Washington Administrative Code › Title 458 - Revenue, Department of › Chapter 458-20 - Excise tax rules › Section 458-20-131 - Gambling activities

Current through Register Vol. 24-14, July 15, 2024
(1)
Introduction.
This section explains the business and occupation
			 (B&O), retail sales, and use tax reporting requirements of persons
			 operating contests of chance such as pull-tab and punch board games, card
			 games, bingo games, raffles, and persons operating amusement games such as
			 dart-toss games, ball-throw or ball-roll games, and crane games. It also
			 explains the B&O tax reporting requirements of persons engaged in the
			 business of conducting parimutuel wagering, which became effective July 1,
			 2005. Nonprofit organizations conducting activities for fund-raising purposes
			 should also refer to
			 RCW
			 82.04.3651,
			 82.08.02573, and WAC
			 458-20-169 (Religious,
			 charitable, benevolent, nonprofit service organizations, and sheltered
			 workshops) to determine if a B&O, retail sales, or use tax exemption is
			 available for their activities.
Persons conducting the types of activities described above
				should also be aware that the Washington state gambling commission regulates
				these activities. These persons should refer to
				chapter
				9.46 RCW (Gambling -- 1973
				Act), Title 230 WAC (Gambling commission), and/or contact the Washington state
				gambling commission with any questions regarding their licensing and reporting
				responsibilities with the commission. Persons engaging in the business of
				parimutuel wagering should refer to
				chapter
				67.16 RCW (Horse racing)
				and/or contact the Washington horse racing commission for additional reporting
				responsibilities.
(2)
Parimutuel wagering.
Effective July 1, 2005, persons engaging
			 within this state in the business of conducting race meets for which a license
			 must be obtained from the Washington horse racing commission are taxable under
			 the parimutuel wagering B&O tax classification. Chapter 369, Laws of 2005.
			 This tax is in addition to any tax imposed under
			 chapter
			 67.16 RCW. Unlike the
			 parimutuel tax, the B&O tax applies to both in-state and out-of-state
			 parimutuel wagering. The measure of tax is the gross income of the business
			 derived from parimutuel wagering. For purposes of this classification, "gross
			 income" does not include amounts paid to players for winning wagers, or taxes
			 imposed or other distributions required under
			 chapter
			 67.16 RCW (i.e.,
			 RCW
			 67.16.102 owners bonus,
			 RCW
			 67.16.105 fair fund,
			 RCW
			 67.16.175 breeders award).
(3)
Contests of chance.
Contests
			 of chance means any contests, games, gaming schemes, or gaming devices, other
			 than the state lottery as defined in
			 RCW
			 67.70.010, in which the outcome depends in a
			 material degree upon an element of chance, notwithstanding that skill of the
			 contestants may also be a factor in the outcome. The term includes social card
			 games, bingo, raffle, and punch board games, and pull-tabs as those terms are
			 defined in chapter 9.46 RCW.
			 Contests of chance does not include race meets for the conduct of which a
			 license must be secured from the Washington horse racing commission, or
			 "amusement game" as defined in
			 RCW
			 9.46.0201.
(a)
Taxability of contests of chance on
			 or after July 1, 2005.
Effective July 1, 2005, persons operating
			 contests of chance are taxable under one of two new B&O tax classifications
			 on their total gross income for all contests of chance. Chapter 369, Laws of
			 2005. Persons whose gross income from contests of chance is less than fifty
			 thousand dollars in a calendar year will report all such income under the
			 "gambling contests of chance (less than $50,000 a year)" tax classification.
			 Income from amusement games should not be combined with income from contests of
			 chance for purposes of determining if the "less than fifty thousand dollar"
			 threshold is met. (See subsection (4) of this section for tax-reporting
			 information about amusement games.)
Persons whose gross income from contests of chance is fifty
				thousand dollars or more in a calendar year will report all such income under
				the "gambling contests of chance ($50,000 a year or greater)" tax
				classification.
(b)
Taxability of contests of chance before July 1, 2005.
Before July
			 1, 2005, persons operating contests of chance were taxable on their gross
			 income under the service and other activities B&O tax
			 classification.
(c)
Measure
			 of tax.
Persons operating contests of chance are subject to B&O tax
			 on the gross income of the business derived from contests of chance. With
			 respect to income from contests of chance, "gross income" of the business does
			 not include the monetary value or actual cost of any prizes that are awarded,
			 amounts paid to players for winning wagers, accrual of prizes for progressive
			 jackpot contests, or repayment of amounts used to seed guaranteed progressive
			 jackpot prizes. In the case of donated merchandise, the operator may deduct the
			 fair-market value of the merchandise. Costs of operating the game, including
			 the amount paid for the purchase of the actual game (e.g., a punch board), may
			 not be deducted.
(d)
Examples.
The following examples identify a number of facts and
			 then state a conclusion. These examples should be used only as a general guide.
			 The tax results of other situations must be determined after a review of all
			 facts and circumstances.
(i)
Example
			 1.
Persons operating for-profit weekly bingo games at the Town &
			 Country Social Club are taxable upon gross income arising from the operation of
			 their games. As their annual gross income from the bingo games is $30,000, they
			 will report under the gambling contests of chance (less than $50,000 a year)
			 tax classification.
(ii)
Example 2.
The Lucky Card Room (LCR) charges a fee to all card
			 players as a condition for participating in their card games. Depending on the
			 game, the LCR may charge a fee based on time, on a per-hand basis, or on a
			 percentage of the wagered amount (commonly referred to as a "rake"). Their
			 annual gross income from card game fees and percentages of wagers is $120,000,
			 and thus they will report under the gambling contests of chance ($50,000 a year
			 or greater) tax classification.
(iii)
Example 3.
Take A Chance
			 (TAC) is a business offering customers several types of gambling activities,
			 such as pull-tabs, bingo, and punch board games. Based on last year's income
			 and this year's anticipated income, TAC started the year out reporting their
			 gross income under the gambling contests of chance (less than $50,000 a year)
			 tax classification. As their income from gambling activities was better than
			 anticipated, they passed the $50,000 threshold. TAC must now start reporting
			 their gross income under the gambling contests of chance ($50,000 a year or
			 greater) tax classification. They must also reclassify, by filing amended
			 excise tax returns, all income reported for the year under the tax
			 classification for less than $50,000 a year to $50,000 a year or
			 greater.