Sweepstakes and social gaming leader Virtual Gaming Worlds (VGW) has begun charging its customers sales tax on purchases of Gold Coins in several U.S. states.
VGW confirmed to SBC Americas on Thursday that its brands Chumba Casino, LuckyLand Slots and Global Poker have implemented the sales tax as of July 10. The company did not specify in which states the change has taken effect, or in how many.
Online sweepstakes casinos typically do not charge sales tax on the basis of the notion that the Gold Coins they sell to players are virtual products in a digital environment, rather than an actual commodity. Moreover, there are many states that do not tax digital transactions. Through sweepstakes casinos’ dual-currency model, players can use Gold Coins to purchase Sweeps Coins which can then be either played or redeemed for prizes, including real money.
However, VGW has now voluntarily begun levying a sales tax on its players.
“Sales tax is common in the U.S. and helps state governments raise revenue, but differs across the country,” a spokesperson told SBC Americas. “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.”
A conciliatory move?
VGW has made the change amid continued scrutiny of the sweepstakes gaming vertical.
Multiple states have banned online sweeps casinos this year, and the biggest recent development has come in California, where a bill backed by tribes, online sportsbooks and other parties has begun advancing through the legislature.
“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,” added VGW in its statement to SBC Americas, a reference to this year’s developments. “This is part of our commitment to upholding the highest standards of integrity and compliance, and our focus now is on ensuring players are well informed and supported as required.”
VGW testified at a California Senate Governmental Organization Committee hearing for the sweeps ban, Assembly Bill 831, on Tuesday, as it has done in similar hearings in several other states this year.
After making other changes such as raising its minimum player age for sweeps to 21 in February, company has suggested in the past that it would be willing to start paying sales tax to state governments. Now, it appears to be doing just that.
While VGW did not shed light on its particular motivations for the move, it seems it could be an attempt to placate state governments and regulators while online sweeps continue to operate in a grey area — except, of course, in the states where they are now explicitly banned through legislation.
Forever in the crosshairs
A leader of the Social Gaming Leadership Alliance (SGLA) to advocate for social gaming operators, VGW has been the target of numerous cease-and-desist letters from authorities in numerous states in recent months.
Louisiana and Mississippi are two of the most recent to issue orders to swaths of sweeps and social casino operators, and Louisiana’s attorney general last week issued a formal legal opinion in which she stated that online sweepstakes casinos should be considered illegal and will face continued enforcement actions.
Although it often stresses that it disagrees with state legislative or regulatory crackdowns on the sweepstakes vertical, VGW tends to be responsive and compliant in the face of such action. It has shut down its sweepstakes offering in several states, including Connecticut (which has banned sweeps through legislation), Delaware, New York and Nevada. Those closures generally have not affected its social gaming products that use Gold Coins only.
