Poker Writer
Global Poker players, along with those on other Virtual Gaming Worlds (VGW) sites, now need to pay tax on purchases of Gold Coins. Those transactions are also the main way most players get their Sweeps Coins, which are the ones redeemable for cash prizes.
VGW is the leader in the sweepstakes and social gaming space and the first such operator to PokerScout’s knowledge to charge its customers sales tax on the purchase of Gold Coins in the United States.
The amount of tax, and whether it’s charged at all, will depend on the player’s state. Most but not all states have such a tax, which can vary between 2.9% and 7.25%.
A VGW spokesperson explained:
Sales tax is common in the U.S. and helps state governments raise revenue, but differs across the country. Some states don’t have sales tax, while in other states that do, the tax rates can vary. Local governments may also have additional taxes. As such, the total rate paid by players following this decision is dependent on their location.
The sales tax began on July 10 across all VGW brands, which include Chumba Casino and LuckyLand Slots in addition to Global Poker.
Sweepstakes model sites like Global Poker don’t technically have deposits and withdrawals. However, a player who buys $50 worth of Gold Coins and receives 50 SC free will pay tax on that $50. If that user plays poker with their SC, breaks even, and eventually redeems 50 SC for $50, the impact on their bottom line will be the same as it would be for a real-money poker player who deposited $50 and later withdrew it, but had to pay tax on the deposit.
A Legal Move or a PR One?
VGW’s stated rationale for the decision was as follows:
We acknowledge this is a change for some of our players, but as the legal framework has evolved over time, we’ve determined it is the appropriate time to take this action.
However, other sweeps operators are not yet charging sales tax, and it’s unclear whether any states have disputed the standard logic that in-app currency isn’t a tangible good and therefore not subject to sales tax.
The sweeps industry is facing a crisis at the moment. New York has prohibited them, and California is looking to possibly follow suit. These sites’ competitive advantage over regulated real money casinos has been that they’re more widely available. If that changes, the market could collapse as quickly as it has boomed.
The real reason VGW is making the change could be one of political strategy. One of the main points of contention that real money gambling has against sweeps is that they don’t pay privilege tax, as regulated casino operators do. The sweeps sites counter by saying that they pay regular business tax, as opposed to offshore sites that pay nothing.
Voluntarily changing its policy on sales tax may be VGW’s attempt to signal to state governments that it can be beneficial, rather than a liability.
