuana order form was pictured in an article in the September 1997 issue of American Philatelist. the order form indicates an order for 36 ounces, so presumably this same docu- ment had an additional 27 $1 stamps on the reverse of the document. the author of the article, research scier~tist Alexander T. Shulgin of California, ex- plained that the original form bearing the stamps was submitted to the gov- ernment. It must be assumed that this order form is either in government files or has been destroyed.

Four documentary stamps were over- printed for use as marihuana tax stamps. the $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 water- marked 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 in each sheet were perforated on four sides.

December 2005 Scott Stamp Monthly 137

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MARIHUANA f T A I ACT " S OF 1937 ;

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

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The National Postal Museum has announced that additional "marked" copies of the stamps wil l be sold. The marking wil l consist of a horizontal and a vertical straight line drawn in in- delible black ink. Given the historical- ly 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 perfora- tions along the right side, a stamp that collectors would normally called damaged. If the National Postal Mu- seum was trying to maximize its rev- enue from the sale of these stamps, it is hard to see why so many straight- edged copies and a damaged stamp were included.

The $1 00 stamps (created by over-

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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 in- delible black ink. Given the historical- ly 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 perfora- tions along the right side, a stamp that collectors would normally called damaged. If the National Postal Mu- seum was trvine to maximize its rev-

I " enue from the sale of these stamps, it is hard to see why so many straight- edged copies and a damaged stimp were included.

The $100 stamps (created by over-

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 in- clude 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 111- ternal 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 58 is not accounted for in the preceding description. That book- Ict was stamped SPECIMEN in 1946. Three panes from that booklet, wi th serial numbers 913 through 920 and 925 through 928, plus booklets 59

through 198, all eventually wound up in the inventory of the National Postal Museum.

The third pane from the booklet, numbered 925 through 928, was sto- len 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 Seat- tle resident pleaded guilty to two mis- demeanor 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 Foun- dation for certificatcs of authentic- ity 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 re- cent deaccession also inclucled some imperforate examples (pairs and larg- er 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 illus- trative 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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Figure 6. The 1962 set of four marihuana tax stamps, Scott RJM5-RJM8. Image courtesy of Matthew Bennett International.

MARIHUANA TAX STAMPS: THE ISSUE OF 1962

In addition to Issue of 1937 mari- huana tax stamps, four denominations of undated documentdry stamps ($1, Scott R667; $5, Scott R676; $1 0, Scott R677; and $50, Scott R727) were over- printed and delivered to Internal Rev- enue 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

Continued from page 40 The $50 stamps were not serially

numbered, but did come in Danes of Fruit Tvoe of 2004 , .

2005, Aug. 25 Wmk. 373 1042 A165 lc Hog plum .20 .20 1043 A165 I0c Caco plum .20 .20 1044 A165 25c Sugar apple .50 .SO 1045 A165 60c Papaya 1.25 1.25 1046 A165 7% Custard apple 1.50 1.50 1047 A165 $1 Olahoite

gooseberry 2 00 2.00 1040 A165 61 50 Guava 3 00 3.00 1049 A165 $10 Passion fruit 20.00 20.00

Nos. 1042-1049 (8) 28.65 28.65

ZIMBABWE (1 1105)

Aloes Type of 2004 2004, July 20 Litho. Perf. 14x1451 37%~ & I n 7-or05hmn eC&3 SF8 iUeY 20 W

Designs 56900, Banded Egyplian cobra. $13 800 Pull adder. $20 000 Boomslan s2s~ooo.~~ezamblauc soltiha cbbra. ~30.00%: Gabon vipor S40.000, 01acc mamba.

'2005, July 12 Litho. Perf. 14%x14 996995 A180 Set 01 6 16 00 16.00

New stamp issues listed in the Scott New Issues Update will appear in future volumes of the Scott Standard Post- age Stamp Catalogue and the Scott Specialized Catalogue of United States S t~ rnps & Covers.

four. ~ n c k again, the high \;slue in- cludes a receipt tab. There is no evi- dence that they were assembled into booklets as the earlier $100 denomi- nation 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 $1 00 stamps of the lssue of 1937 for the punitive tax (more than half were sent to the National Postal Mu- seum), the most logical explanation is that these were intended for larger or- ders 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 denomina- tion. 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 is tempted to think that the final sheet in the fiscal 1971 de- livery 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 hallucino- genic drug use. I find nothing in that decision that invalidated the tax; the case of Leary's conviction for posses- sion 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 1 937 Marihuana Tax Act."

The strongest evidence against a 1 969 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 i s clear that the use of both narcotic and marihuana tax stamps ceased on April 30, 1971.