Tax on Wagering

The following two taxes are imposed on wagering activities.

• Occupational tax. You must pay the occupational tax if you accept taxable wagers for yourself or another person. See Form 11-C, later, for more information.
• Wagering tax. You must pay the tax on wagering if you are in the business of accepting wagers or running a wagering pool or lottery. You must also pay the tax on wagering if you have not properly registered the name and address of your principal on Form 11-C. See Form 730, later, for more information.

Exempt organizations. Organizations exempt from income tax under section 501 or 521 of the Internal Revenue Code are not exempt from the tax on wagering or the occupational tax. However, see Lottery, later, for an exception.

Confidentiality. No Treasury Department employee may disclose any information that you supply in relation to the wagering taxes, unless necessary to administer or enforce the Internal Revenue laws.

Definitions

The following definitions apply to Form 11-C and Form 730.

Principal. A principal is a person who is in the business of accepting wagers for his or her own account. This is the person who makes profit or risks loss depending on the outcome of the event or contest for which the wager is accepted.

Agent. This is the agent of the principal who accepts wagers for the principal.

Wagers. Wagers include any wager:

• Made on sports events or contests with a person in the business of accepting wagers,
• Placed in a wagering pool on a sports event or contest, if the pool is conducted for profit, or
• Placed in a lottery conducted for profit.

Sports event. A sports event includes every type of amateur, scholastic, or professional sports competition, such as:

Contest. A contest is any competition involving speed, skill, endurance, popularity, politics, strength, or appearance, such as the following.

• Elections.
• The outcome of nominating conventions.
• Dance marathons.
• Log-rolling contests.
• Wood-chopping contests.
• Weightlifting contests.
• Beauty contests.
• Spelling bees.

Wagering pool. A wagering pool conducted for profit includes any method or scheme for giving prizes to one or more winning bettors based on the outcome of a sports event, a contest, or a combination or series of these events or contests if the wagering pool is managed and conducted for the purpose of making a profit. A wagering pool or lottery may be conducted for profit even if a direct profit does not occur. If you operate the wagering pool or lottery with the expectation of a profit in the form of increased sales, attendance, or other indirect benefits, you conduct it for profit.

Lottery. This includes the numbers game, policy, punch boards, and similar types of wagering. In general, a lottery conducted for profit includes any method or scheme for the distribution of prizes among persons who have paid or promised to pay for a chance to win the prizes. The winning prizes are usually determined by the drawing of numbers, symbols, or tickets from a wheel or other container or by the outcome of a given event.

It does not include either of the following kinds of events.

1. Games of a type in which usually the wagers are placed, winners are determined, and the prizes are distributed in the presence of everyone who placed a wager.
2. Drawings conducted by a tax-exempt organization, if the net proceeds of the drawing do not benefit a private shareholder or individual.

Card games, roulette games, dice games, bingo, keno, and gambling wheels usually fall within exception (1) above.

Form 11-C

You use Form 11-C to register with the IRS certain information on wagering activity and to pay the occupational tax on wagering. Your canceled check is proof of registration and payment.

Who must file. You must file Form 11-C if you are a principal or an agent, defined earlier.

When to file. You must file your first Form 11-C before you begin accepting wagers. After that, file a renewal return by July 1 for each year that you accept wagers. You may also be required to file a first return for a new entity created when certain changes in ownership or control occur. In addition, you are required to file a supplemental registration when certain events occur. See the Form 11-C instructions.

Information required. Follow the instructions on the back of the form. All filers must have an employer identification number (EIN). You cannot use your social security number. If you do not have an EIN, you need to file Form SS-4, Application for Employer Identification Number. You can get a Form SS-4 from the IRS or from the Social Security Administration. If you do not receive an EIN by the time a return is due, file your return anyway and write "Applied for" and the date you applied in the space for the EIN. See the Form SS-4 instructions for how to file.

If you are a principal, you must show the number of agents that accept wagers for you and their names, addresses, and EINs. If you engage a new agent after filing Form 11-C, you must file a supplemental registration showing this information within 10 days after you engage the agent.

