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Vermont's laws concerning gambling and break open tickets can be found at 13 V.S.A. chapter 51 and 32 V.S.A. chapter 239. The following is a quick summary of those laws, but you should consult the statutes themselves for a complete understanding of the requirements for gambling and break open tickets.
What are the gambling laws?
Professional gambling is illegal in Vermont. The purpose of the gambling laws is to ensure that only nonprofit organizations operate games of chance and to ensure that the proceeds from the games go to charity. All funds raised by a nonprofit organization, except for the prizes and certain expenses specifically allowed by statute, must be used for charitable, educational, religious, or civic undertakings. Special rules apply to the sale of break-open tickets. All proceeds from the sale of break-open tickets on premises licensed to sell alcoholic beverages must be used for charitable purposes.
Who may operate games of chance?
Only bona fide nonprofit organizations that have engaged in charitable, educational, religious or civic activities in Vermont may operate games of chance. Bona fide nonprofits include nonprofit corporations that qualify for tax exempt status under federal law (501(c) status) churches, schools, fire departments, municipalities, fraternal organizations and agricultural fairs. The nonprofit must have been engaged in charitable activities for at least one year prior to the game of chance.
What types of gambling are allowed?
The gambling law allows nonprofits to operate games of chance like raffles, bingo, card games and "break-open" tickets. Slot machines and other mechanical gambling devices such as "Cherry Master" or "Money Machines" are prohibited.
What prizes are allowed?
As a general rule, prizes are limited to $400 per game. A $1,000 prize may be offered at one game each day. A $5,000 prize may be offered once a month. A motor vehicle, boat, or firearm worth up to $50,000 may be offered as a prize once a year.
Exception: A nonprofit organization may exceed the prize limitations four days per year, so long as the days are at least 20 days apart. The total prize money offered for all games on that day must not be more than $20,000.
What expenses are allowed?
The entire proceeds from break-open ticket sales on premises licensed to sell alcoholic beverages must be used for charitable purposes.
For other games of chance (for example, bingo) the law allows nonprofit organizations to rent a hall for a gambling event and to pay a reasonable rent. The law allows payments for equipment and for advertising, so long as these expenses are reasonable. Prizes and payments to employees (within limits) may also be paid from gambling proceeds. All remaining proceeds must be used for benevolent purposes.
Can nonprofits pay employees to operate the games?
Most nonprofit organizations rely on volunteers to run their gambling events. However, a nonprofit may spend up to $15,000 a year to pay all persons engaged in any way to organize or execute games of chance. No individual can earn more than $2,000 per year working at gambling events, no matter how many nonprofit organizations the person works for.
Exception: In calculating the payroll, only wages for gambling activities are counted against the $15,000/organization and the $2,000/employee limits. Refreshments and meals given to workers are not included.
How often can bingo, lottery, and raffle events be held?
An organization may hold games twice a week. Nonprofits can operate games on three consecutive days twice a year, so long as there are at least 90 days between each three-day event. Generally, the same location cannot be used for gambling activities more than twice a week. However, nonprofits in existence on January 1, 1994 can share a location and each may use it twice a week for ordinary gambling events.
How often can "Casino Night" events be held?
A nonprofit may hold casino events not more than once in a calendar quarter or three casino events in any calendar year as long as they are at least 15 days apart. Nonprofits can share locations for casino events as long as the sharing would not cause a location to be used more often than once a quarter, or three times a year and at least fifteen days apart.
How often can "Agricultural fairs" be held?
Agricultural fairs may exceed the two days per week limit and conduct games on 12 consecutive days once a year.
Are there any laws which specifically apply to the sale of break-open tickets?
The entire proceeds from the sale of break-open tickets at premises licensed to sell alcoholic beverages (except prizes, the wholesale cost of the tickets and certain legal and accounting expenses) must be used for charitable purposes.
Can "Break-Open" tickets be sold at bars?
A qualified non-profit organization (for example, a fraternal organization) can sell break-open tickets at its own licensed premises. A qualified non-profit organization can also sell break-open tickets at a for-profit bar, but only if the non-profit itself purchases the tickets from the wholesaler, sells all of the tickets itself and handles the money. A for-profit bar cannot purchase tickets from wholesalers, cannot sell any tickets, cannot handle the money and cannot receive any money from the ticket sales.
Are there any other restrictions on gambling?
Convicted felons cannot organize or execute a gambling event. Minors can work on the site -- for example, selling food and drinks -- but cannot work the games. No one can work and gamble at the same event.
What are the reporting requirements?
If a nonprofit conducts gambling activities and is required to file federal tax form 990 or 990T it must file copies of the federal forms with the State tax department within 30 days of the federal filing date.
Nonprofits not required to file 990 or 990T forms must file State form B-3 on or before June 15 for the previous calendar year if they have gambling gross receipts of more than $10,000. Forms are available from the State tax department.
Is there a withholding requirement?
Organizations required to withhold federal income taxes from gambling winnings (on certain prizes over $7,500) must also withhold State taxes. The State income tax withheld must be reported and paid over to the State tax department.
Are nonprofit organizations subject to taxes on gambling income?
Qualified nonprofits are not subject to State income taxes. They may be subject to the federal income tax if their gambling income is "unrelated business income."
What are the penalties for violating the gambling laws?
Penalties range up to $100,000 and three years in jail for serious offenses. A bar can also have its liquor license suspended or have an injunction placed upon it to cease selling break-open tickets.
Is there a licensing or advance approval requirement to operate and execute games of chance to conduct gambling events for nonprofits?
No. There are no licensing requirements to operate any of these games in Vermont. However, you should review the applicable statutes concerning the operation and execution of these games, or consult with a private attorney to ensure compliance with all laws.
Where can additional information be found?
Whom should I call regarding potential violations of the laws and regulations concerning gambling?
You should consult your local police agency, your county State's Attorney, the Tax Department, or the Office of the Attorney General.
Consumer Fraud Rule CF 109 - Contests and Prizes
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