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Use
of Proceeds:
Q: Can my organization have a raffle and use the proceeds to
benefit a local child who needs medical care or another similar good
deed in the community?
A: Probably, but you need to be sure you have obtained specific
approval from the Gambling Commission (230-20-050). The Commission will
need to confirm that using the proceeds in this way is in compliance
with your organization's stated goals and purposes as set forth in your
by laws. Also, the Commission will require that you give the money directly
to the purpose for which you intend it, not to the individual. In the
example cited, the money would be given to the hospital, to a medical
supply company for a wheelchair, etc.
Q:
I do not representam not a nonprofit organization, but I want to conduct
a raffle and donate the proceeds to a nonprofit. Can I do this?
A: No, state law does not authorize anyone to conduct a raffle
other than specific types of nonprofits and charitable organizations
set forth in the statute. This means the charitable/nonprofit must manage
all phases of the raffle. If your intent is to assist with a particular
charitable enterprise, we suggest that you contact the nonprofit and
offer to donate a prize thatwhich they can use in their raffle. If the
organization is licensed, there are also procedures for allowing nonmembers
to assist with ticket selling; however, the nonprofit/charitable organization
must have control over this process.
Q: What is a 50/50 raffle?
A: A 50/50 raffle is a raffle in which 50% of the proceeds are
given away as prizes, and the remaining 50% of the proceeds are used
towards the organization's stated purpose. The amount of the prize in
a 50/50 raffle is determined by the number of tickets sold.
Unlicensed Raffles:
Q: I want to conduct a raffle, but have never conducted a raffle
before. Can I run one on a trial basis, and then cancel if I do not
make enough money from it?
A: You are not allowed to cancel a raffle after you have begun sales.
You must take all aspects of running the raffle into consideration prior
to beginning ticket sales.
Q: My organization wants to conduct a raffle but it does not
qualify for licensing because it does not have 15 members who elect
the governing board. Can I conduct an unlicensed raffle instead?
A: No. The requirements to be determined a charitable or nonprofit
organization for purposes of conducting a gambling activity are exactly
the same whether the activity is allowed to be conducted without a license,
or a license is required.
Q: My organization does not have 15 members on our board, but
we do have more than 15 members. Do we still qualify?
A: Yes. The requirement is that 15 members of your organization
must be eligible to elect your governing board. The size of the board
is not the issue, but the number of voting members.
Q: My organization already conducts weekly drawings from among
the members. We would like to conduct a public raffle but are afraid
we will exceed the $5,000 gross receipts limit. What should we do?
A: You may collect up to $5,000 gross receipts in a calendar
year from an unlimited number of members-only raffles. You are also
allowed to collect up to $5,000 from up to two public raffles. Therefore,
you may collect a total of $10,000 from both types of raffles, assuming
you stay within the limitations of each type of raffle.
Q: Can I tell people that they can become a member by purchasing
a raffle ticket, and therefore expand the number of raffles I can conduct?
A: No. Member must be a person who became a member prior to conduct
of the raffle, and whose membership is not dependent upon participation
in the gambling activity.
Raffle Licenses:
Q: Is the license limited to a single raffle or for a certain
time period?
A: What if I exceed the license we received?The license covers
a full year and all raffles conducted within that time period. It is
based on the combined gross receipts during that period.
If you find you may exceed the size, you should apply for an upgrade
to the proper size, pay the difference in licensing fee, and the upgrade
fee. You must do this BEFORE you exceed the gross receipts listed on
your license.
Q: How many raffles can I run per year once I am licensed?
A: You may run as many raffles per year as you want. Your license
class is based on gross receipts taken in from raffle ticket sales.
Therefore, you may run as many raffles as you would like as long as
you stay within the limits of your license class. You may also exceed
your license class for a fee and the difference in cost between the
two classes.
Special Situations:
Q: Can several organizations join together and conduct a single
raffle? Who needs to get the license? When don't we need a license to
do this? Can we do this as an unlicensed activity?
A: WAC 230-20-350 authorizes organizations to join together to
conduct a raffle, as long as each organization obtains the proper licensing
and the appropriate form for a joint event is submitted. One organization
will be denoted as the " lead" in order to coordinate the raffle, and
proceeds will be disbursed using a method agreed to by all participants.
