How to tell the difference between a
sponsored lottery game (free) and an operated lottery (pay to play).
If you have received a lot of Lottery Scam Letters, you have
undoubtedly seen that some that claim to be sponsored by Bill Gates or Jesse
Jackson.
Let's set the record straight: lotteries are NOT sponsored.
Lotteries are "operated." That means that they are managed
by a company (either government owned or independent) that specializes in every aspect of lottery law, promotion,
and financial responsibility.
Now why is that? Well, just think of the numbers for a
moment. Lotteries winnings are a portion of the total fees paid into the
lottery by players. That's an awful lot of money. And that money has
to be disbursed. Here are just some (not all) of the expenses incurred by
operating a lottery:
Marketing and Advertising (ad development, cost of advertising
in the media, marketing and advertising specialists)
Printing
Point of purchase machines and machine maintenance
Security specialists
Cash pick-up and delivery services
Corporate salaries
Bookkeeping
Computers
Software
Corporate overhead
Attorney fees (to keep up with lottery laws)
Web site maintenance
Game development
General overhead (rent, insurances, office furniture, office
supplies, etc.)
Disbursement oversight (to schools and other public works, to
tax authorities, to winners).
All
those expenses are paid for by the amounts that players pay for their game.
The winnings are what is left over after expenses and disbursements to public
works. Taxes are deducted from the winnings of the specific player once
that player reports his claim to the lottery.
A SPONSORED lottery is normally called a sweepstakes.
Sponsored games are free, and are an enticement for players to provide their
name, address, and telephone number for marketing and advertising purposes.
Where does the money come from for Sweepstake jackpots? From advertisers.
The most important information for advertisers is called
demographics. 'Demo' - from the Greek "demos" meaning POPULACE
or the people; and 'graphic' - relating to a written or pictorial
presentation.
Briefly, demographics tell advertisers who is spending money and
what they are spending it on. And that information is so important that
advertisers are willing to spend a great deal of money to get it.
On top of that, new Internet laws are cracking down on Spam
(unsolicited emails). While the laws don't have much bite to them right
now, they will be stronger as time goes by. Advertisers must look to the
future. There is so much money to be made on the Internet that merchants
simply cannot afford to miss even one day of advertising.
This means they are willing to buy your permission to send you
email advertising.
So they sponsor sweepstakes, or free betting games with any
number of catchy and traditional names, in return for your information and the
right to send you advertising.
Many advertisers get together and set aside a portion of their
profits to send out as sweepstakes winnings, and you will find a profile of one
such advertiser-sponsored game site at GroupLotto vs.
Lottery Scams.
REMEMBER! A RESPONSIBLE ONLINE LOTTERY OR SWEEPSTAKES:
Requires that a person register in order to
play.
Provides an online account for each player.
Provides full corporate information so that
anyone can verify licenses, registrations, complaints, corporate officers,
and the existence of outside agents without relying on the claims of that
corporation or agent.
Does not require any fees to be paid in
advance of disbursing winnings.
Encourages you to talk about them -
there is no confidentiality required. On the contrary, talking about
your winnings is encouraged so that others will participate.
Does not get the winning numbers mixed up.
Has well-defined and easy to read Rules, and
the responsible corporation and/or government commission is plainly listed in
these Rules so that you can research everything about that lottery or
sweepstakes on your own.
Deducts whatever expenses and/or taxes are
required as listed in the Rules or under the Terms and Conditions, or are available by
contacting the company. These expenses and/or taxes are deducted from the
winnings before disbursement.
CAUTION: not all sweepstakes deduct taxes - in some cases they are reported
to tax authorities and it is up to the player to report winnings as income
and pay the taxes accordingly.
The only agencies that
can collect the taxes due on lottery winnings are the state, Province, or
federal government in which the lottery games are played.
In
many countries, the taxes due the federal government are immediately
deducted from the winning amount. The rules for state or Provincial taxes
may vary, with some deducting the taxes before winnings are sent out, while
others require the winnings be stated on the state or Province annual income
tax report.
If the state, Province, or federal
government requires that taxes be deducted from winnings immediately -
before the money is sent to the winner - the lottery operator must comply
and you can request confirmation from both the lottery operator and the
appropriate government agencies that your taxes have been paid on the
winnings.
Lottery scam letters often claim that you must pay for the taxes on winnings
by sending money to a “claims agent” or other party. That is a lie. Taxes
are never, ever sent to a 3rd party to be paid on your behalf,
and absolutely never by Western Union or MoneyGram. Only you can pay your
taxes, and that check must be made payable to the government agency that is
responsible for collecting taxes.
For
instance, if you are a resident of California in the US, taxes are paid to
the Internal Revenue Service (IRS) which collects our Federal taxes, and to
the California State Franchise Tax Board, which collects our California
State taxes. Both of these are government agencies.
EXCEPT FOR TAXES YOU
PERSONALLY PAY TO YOUR OWN GOVERNMENT, THE AMOUNT LISTED AS YOUR WINNING
AMOUNT IS FINAL.
