United States

West Virginia: Sales of Raffle Tickets Not Taxable Sales of Tangible Personal Property

Oct 24, 2016
From KPMG TaxWatch

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Recently, the West Virginia Office of Tax Appeals ruled that sales of raffle tickets were sales of intangible property not subject to sales tax. The taxpayers at issue in were bar owners that sold raffle tickets to patrons. The raffle tickets were sold illegally, as the bar owners lacked a gambling license. On audit, the Tax Commissioner assessed the taxpayers for unpaid sales tax on each raffle ticket sold. On appeal, the taxpayers argued a raffle ticket represents a ticket holder’s chance at winning a prize and as such, the ticket qualifies as intangible personal property not subject to sales tax.

In addressing whether raffle tickets were intangible property, the Administrative Law Judge (ALJ) noted that the West Virginia courts had not addressed this issue. However, the ALJ was persuaded by cases from several neighboring states addressing sales of lottery tickets. In these cases, the courts uniformly held that a lottery ticket was intangible personal property, representing a chance to win money. Purchasers of lottery tickets were essentially indifferent to the physical ticket and were only interested in the prize the ticket might generate. Noting that the substance of a transaction governs over form in West Virginia, the ALJ found these interpretations persuasive in the absence of any controlling or contradicting West Virginia authority. Further, the ALJ was unpersuaded by the Commissioner’s argument that the term “raffle ticket” was not specifically listed in the regulatory definition of intangible personal property. The ALJ also rejected the Commissioner’s argument that the raffle tickets could not be intangible property because they were illegally sold. The illegality of the sale of the raffle tickets was of no consequence. For more information on this ruling, please contact Christina Sray at 412-232-1565.


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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.