You do not need to get a license if the organizations are considered
"auxiliary" units. For example, if the Seattle VFW combines with the
Tacoma VFW to conduct a joint raffle, a joint raffle application must
be submitted. However, if the Ladies Auxiliary to the Seattle VFW wants
to assist the Seattle VFW, no joint raffle application is required.
Joint raffles are only authorized for licensed raffles, not unlicensed
raffles.
Selling Tickets:
Q: Can I sell the tickets at a discounted price, for example,
50 cents each or 3/$1? Can I do this in an unlicensed raffle?
A: Yes, you can do this for a licensed raffle as long as you
get prior approval from the Nonprofit Coordinator for the Gambling Commission.
You may not discount tickets for an unlicensed raffle.
Q: Can I have nonmembers
sell raffle tickets in a licensed raffle?
A: Nonmembers may sell raffle tickets if they are:
- well-supervised
by members of your organization
- not
directly compensated
You must
explain these relationships in your licensing application, and keep
a copy that you can make available to the Commission upon request.
The Commission may charge you an additional fee to offset the cost of
evaluating an application containing this added information.
Q: Can I have nonmembers sell raffle tickets in an unlicensed
raffle?
A: No. Nonmembers may only sell tickets in a licensed raffle.
Q: Can I have minors sell raffle tickets?
A: Only if the minors are bona fide members of the organization
and are supervised by members over 18 years of age.
Q: Can I sell raffle tickets to minors?
A: No. Minors may not purchase raffle tickets.
Q: Can I sell tickets on the Internet?
A: Selling raffle tickets over the Internet is prohibited, and
is deemed a violation of interstate gambling laws. There are also laws
regarding mailing raffle tickets through the U.S. Postal Service., and
lLicensees are encouraged to contact their local Postmaster for further
information on this issue.
Q: Can I accept credit cards for payment of raffle tickets?
A: Yes. This is the only gambling activity where credit cards
are allowed to be used.
Q: What is the minimum information that must be printed on the ticket?
A: In addition to the consecutive number, the following must be
printed on the ticket or available in writing at point of sale:
- Cost
per chance
- Date,
time and location of drawing
- Name
of organization
- Descriptions
of all prizes
- Whether
a person must be present to win (If the purchaser must be present
to win, you must state the time and place).
Q:
Can I use theater-style pre-printed tickets instead of printing up some
specially for my raffle?
A: Yes, you may do this as long as there is written disclosure
at point of sale of the following:
- Cost
per chance
- Date,
time and location of drawing
- Name
of organization
- Descriptions
of all prizes
- Whether
a person must be present to win (If the purchaser must be present
to win, you must state the time and place).
Theater tickets are generally used for "need to be present to win"
raffles where sales and the drawing take place at the same location.
Q:
Can I give away tickets?
A: No. All tickets must be purchased, and purchased for the same
price (except as allowed in a discounted ticket scheme). No one should
get tickets for free.
Q: Can members purchase tickets?
A: Yes, but you need to be prepared to some negative feedback
in case a member wins the big prize in a raffle where tickets are sold
to the general public. Some people may be suspicious of the honesty
of the drawing, so be sure you conduct the drawing in a manner that
will lessen those complaints. Also, be sure to notify your members if
they cannot purchase tickets themselves to ensure consistency.
Q: Can I award prizes to the members of my organization for selling
raffle tickets?
A: Yes, you can offer rewards to the members selling tickets.
The rewards are called noncash incentive awards, and may be given with
the following restrictions:. Each individual award may not exceed a
fair market value of ten dollars; the awards are based on the number
of chances sold; and the fair market value of the total amount awarded
for an individual raffle may not exceed 2% of the gross gambling receipts
taken in from raffle ticket sales.
Q: There are some specially approved procedures for members-only
licensed raffles listed in the WAC rules. Can unlicensed raffles for
members-only also use those methods?
A: No. These methods are only available for the licensed members-only
raffles. Unlicensed raffles must stay within very specific laws set
forth in the RCW and must be licensed if they want to utilize the alternative
sales and drawing options.
Q: What if I have so many prizes that I can't get all the information
printed on the ticket?
A: The extra prizes should be made available on another written
document that can be shown to purchasers at the time of sale.
