The Frank bill and State Laws/Taxes

[Gunslinger1988]

I am trying to decide if I support this bill. I Just spent some time reading the entire bill. I have two major concerns, State Laws and Tax Collection. I hope that some of you posters can help answer my questions.

I live in Georgia. I am a professional player who pays taxes on live and internet winnings. I do not know what laws if any are on the books about internet gambling in my state( how do I find this out?) . I am concerned that if the Frank bill passes, I will not be able to play with other US residents, and will be forced to move to another state in order to play online poker. I'm sure there are MANY others with similar concerns.

Regarding the tax section of the bill. ‘‘(3) Appropriate mechanisms to ensure that all
11 taxes relating to Internet gambling due to Federal
12 and State governments and to Indian tribes from
13 persons engaged in Internet gambling are collected
14 at the time of any payment of any proceeds of Internet gambling.

This could be very troubling. If they decide to collect taxes on anything other a players year-end profit, the tax burden for players could be enormous. It seems that this bill will give a TON of power to the named " Director". Any Thoughts?

[Skallagrim]

You (and everyone else) can check your actual state law on gambling here:
http://www.gambling-law-us.com/State-Law-Summary/

I hate to say this, but your livlihood in the state of Georgia is illegal. Georgia law makes it a misdemeanor to bet money on "any game played with cards."

I assume your B&M play is not in Georgia so that is OK. But, although Georgia has no law specific to the internet, my opinion (and I am a lawyer) is that the Georgia law is written so that playing cards on the internet is covered too.

The Frank Bill allows individual states to opt out and prevent their residents from participating. You can guess what Georgia would decide to do.

As to taxes, the Frank Bill requires sites to be able to collect taxes at time of cashout, but only "TAXES RELATED TO INTERNET GAMBLING." There are no taxes related to internet gambling NOW. What they may pass later is anyone's guess.

Skallagrim

[permafrost]

[ QUOTE ]

Regarding the tax section of the bill. ‘‘(3) Appropriate mechanisms to ensure that all
11 taxes relating to Internet gambling due to Federal
12 and State governments and to Indian tribes from
13 persons engaged in Internet gambling are collected
14 at the time of any payment of any proceeds of Internet gambling.

This could be very troubling. If they decide to collect taxes on anything other a players year-end profit, the tax burden for players could be enormous. It seems that this bill will give a TON of power to the named " Director". Any Thoughts?

[/ QUOTE ]

Could be troubling??

"if they decide"? No, the bill will decide and it won't be on "year-end profit". How does the site know that you will have any money in the cashier at the end of the year?? At the least, they collect when you cash out of the site. BTW, are you okay with giving them your SS#?

More likely, all taxes will be collected when you leave a table and your chips return to the cashier. That is the most logical method.

An argument against taxes being collected when you withdraw from the cashier, instead of the table, would be that you could make money in 2007 and not withdraw until late 2008. Did the site follow the rules about withholding taxes due?? No, and the one or two states that fell for this boondoggle call them on their mistake and their license is gone.

I can even make an argument that it is collected from every pot. The press release for the bill said "No applicant would receive a license unless the following requirements <font color="red"> with respect to any Internet bet or wager</font> , at a minimum, are met:
Mechanisms to ensure all appropriate taxes and fees are collected from individuals". Notice it is collected from any bet or wager!!??

Now, which taxes is the bill promising to collect?? It says "all taxes relating to Internet gambling" owed to the Feds and the states. That is your income and SS taxes. If it isn't, then there is a new tax promised and not explained. Troubling?? Worse than troubling, to me. Last I heard, the lottery payouts are about 2/3 of each dollar they take in. If you win at poker, is the new tax 1/3 of the winnings??

And unless this new tax replaces your other taxes, LOL, you still owe another chunk!! Welcome to Fed regulation.

[Skallagrim]

"Now, which taxes is the bill promising to collect?? It says "all taxes relating to Internet gambling" owed to the Feds and the states. That is your income and SS taxes."

Perma, perhaps you could point me to a provision in the IRS code or the SS law that "relates to internet gambling?"

