Publication 510 - Excise Taxes For 2005 - Department Of Treasury (Page 31 of 47) in pdf

The IRS may withdraw the right to

Cards

Checkers

Cricket

that you accept wagers. You may also be re-

Croquet

Dog racing

Football

make deposits of tax using the safe

quired to file a first return for a new entity created

Golf

Gymnastics

Hockey

harbor rule from any person not com-

when certain changes in ownership or control

CAUTION

Horse racing

Lacrosse

Rugby

plying with these rules.

occur. In addition, you are required to file a

Soccer

Squash

Tennis

supplemental registration when certain events

Tax rate increases. You must modify the safe

Track

Tug of war

Wrestling

occur. See the Form 11-C instructions.

harbor rule if there has been an increase in the

rate of tax. You must figure your tax liability in

Information required. Follow the instructions

Contest. A contest is any competition involv-

the look-back quarter as if the increased rate

on the back of the form. All filers must have an

ing speed, skill, endurance, popularity, politics,

had been in effect. To qualify for the safe harbor

employer identification number (EIN). You can-

strength, or appearance, such as the following.

rule, your deposits cannot be less than 1/6 of the

not use your social security number. If you do

•

Elections.

refigured tax liability.

not have an EIN, you may apply for one online.

•

Go to the IRS website at

The outcome of nominating conventions.

nesses/small and click on the “Employer ID

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Dance marathons.

Numbers (EINs)” link. You may also apply for an

Tax on Wagering

•

EIN by telephone by calling 1-800-829-4933, or

Log-rolling contests.

you can fax or mail Form SS-4, Application for

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Wood-chopping contests.

The following two taxes are imposed on wager-

Employer Identification Number, to the IRS.

•

If you are a principal, you must show the

ing activities.

Weightlifting contests.

number of agents that accept wagers for you

•

Occupational tax. You must pay the occu-

Beauty contests.

and their names, addresses, and EINs. If you

pational tax if you accept taxable wagers

•

engage a new agent after filing Form 11-C, you

Spelling bees.

for yourself or another person. See Form

must file a supplemental registration showing

11-C, later, for more information.

this information within 10 days after you engage

Wagering pool. A wagering pool conducted

•

the agent.

Wagering tax. You must pay the tax on

for profit includes any method or scheme for

Agents must show the name, address, and

wagering if you are in the business of ac-

giving prizes to one or more winning bettors

EIN of each of their principals. If you are en-

cepting taxable wagers or running a wa-

based on the outcome of a sports event, a con-

gaged by a new principal after having filed a

gering pool or lottery. You must also pay

test, or a combination or series of these events

Form 11-C, you must file a supplemental regis-

the tax on wagering if you have not prop-

or contests if the wagering pool is managed and

tration within 10 days after being engaged by the

erly registered the name and address of

conducted for the purpose of making a profit. A

new principal. If you do not provide the required

your principal on Form 11-C. See Form

wagering pool or lottery may be conducted for

information about the principal, you will be liable

730, later, for more information.

profit even if a direct profit does not occur. If you

for the excise tax on wagers you accept as if you

operate the wagering pool or lottery with the

were the principal.

Exempt organizations. Organizations ex-

expectation of a profit in the form of increased

empt from income tax under section 501 or 521

sales, attendance, or other indirect benefits, you

Example. Ken operates a numbers game

of the Internal Revenue Code are not exempt

conduct it for profit.

and engages 10 people to receive wagers from

from the tax on wagering or the occupational tax.

the public on his behalf. Ken also employs a

Lottery. This includes the numbers game, pol-

However, see Lottery, later, for an exception.

secretary and a bookkeeper. Ken and each of

icy, punch boards, and similar types of wager-

the 10 agents are liable for the tax. They must

Confidentiality. No Treasury Department em-

ing. In general, a lottery conducted for profit

each file Form 11-C. The secretary and the

ployee may disclose any information that you

includes any method or scheme for the distribu-

bookkeeper are not liable for the tax unless they

supply in relation to the wagering taxes, unless

tion of prizes among persons who have paid or

necessary to administer or enforce the Internal

also accept wagers for Ken.

promised to pay for a chance to win the prizes.

Revenue laws.

On Ken’s Form 11-C, he lists all required

The winning prizes are usually determined by

information (name, address, and EIN) for each

the drawing of numbers, symbols, or tickets from

Definitions

of his ten agents as well as himself. He does not

a wheel or other container or by the outcome of

list his secretary or bookkeeper.

a given event.

Each of the 10 agents file Form 11-C show-

The following definitions apply to Form 11-C and

It does not include either of the following

ing his or her name, address, and EIN, as well

Form 730.

kinds of events.

as Ken’s.

Principal. A principal is a person who is in the

1. Games of a type in which usually the wa-

business of accepting wagers for his or her own

Figuring the tax. The following tax must be

gers are placed, winners are determined,

account. This is the person who makes a profit

paid annually for every year in which taxable

and the prizes are distributed in the pres-

or risks loss depending on the outcome of the

wagers are accepted.

ence of everyone who placed a wager.

event or contest for which the wager is ac-

•

$50 if all wagers accepted are authorized

2. Drawings conducted by a tax-exempt or-

cepted.

under the laws of the state in which ac-

ganization, if the net proceeds of the draw-

Agent. This is the agent of the principal who

cepted.

ing do not benefit a private shareholder or

accepts wagers for the principal.

•

individual.

$500 for all other wagers.

Wagers. Wagers include any wager:

Card games, roulette games, dice games,

The tax year begins on July 1. If you start ac-

•

bingo, keno, and gambling wheels usually fall

Made on a sports event or a contest with a

cepting wagers after July 31, the tax is prorated

within exception (1) above.

person in the business of accepting wa-

for the first year. The prorated amounts are

gers,

shown in the table in the Form 11-C instructions.

Form 11-C

•

Placed in a wagering pool on a sports

Refund. A refund for an overpayment of the

event or contest, if the pool is conducted

You use Form 11-C to register with the IRS

occupational tax may be claimed on Form 8849

for profit, or

certain information on wagering activity and to

using Schedule 6. See the Form 8849 instruc-

•

Placed in a lottery conducted for profit.

pay the occupational tax on wagering. Your can-

tions for details.

celed check is proof of registration and payment.

Form 730

Sports event. A sports event includes every

Who must file. You must file Form 11-C if you

type of amateur, scholastic, or professional

are a principal or an agent, defined earlier.

Form 730 is used for figuring the tax on wagers.

sports competition, such as:

When to file. You must file your first Form

The wagering tax applies to the wagers (as

11-C before you begin accepting wagers. After

defined earlier), regardless of the outcome of

Auto racing

Baseball

Basketball

Billiards

Bowling

Boxing

that, file a renewal return by July 1 for each year

the individual wagers.

Page 31

Publication 510 - Excise Taxes For 2005 - Department Of Treasury Page 31

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