It Really Could Matter Where Your Lottery Tickets Are Purchased!
Okay, when you do win that mega jackpot, it would be good to understand what you actually will win. We have all read about the difference between an annuity lottery versus taking a lump sum. The annuity is based on what the jackpot would be worth over say 25 years versus the smaller amount that you get today. But there are other things to think about! Where a ticket is purchased can add to what the lottery takes before you even get your winnings. We’re talking taxes folks. And it starts with the different states that tickets can be purchased from in the United States.
United States Lotteries
I must confess I do wonder why online lottery providers pick a state that takes tax versus a state that doesn’t. Take California that does collect federal tax on lotteries, but no state tax. That goes for Delaware and Pennsylvania. We can take Alabama, Alaska, Hawaii, Mississippi and Wyoming off the list as they have no lotteries. There are also several that simply do not collect Income Tax (so where do they get their money?). All states in the US that play lotteries must collect Federal Withholding Tax! More about the USA lottery taxation here.
Definitely, where an online lottery provider’s agent buys your ticket can make a difference. Take Spain, who implemented a 20% tax on lottery wins over €2,500. This doesn’t just include the Spanish lotteries but also any tickets sold on any of EuroMillions or EuroJackpot in Spain. So, whether you live in Spain or buy tickets from Spain, you are paying tax.
Adding to the Package
Of course, winning on the last Friday of the month in the UK EuroMillions draw, it’s a good thing that they don’t charge tax. Winning a super trip would be great, but then having to find the money to pay the tax on it would not.
The Small Print
The other thing to verify is what they say in the small print. There are some lotteries that say visitors from other countries can play and win as long as the ticket is purchased in say Canada. Lotto Max has a good bit on this in their terms and conditions.
Why Do They Do It?
Keep in mind that talking about Spain, it’s only been a couple of years that this tax has been in place and in many cases, online lottery providers have longer term contracts with suppliers. The other thing – most of the places that collect tax on lotteries (before the winner gets their share) are official, government run lotteries and for years now, they have been using these games to supplement their budgets, particularly for sports. Okay – I don’t agree with the fact that some of the US states double dip (take part of the revenue and then take state tax) but there are others to choose from.
The Bottom Line
Where there is a choice, definitely online lottery providers should be looking at how to maximize winnings and minimize taxes collected. But keep in mind; this is an evolving situation where it can be a nightmare of jurisdictions between the lottery you are playing, the owner of the online company you buy it through and the operator of the actual provider. There is no question, it is also important to ask what could be a million dollar question of “so where do you actually purchase the lottery tickets”.