Bingo, Keno, and Slot Machines. File Form W-2G for every person to whom you pay $1,200 or more in gambling winnings from bingo or slot machines, or $1,500 or more from keno after the price of the wager for the winning keno game is deducted. If the winnings aren't paid in cash, the FMV of the item won is considered the amount of the winnings.
Established in 1973 after a number of costly and embarrassing scandals involving games of chance, the Washington State Gambling Commission is the second oldest regulatory agency of its kind in the United States. Despite the generally laid-back reputation of the Evergreen State, gambling is a serious business that brings in more than a billion dollars in annual revenue. Unfortunately, it also draws a criminal element that seeks to profit by skirting the law, and this is where the men and women of the WSGC earn their paychecks.
To give you an idea of the stakes, here are the Washington State gambling net receipts for 2013:
- Tribal Casinos – $2,225,300,000
- State Lottery – $230,200,000
- Card Rooms – $212,800,000
- Punch Boards/Pull Tabs – $65,500,000
- Horse Racing – $28,000,000
- Bingo – $8,200,000
- Raffles/Fundraising Events – $4,900,000
How the Commission Works
The Governor of Washington State, with approval from the Senate, selects five individuals to serve as commissioners for a term of six years. The members of the commission also appoint a director, and this individual selects a staff. There were 146 staff members as of this writing, with 83 also being law enforcement officers.
The agency is not funded by taxes from the citizens of Washington State. Instead, funds are obtained through regulatory fees paid out by the tribal governments and anyone else seeking a license to offer games of chance.
The commission is responsible for regulating and licensing all legal gambling in the state, with the exception of horse racing and the lottery. Due to an agreement with the Native American tribes of Washington State, the commission also assists in the regulation of any gambling that takes place on tribal land.
Working with law enforcement and tribal authorities, the employees of the commission investigate a wide range of gambling-related offenses. These include the following: fraud, money laundering, animal fights, bookmaking, loansharking, Internet gambling, cheating, theft, and embezzlement.
Much of their work revolves around financial audits, as well as on-site and background investigations. Everyone involved in the gaming industry is subject to a thorough background check, and in 2013 the agency investigated 23,300 new applicants and license holders.
Investigators may also be called upon to go undercover, which is especially useful when investigating complaints from the public against casinos and card rooms. About 500 complaints were investigated during the 2013 fiscal year, and these resulted in the discovery of over 840 violations of the law (with 72 criminal cases being sent to state prosecutors).
Gambling Tax
The state of Washington does not collect a gambling tax, but cities, towns, and counties are free to do so. Many take advantage of this opportunity to boost the local economy, and an estimated $29 million was collected in the 2013 fiscal year. Of this number, card games made up the largest source of tax revenue with $21.3 million, followed by punch boards and pull tabs ($7.2 million), and bingo ($267,592).
Business and occupation taxes also exist for establishments offering various forms of gaming. Anyone with a gambling license is required to pay an annual business and operation tax of 1.5%, and those with a gross income greater than $50,000 are subject to an additional 0.13% tax to help raise funds for problem gambling programs. In total, the B&O taxes generated an additional $5.5 million for Washington State in 2013.
Internet Gambling in Washington State
According to Article II Section 24 of the Washington State constitution, all gambling activities are considered illegal unless they’ve been specifically approved. This means online gambling is prohibited in all forms, from running an Internet casino to wagering money on virtual slots. The crime of online gambling was upgraded in 2006 from a misdemeanor to a felony, which means players could face prison time alongside the people who run the establishments.
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The stated reason for such tight restrictions involves the safety of potential players. According to the Washington State Gambling Commission website, online games may be dishonest, and proceeds could end up funding criminal activities. The opportunity for credit card fraud is always present, as well as the risk presented to minors and problem gamblers.
In 2010, the Supreme Court heard a case labeled “Rousso vs. State of Washington.” The plaintiff challenged the legality of the state’s Internet gambling laws, but the Supreme Court upheld the legislation by a vote of 9-0.
Card Games in Washington State
Prior to 1997, the only allowable card games in Washington State were the kind that took place between players (such as poker). While a card room could still charge players for renting a seat, they could not offer games that pitted customers against the house.