Random Drawing:
Q: Can I use a method other
than drawing a ticket from a container to determine the winner of the
prize?
A: Yes, there are several alternatives to a standard drawing, but
prior approval must be given before conducting this type of drawing.
Q: What are examples of alternative drawing schemes for raffles?
A:
- Duck
Race
- Cow
Plop (Cow Bingo) or Chicken Plop
- Bingo
Horse Race/Mock Horse Race
- Paddlewheel
- Poker
Run
- Hole
In One Contest
Q:
What are Paddlewheel Raffles, Poker Runs, and Duck Races?
A: Paddlewheel Raffles, Poker Runs and Duck Races are alternative
forms of raffles, which must be licensed, regardless of gross sales.
Each alternative raffle must be approved by the Washington State Gambling
Commission's Nonprofit Coordinator prior to selling tickets.
Q: How do I obtain approval for an alternative form of a raffle?
A: The easiest way
to have an alternative form of a raffle approved is to send a detailed
proposal along with your raffle license application or renewal. A copy
of your proposal will be forwarded to the Nonprofit Coordinator for
evaluation and possible approval.
Awarding Prizes:
Q: Can I offer a gift basket of various food items if it also contains
a bottle of wine?
A: Only if the raffle is an unlicensed members-only raffle. Otherwise,
liquor may not be offered as a prize in any gambling activity.
Q: Can I offer a firearm as a prize?
A: Yes, but you may only offer a certificate to redeem the firearm
from a licensed firearm dealer. You may not award the firearm directly
to the winner without proper background checks and federal being performed.
(see related question below)
Q: What if the person who wins a firearm is later found to have
a criminal history which will prohibit him/her from owning a firearm?
A: This has happened up in some raffles and can cause some hard
feelings on the part of the winner. We recommend that you place a disclaimer
on the tickets with a statement to the effect that "Anyone deemed not
eligible to possess a firearm due to failure to pass the National Instant
Background Check System will be awarded an alternate prize of xxx."
The alternate prize must be a value greater than the cost of the raffle
ticket, but does not need to be equal to the value of the firearm.
Q: Is there any limit on the value of a prize I can offer?
A: There is no limit, but if the single prize is valued at over
$40,000 or the total of all prizes will be over $80,000, prior approval
from the Gambling Commission must be obtained. This process may take
up to three months.
Q: I want to offer my house to a nonprofit so they can raffle
it off and give me a percentage of the proceeds. Can I do this?
A: No. You may not receive a percentage of the proceeds of a
gambling activity conducted by a nonprofit organization (WAC 230-12-223).
You can, however, sign a contract with the organization allowing them
to purchase the house from you at a price not more than the fair market
value of the house. If the organization makes a large profit in their
raffle, they cannot give you a portion of the proceeds that would exceed
the fair market value of the house. If the organization does not raise
the agreed upon fair market value of the house through raffle proceedsConversely,
they will be required to pull funds from other sources to pay you, or
you may always reduce the price of the house.
In either event, the organization must own the house prior to the drawing.
Q: If I cannot raffle off my house, and cannot find a nonprofit
that wants to purchase the house as a raffle prize, can I conduct an
essay contest to award the house to someone and charge a fee to enter?
A: Essay contests are not regulated by any state agency, including
the Gambling Commission. If you intend to conduct such a contest, we
recommend that you review the material on the agency website related
to essay contests. (www.wsgc.wa.gov/unlicensed
activities) The Gambling Commission will not design or approve such
contests. We recommend that you contact an attorney before you consider
this alternative.
Q: If we offer a vehicle as a prize, can we require the winner
to pay sales tax and licensing?
A: The organization must pay the sales tax, however you can make
the winner responsible for paying licensing fees.
Q: If I offer a car as a prize, is there a way to avoid a double
sales/use tax for the winner?
A: The Dept. of Revenue will usually accept documentation showing
that the sales tax has been paid (a completed invoice is usually sufficient),
the Title/registration showing the winner now owns the prize, and a
letter from the licensee stating that the person won the prize in a
raffle and the organization has already paid the sales tax. The Dept.
of Revenue can then fill out a "Declaration of Use Tax" form that will
waive the tax.
Q: When do we have to own the prize?
