Small Games of Chance State and Host Municipality Tax Obligations Relating to Taverns
Small Games of Chance have a number of different tax obligations related to taverns, which can vary based on the type of game.
Tavern Games Tax Rates
State Tax: 60 percent of net revenue from tavern games, which include pull-tabs, tavern daily drawings and tavern raffles.
Host Municipality Tax: 5 percent of net revenue from tavern games.
Both taxes are remitted to the Department of Revenue; distributors and taverns have tax roles. Taverns offering SGOC will be required to electronically file quarterly returns with the department.
Tavern Games Tax Obligations Vary by Game
- For games purchased from a licensed distributor (pull-tabs), a tavern will pay tavern tax to the distributor, and the distributor will remit the tax.
- Pull-tabs are subject to the 65 percent state/municipality tavern tax, as well as sales tax, which is 6 percent of the cost of the pull-tabs (additional 1 percent local sales tax in Allegheny County and 2 percent local sales tax in Philadelphia).
- A tavern should keep records regarding tavern tax paid to distributors to facilitate quarterly and annual reporting.
- Taverns that sell only pull-tabs will file quarterly tavern tax returns indicating tax paid to distributors on pull tabs and zero tax obligation for tavern daily drawings and raffles.
list of licensed distributors can be found on the department’s website.
Tavern Daily Drawings and Tavern Raffles:
- State and municipality tavern tax on daily drawings is 65 percent of net revenue, or 65 percent of what’s left after paying prizes and the cost of the game.
- Tavern tax on tavern raffles, which may be conducted up to once monthly for charity, is 65 percent of what’s left after paying prizes, game costs and donating half of proceeds to a designated charity.
Taverns are responsible for remitting the state/host municipality tavern tax on these games, and reporting those taxes quarterly.
Tavern Tax Examples
Tavern Daily Drawing Examples:
- Tavern sells $1 tickets for a prize equaling 100 percent of ticket sales. In such case, there is no net revenue and therefore no tavern tax due.
- Tavern sells $1 tickets for a prize equal to the greater of 50 percent of ticket sales or $2,000. Tavern sells 5,000 tickets for gross revenue of $5,000.
- Winner gets $2,000; cost of game is $50; net revenue is $2,950.
- Tavern tax is imposed on $2,950: state tax of $1,770 (60 percent of $2,950) and municipality tax of $147.50 (5 percent of $2,950).
Tavern Raffle Example:
Tavern sells $1 raffle tickets to benefit the local food bank. One winner will receive $400.00, there are 1,000 tickets sold over a course of the month for total gross revenue of $1,000.
- Winner gets $400.00; raffle ticket printing costs total $10.00; net revenue is $590.00.
- At least $295.00, or 50 percent of the remaining $590.00, must be given to the food bank.
- Tavern tax is imposed on what remains: state tax of $177.00 (60 percent of $295.00) and host municipality tax of $14.75 (5 percent of $295.00).
Eligible Tavern Game Costs
Deductible game costs:
- Cost to purchase the game.
- Cost to purchase materials to make the game.
Other examples of costs that are NOT deductible:
- Labor or wages of employees selling tickets.
- Regular tavern operating expenses.
- Taxes paid relating to tavern operation.
- Advertising for game events.
Tavern Registration with PA Department of Revenue
The Department of Revenue does not license taverns for tavern gaming; questions regarding applying to become licensed to sell tavern games should be directed to the
Pennsylvania Liquor Control Board (PLCB). Once the department receives notice from the PLCB that a tavern is licensed to sell tavern games, the department will send the tavern notification of filing and reporting requirements for tavern taxes. Taverns will be required to file and pay tavern games tax using the LID number issued by the PLCB.
Taverns’ SGOC Tax Filing Requirements
- Quarterly returns must be filed to report/pay tax on tavern daily drawings and tavern raffles, as well as to report tavern tax paid to distributors for pull-tabs purchased in that quarter.
electronic filing system is available online at www.doreservices.state.pa.us/SGOC.
- Returns due on the 20th of the month following the close of each calendar quarter: April 20, July 20, October 20 and January 20.
- A tavern must file quarterly returns with the department so long as it maintains a tavern gaming license, regardless of SGOC activity.
- A tavern will need the following to file tavern tax returns: LID #, FEIN/SSN, Sales Tax Account ID, County and Municipality of location, net revenue for tavern daily drawings, net revenue for tavern raffles
and amount of tax paid to distributors for pull-tabs.
- Along with the fourth quarter return due January 20, a tavern must complete the REV-722 Tavern Games Licensee Annual Report.
Taverns’ Annual Reporting Requirements
Taverns will have to complete the REV-722 Tavern Games Licensee Annual Report. The annual report requires information itemized by week and game type regarding:
Pull-tabs: number of W-2Gs, gross winnings reported from W2-Gs, total gross revenue, total payable prizes, total net revenue, state/municipality tavern tax.
- Tavern daily drawings & tavern raffles: Type of game, number of W-2Gs, gross winnings reported from W2-Gs, total gross revenue, total prizes paid, total net revenue, total amount donated (raffles) and state/municipality tavern tax.
- Under federal law, taverns must report a payment of SGOC winnings via W-2G when the amount paid is $600.00 or more, and at least 300 times the amount of the wager.
- A copy of each W-2G must be provided to the Department of Revenue and the IRS. Additional information and W-2G forms are available at
http://www.irs.gov/uac/Form-W-2G,-Certain-Gambling-Winnings. While SGOC prizes are subject to PA personal income tax, taverns have no obligation to withhold the tax from the prize.
If you have any questions or need further assistance, please contact the department by: telephone 717.787.8326 (or) email