Frequently Asked Questions
Who is eligible for the Wagering Tax Exclusion via Separate Charging?
Available to businesses engaged in accepting wagers that explicitly break out the tax amount as a separate charge to the customer.
How does the Wagering Tax Exclusion via Separate Charging work?
Excludes the amount of the excise tax from the taxable 'amount of wager' if the taxpayer establishes that the tax was collected as a separate charge from the person placing the wager.
What law authorizes the Wagering Tax Exclusion via Separate Charging?
The Wagering Tax Exclusion via Separate Charging is authorized under IRC §4401(b) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §4401
Source: Internal Revenue Code, Title 26, United States Code
§ 4401. Imposition of tax(a) Wagers(1) State authorized wagersThere shall be imposed on any wager authorized under the law of the State in which accepted an excise tax equal to 0.25 percent of the amount of such wager.
(2) Unauthorized wagersThere shall be imposed on any wager not described in paragraph (1) an excise tax equal to 2 percent of the amount of such wager.
(b) Amount of wagerIn determining the amount of any wager for the purposes of this subchapter, all charges incident to the placing of such wager shall be included; except that if the taxpayer establishes, in accordance with regulations prescribed by the Secretary, that an amount equal to the tax imposed by this subchapter has been collected as a separate charge from the person placing such wager, the amount so collected shall be excluded.
(c) Persons liable for taxEach person who is engaged in the business of accepting wagers shall be liable for and shall pay the tax under this subchapter on all wagers placed with him. Each person who conducts any wagering pool or lottery shall be liable for and shall pay the tax under this subchapter on all wagers placed in such pool or lottery. Any person required to register under section 4412 who receives wagers for or on behalf of another person without having registered under section 4412 the name and place of residence of such other person shall be liable for and shall pay the tax under this subchapter on all such wagers received by him.
(Aug. 16, 1954, ch. 736, 68A Stat. 525; Pub. L. 85–859, title I, § 151(a), Sept. 2, 1958, 72 Stat. 1304; Pub. L. 93–499, § 3(a), Oct. 29, 1974, 88 Stat. 1550; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 97–362, title I, § 109(a), Oct. 25, 1982, 96 Stat. 1731.)
Editorial Notes
Amendments1982—Subsec. (a). Pub. L. 97–362 substituted provision that there shall be imposed on any wager authorized under the law of the State in which accepted an excise tax equal to 0.25 percent of the amount of such wager and that there shall be imposed on any other wager an excise tax equal to 2 percent of the amount of such wager for provision that there be imposed on wagers, as defined in section 4421, an excise tax equal to 2 percent of the amount thereof.
1976—Subsec. (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
1974—Subsec. (a). Pub. L. 93–499 substituted “2 percent” for “10 percent”.
1958—Subsec. (c). Pub. L. 85–859 made all persons required to register under section 4412 of this title who receive wagers for or on behalf of another person without having registered under section 4412 of this title the name and place of residence of such other person liable for the tax on all such wagers received by them.
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