That all changed in 1997, when the state legislature approved house-banked games such as blackjack. Under the current laws, a card room can operate up to 15 tables, and the maximum wager is limited to $300.
During the gambling boom of the new millennium, a high of 96 card rooms were in operation throughout the state. This number has fallen in recent years, however, and the latest statistics show that 53 card rooms were in operation by April of 2014.
Tribal Gaming
The Indian Gaming Regulatory Act went into effect throughout the United States in 1988, and this granted Indian tribes the right to build casinos and offer gaming on their lands. The WSGM works alongside the tribes to regulate gaming and certify employees.
This relationship has largely been a harmonious one, although the dispute over tribal machine gaming was a notable exception. For years, state and tribal officials disagreed over which types of machine games were legal. In 1994, a federal court was asked to render a decision on the matter, and three years later they deemed slot machines to be illegal.
As a compromise, tribal lottery machines were created. They look and play similar to slot machines, but the random number generator is replaced by a predetermined pool of winner or losing tickets. Each of the 29 federally recognized tribes in Washington State were allowed 975 machines, although they have the right to negotiate this number much higher by entering into a compact.
The state has an overall limit on these machines that caps out at 27,300, and most times it operates at just under capacity. No matter what the number, however, all machines are checked in the commission's electronic testing lab to verify a fair experience for players.
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Players dream of hitting a big jackpot when they play the slots. When that day comes for you, you'll have questions about the taxes you must pay on the winnings.
Hand Pay Jackpots
When you hit the winning combination of symbols for a large jackpot, your slot machine locks up. Depending on the machine, the lights on top of the machine may come on and start flashing, music may play or bells ring. A slot attendant arrives promptly to see what you have won.
On jackpots smaller than $5,000, an attendant verifies that you hit the jackpot and then assists you in claiming your money at the cashier's cage. In the case of a large or progressive jackpot, the casino may have technicians come and check the machine to certify that it was functioning properly when the jackpot hit. If you hit one of the wide-area progressive machines such as MegaBucks, the slot company that operates the game comes out and verifies that machine before giving you a check.
When you hit a jackpot, you have the option of taking your winnings in cash or check. Usually, large amounts are paid by check. In the case of the MegaBucks or similar multi-million dollar jackpots, you receive a check for the partial amount, and then you have 90 days to decide if you want to be paid a lump sum or an annual annuity on the balance. If you select the lump sum option, you receive only a percentage of your actual winnings. For example, the full winnings of one multi-million slot jackpot is paid in 25 annual installments, or you can take a lump sum of 60 percent of the winnings.
IRS Withholding
All casino winnings are subject to federal taxes. However, the IRS only requires the casinos to report wins over $1,200 on slots and video poker machines or other games such as keno, lottery or horse racing. When you have a win equal to or greater than $1200, you are issued a W-2G form. This form lists your name, address and Social Security number. The casinos are not required to take out withholding tax on jackpots under $5,000 as long you supply your Social Security number. If you don’t provide your Social Security number, the casinos withhold 28 percent on small jackpots.
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You can request a specific amount of withholding tax to be taken out of any jackpot you win. Some players like to do this to avoid a big tax payment in April when they file their income tax returns. The additional withholding may not be necessary if you keep a log book. The law allows you to deduct gambling losses up to the amount of your winnings. You can only do this if you have documentation of your losses. Keeping a diary or log book is the way to do this.
Proper Identification
Casinos can refuse to pay you until you produce proper identification—a photo ID such as a driver’s license, military ID or passport.
If you don’t produce an ID, you are photographed and the casino holds your winnings until you come back with proper ID. For this reason, you should always carry a valid form of identification with you when you visit the casino.
Washington State Slot Machine Tax Rate 2019
When the casino checks your identification, it also checks your age to make sure you are legally old enough to play. The minimum age for gambling varies from state to state, but under-age gamblers are not be paid if they hit a jackpot. This is the law in all jurisdictions, and it has been upheld in court.
Plan Ahead
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Before you start playing your favorite slot machine you should have a plan for the day you hit a jackpot. Players become excited when they hit the big one, and this may affect the decisions you make about your winnings. It is helpful if you know ahead of time how much withholding you want taken out or whether you want a check for all or some of the amount.