I'll wait.

[TheEngineer]

[ QUOTE ]
"if they decide"? No, the bill will decide and it won't be on "year-end profit". How does the site know that you will have any money in the cashier at the end of the year?? At the least, they collect when you cash out of the site. BTW, are you okay with giving them your SS#?

[/ QUOTE ]

I agree with you here. Players probably won't be able to make withdrawals of amounts that exceed deposits (perhaps exceeding by some threshold) without having taxes withheld on the profit. I also agree that social security numbers will be required.

[ QUOTE ]
More likely, all taxes will be collected when you leave a table and your chips return to the cashier. That is the most logical method.

[/ QUOTE ]

How is this more likely? Obviously, none of know exactly what would happen at this point, but there seems to be little logic in withholding taxes from losing players. It's unlikely the IRS would wish to get bogged down the paperwork for withholding from losing players.

[ QUOTE ]
An argument against taxes being collected when you withdraw from the cashier, instead of the table, would be that you could make money in 2007 and not withdraw until late 2008. Did the site follow the rules about withholding taxes due?? No, and the one or two states that fell for this boondoggle call them on their mistake and their license is gone.

[/ QUOTE ]

I don't see why that would cause a problem. The sites could simply withhold taxes on profits at the end of the year. For example, if someone had a profit of $10K on a site and hadn't made any withdrawals that year, the site could withhold some percentage and send that to the IRS.

[ QUOTE ]
Now, which taxes is the bill promising to collect?? It says "all taxes relating to Internet gambling" owed to the Feds and the states. That is your income and SS taxes.

[/ QUOTE ]

Unless filing as a professional gambler, that's income tax only.

[ QUOTE ]
Last I heard, the lottery payouts are about 2/3 of each dollar they take in.

[/ QUOTE ]

That's just the income tax. Nothing new. It's not some special "lottery tax".

[TomVeil]

[ QUOTE ]
I can even make an argument that it is collected from every pot. The press release for the bill said "No applicant would receive a license unless the following requirements with respect to any Internet bet or wager , at a minimum, are met:
Mechanisms to ensure all appropriate taxes and fees are collected from individuals". Notice it is collected from any bet or wager!!??

[/ QUOTE ]

While you could make that argument, logistically that would be a nightmare for everybody involved. Not everybody who plays on any site will be from the US, and therefore would not be taxed at all by the IRS. I can't imagine any site agreeing to learn every single tax law in the world and apply them all on the fly to every hand that's dealt.

Personally, I expect to see some sort of tax on winnings at cashout (probably above $X). Remember, the politicians don't have all the power. There's people who are VERY interested in making sure that the process to get people to play online poker is quick and easy.

We'll see how it plays out, but the energized have a lot more power than the politicians who are doing a million things at once.

[permafrost]

[ QUOTE ]
While you could make that argument, logistically that would be a nightmare

[/ QUOTE ] The point was that we don't know what they will do. I was not making a serious "every pot" argument.



[ QUOTE ]
Remember, the politicians don't have all the power.

[/ QUOTE ] They don't??


[ QUOTE ]
There's people who are VERY interested in making sure that the process to get people to play online poker is quick and easy.

[/ QUOTE ] And there ARE people that want tax revenue. What tax? Again no one seems to know but it does say ALL taxes will be collected.

Is it new taxes and fees on top of income and SS tax? I certainly want to know. You should also.

[pig4bill]

[ QUOTE ]
Remember, the politicians don't have all the power.

[/ QUOTE ]

Yes they do.

[ QUOTE ]
There's people who are VERY interested in making sure that the process to get people to play online poker is quick and easy.

[/ QUOTE ]

Who cares? They won't be able to do anything.

[ QUOTE ]
We'll see how it plays out, but the energized have a lot more power than the politicians who are doing a million things at once.

[/ QUOTE ]

Don't be so naive. If this bill makes it into law, some beaurocrats will have a full-time job of writing the regulations for it. Any site that wants U.S. customers, and they all do, will follow those regulations to get licensed and stay licensed.