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Are gaming activities taxed under the FairTax?
Yes, gaming activities are taxed under the FairTax; however, given the impracticality of taxing the purchase of lottery tickets or casino chips and the like, the tax is levied on the establishment running the gaming operations. The FairTax legislation (see excerpt below) requires a gaming establishment to register as a gaming sponsor. The tax is imposed on the gaming sponsor and must be remitted by the 15th day of each month for the gaming services sold during the prior month. The tax is computed by multiplying 23 percent times the gross receipts for gaming services received by the gaming business minus the sum of total gaming payoffs to chance purchasers and any other gaming taxes. Example: Offtrack betting is a gaming activity. The offtrack betting business pays taxes equal to 23 percent of its gross receipts for gaming activities (the total amount bet) minus the sum of the prize money paid to winners plus any state gaming taxes paid.
Under the income tax, casinos, etc. are already paying tax to the government for net profits and the employer share of payroll taxes, which go away under the FairTax. Their compliance costs would decrease under the FairTax as well. Finally, people who gamble will have more gross take-home pay under the FairTax and big winners will not have to pay tax at the time of winning. So this is a win-win for all.
Below is the section of the FairTax bill, HR 25, specifying the taxation of gaming activities.
SEC. 702. GAMING ACTIVITIES.
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