3 ms·

You're paying income tax, not sales tax, because winnings are income. (Think about professional gamblers...) Income taxes are progressive, of course, and then

by ben509 8y ago

You're paying income tax, not sales tax, because winnings are income. (Think about professional gamblers...) Income taxes are progressive, of course, and then there are a mess of deductions. But they could still make an estimate by just assuming the person is in the $37K to $92K bracket. So that's 25% [1]. > It seems like bad publicity if your "winners" have to pay several thousand in sales tax to get their "prize car." I think they make the judgement that offering a prize that is 3/4ths as expensive would be less good publicity vs. the largely unknown bad publicity that is mostly oriented towards the government anyway. [1] ... and yeah, there's 25% on that, and 25% on that, etc.; for tax rates < 1 it's convergent, if the tax_paid = rate * (original_value + tax_paid), just solve for tax_paid.

Dylan16807 8y ago
> You're paying income tax, not sales tax, because winnings are income. (Think about professional gamblers...) Think about them why? Gambling income is in a completely different category from a prize you won for free. There's no reason they have to be taxed the same.
- ben509 8y ago
  > Gambling income is in a completely different category from a prize you won for free. The only difference is that as a professional, you're filing your taxes as a business. It's still "income"[1], it's just the entity filing is a business rather than a specific person. Regardless, a prize you win is not taxed as a sale. > There's no reason they have to be taxed the same. To the extent they're treated inconsistently, people will use the discrepancy to game the system. Politicians do that deliberately, of course, since it's an opportunity for graft. [1]: https://www.investopedia.com/terms/i/income.asp https://www.investopedia.com/terms/i/income.asp
  - Dylan16807 8y ago
    > The only difference is that as a professional, you're filing your taxes as a business. In gambling, you're putting money into the system, possibly applying skill, and getting money back out. With free prizes, you're just being given things with nothing in return. That's a big difference. And not one that you can effectively game. It's very clear whether you're inputting money or not.

by ben509 8y ago

Dylan16807 8y ago

> You're paying income tax, not sales tax, because winnings are income. (Think about professional gamblers...) Think about them why? Gambling income is in a completely different category from a prize you won for free. There's no reason they have to be taxed the same.

ben509 8y ago
> Gambling income is in a completely different category from a prize you won for free. The only difference is that as a professional, you're filing your taxes as a business. It's still "income"[1], it's just the entity filing is a business rather than a specific person. Regardless, a prize you win is not taxed as a sale. > There's no reason they have to be taxed the same. To the extent they're treated inconsistently, people will use the discrepancy to game the system. Politicians do that deliberately, of course, since it's an opportunity for graft. [1]: https://www.investopedia.com/terms/i/income.asp https://www.investopedia.com/terms/i/income.asp
- Dylan16807 8y ago
  > The only difference is that as a professional, you're filing your taxes as a business. In gambling, you're putting money into the system, possibly applying skill, and getting money back out. With free prizes, you're just being given things with nothing in return. That's a big difference. And not one that you can effectively game. It's very clear whether you're inputting money or not.