Agents must show the name, address, and EIN of each of their principals. If you are engaged by a new principal after having filed a Form 11-C, you must file a supplemental registration within 10 days after being engaged by the new principal. If you do not provide the required information about the principal, you will be liable for the excise tax on wagers you accept as if you were the principal.

Example. Ken operates a numbers game and engages 10 people to receive wagers from the public on his behalf. Ken also employs a secretary and a bookkeeper. Ken and each of the 10 agents are liable for the tax. They must each file Form 11-C. The secretary and the bookkeeper are not liable for the tax unless they also accept wagers for Ken.

On Ken's Form 11-C, he lists all required information (name, address, and EIN) for each of his ten agents as well as himself. He does not list his secretary or bookkeeper.

Each of the 10 agents file Form 11-C showing his or her name, address, and EIN, as well as Ken's.

Figuring the tax. The following tax must be paid annually for every year in which taxable wagers are accepted.

• $50 if all wagers accepted are authorized under the laws of the state in which accepted.
• $500 for all other wagers.

The tax year begins on July 1. If you start accepting wagers after July 31, the tax is prorated for the first year. The prorated amounts are shown in the table in the Form 11-C instructions.

Refund. A refund for an overpayment of the occupational tax may be claimed on Form 8849 using Schedule 6. See the Form 8849 instructions for details.

Form 730

Form 730 is used for figuring the tax on wagers. The wagering tax applies to the wagers (as defined earlier), regardless of the outcome of the individual wagers.

The tax applies only to a wager that meets either of the following conditions.

• It is accepted in the United States.
• It is placed by a person who is in the United States with a U.S. citizen or resident, or in a wagering pool or lottery conducted by a U.S. citizen or resident.

Wagers made within the United States are taxable regardless of the citizenship or place of residence of the parties to the wager.

Laid-off wagers. Persons accepting more wagers than they are willing to carry may lay off a portion of the wagers with another person to avoid the risk of loss. If you accept a wager taken initially by someone else (other than an agent acting for you) include the wager in your gross receipts. If you accept a wager and lay off all or part of it with a person who is liable for the tax, you may be entitled to a credit or refund, discussed later.

Excluded wagers. Tax is not imposed on any of the following.

• Parimutuel wagering, including horse racing, dog racing, and jai alai when licensed under state law.
• Coin-operated devices such as pinball machines.
• Sweepstakes, wagering pools, or lotteries that are conducted by an agency of a state if the wager is placed with the state agency or its authorized agents or employees.

Figuring the tax. The amount of the wager is the amount risked by the bettor, including any fee or charge incident to placing the wager. It is not the amount that the bettor stands to win.

The tax is 2% of the wager if it is not authorized under the laws of the state in which accepted. If the wager is authorized, the rate is 0.25% of the wager.

When to file. File Form 730 for each month by the last day of the following month. File a return whether or not you have taxable wagers to report. If you have none to report, write "0" in the last box of the dollar amount column. If you stop accepting wagers permanently, check the final return box on the form.

Credit or refund. A credit or refund may be claimed for an overpayment of the wagering tax or for the amount of tax imposed on a wager that is laid off with another person who is liable for the tax on the amount laid off. Claim a credit on line 5 of Form 730 or file a claim for refund on Form 8849 using Schedule 6. No credit or refund will be allowed unless the timely filed claim has the required statements, certificates, and consents attached. For more information, see the instructions for Form 730 and Form 8849.

Conditions to allowance. One of the following statements must be attached to the claim for credit or refund.

• The tax has not been collected from the person who placed the wager.
• The tax has been repaid to that person.
• The written consent of that person to make the claim has been obtained.

If the claim is for a laid-off wager accepted by the claimant, the statement must be attached for both the person who placed the laid-off wager and the person who placed the original wager.

Each person liable for the wagering tax must keep records to reflect each day's operations. Your records should include the following information.

For more information on records, see sections 44.4403-1 and 44.6001-1 of the regulations.

Previous| First | Next

Publication Index | IRS-Forms Main | Home