"Michael S. Lorrey" says:
> James Wetterau wrote:
> > The really big thing was that the winnings were untaxed in any way.
> > Apparently gambling winnings in the U.S. by a foreigner do not (or at
> > the time did not) subject you to U.S. taxes, and Australia (like many
> > former British Commonwealth countries) has no tax on gambling. So the
> > consortium would just pocket the profits. After they walked away with
> > many millions from (I think) Tennessee there were rumors that either
> > the U.S. or Tennessee might start imposing a special tax on winnings
> > for people who cover more than some large fraction of the lottery
> > numbers.
>
> There is always a tax. Capital gains taxes are assessed on businesses,
> and income taxes on individuals. The operatives the company was sending
> around to buy tickets had to either be residents or have green cards, in
Cannot tourists participate in the U.S. state lotteries? Anyway,
assume the operatives were U.S. citizens. If they bought the tickets
with money belonging to foreign nationals on behalf of foreign
nationals and delivered the tickets to the foreign consortium before
the drawing for face value plus their service charge, the
U.S. residents/citizens made no money on the lottery, (except what
they were paid for their services, which clearly they must pay income
tax on) and thus owe no tax on the winnings. The foreign consortium
was not operating a business as far as Australia is concerned, just
gambling. I believe at the time the U.S. tax code did not require
Australians who place bets on U.S. lotteries to pay capital gains
taxes to the U.S., but rather to pay them to their home country (at
least from what I recall in the Time or Newsweek article). Of course
Australia had no capital gains tax on gambling winnings.
I searched the web for clarity on this issue. What I found concerns a
treaty protocol between the U.S. and Canada -- Australia may be
different. I found this:
http://www.grasmick.com/taxv11n3.htm#NEW RULES FOR U.S.
It appears that the U.S. as of 1996 levies a 30% "withholding" tax on
certain gambling winnings by Canadians:
(http://www.grasmick.com/taxv11n3.htm#NEW RULES FOR U.S.), but that
Canadians may be entitled to a partial refund if they file a U.S. tax
return. I believe at the time (around 1990) there was no such
withholding tax on lotteries for Australians. Certain games are still
exempt from the withholding tax for the Canadians, according to the
info at this URL: blackjack, baccarat, craps, roulette and big-6
wheel.
...
> Even with these numbers though, it might be a decent deal, however,
> buying every possible number combination ranges from 7 million up to 70
> million dollars in ticket buys. The state typically keeps half to two
> thirds of the total amount even before the jackpot is made, and then you
> also have subsidiary prizes.
...
If there's no winner, the states pour some of the money back into the
lotteries, building up the jackpot. This leads to positive
E.V. lotteries. The consortium watched for those, and monitored the
number of tix sold.
Regards,
James
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