A: Your organization needs to own the prize prior to the date
of the drawing.
Q: Can we enter into a contract to purchase the prize instead of
purchasing the prize directly?
A: Yes. You can have a contract obligating the organization to the
purchase - and this is often used if the prize has certain options available
within the same price range (i.e. color). It is also used if the organization
is offering an alternative of cash instead of the merchandise prize,
and in this case, the contract should include an escape clause in case
the winner chooses the cash prize.
Q: Can we offer a cash alternative to a merchandise prize? If
so, do we still have to purchase the merchandise prize before the drawing?
A: Yes, you can offer a cash alternative to a merchandise prize.
In that case, you should have a contract drawn up to obligate you to
the merchandise prize. If you utilize the escape clause because the
winner chose the cash alternative, be sure to maintain the voided contract
within your records.
Q: What if we don't make enough money on the raffle to pay for
the prize? Can we delay the drawing until we have as much money as we
needed to raise for the raffle?
A: No. You must be sure you have properly planned for the raffle,
including allowing enough time to sell tickets. The public knows that
the longer you are given to sell tickets, the more tickets you will
sell and this reduces their chances of winning. They will usually complain
to the Commission in this case.
Q: How do we choose the person to draw the winning ticket?
A: The best option is to choose someone independent of your organization,
or who has not purchased a ticket him/herself. The most embarrassing
situation for the organization is to have the person draw their own
ticket! It doesn't void the drawing, but can cause people to complain
to the Commission.
Q: What if no one claims the prize?
A: You should make a good faith effort to contact the person,
including sending a letter and posting a notice in the newspaper if
necessary. Extra efforts will increase, of course, depending on the
value of the prize. In the letter you send, you should give a reasonable
amount of time for the prize to be claimed. If no one responds, the
organization should document this fact. Discuss any further actions
with your local special agent before doing anything else with the prize.
Q: What if the person says they don't want the prize?
A: The person can "donate" the prize back to the organization
- or take it to give to another person. If it is donated back to the
organization, the person can be given a charitable donation receipt
for IRS purposes.
Q: What if the winning ticket is not legible and we cannot determine
the winner's identity?
A: To be sure this doesn't happen, make sure you stress to your
ticket sellers that they should look at the ticket stubs when they receive
them from the purchaser. If one does slip through, you should follow
the steps suggested in "What if no one claims the prize?"
Record-keeping:
Q: What kind of records are we required to keep?
A: Unlicensed raffles and Class A-D raffles must keep at least
monthly records detailing:
- Gross
Receipts
- Full
details on all expenses related to the raffle
- Total
cost of all prizes paid out; and
- How
the proceeds were used or disbursed.
Class
E-F raffles and those using the alternative drawing format have specific
forms that must be kept.
Q: How long do I have to produce records if requested by the
Gambling Commission or other law enforcement agency?
A: You must produce records within 7 days of a request.
Q: Where do I have to display the license?
A: You must display the license at the point of the drawing,
although it is sometimes a good idea to make copies for ticket sellers
to show the public.
Q: Where do I have to keep the records?
A: The records must be kept within the state of Washington. We
recommend that raffle managers forward completed paperwork to the treasurer
of the organization if the manager is not responsible to complete the
annual activity report for the Commission.
Q: Is there any IRS paperwork I need to do for the prizes we
award?
A: There are reporting requirement for prizes valued at over $600.
Contact the IRS to have the procedure explained and to receive a copy
of the required form.
Q: Do I have to pay gambling taxes for my raffle?
A: Yes, but you pay it to your local jurisdiction only if your
city or county has an ordinance to collect a tax on raffle. Per state
law, they cannot collect anything on the first $10,000 of net proceeds,
and are limited to 5% of the net receipts beyond the $10,000 exemption.
Contact the city or county to find out their local ordinance. There
is no state tax collected on raffles.
House Rules:
Many times there are situations that arise in raffles that are not
specifically addressed in the raffle rules. Here are some situations
that have been reported by licensees and suggestions as to how to handle
them.
Q: Can I allow members and/or officers of my organization to
purchase tickets in our raffle?
A: A lot rests on the perception of the public and how your organization
chooses to handle this issue. Often there is an assumption that purchasing
tickets is another way that the membership supports the fund raising
efforts of the organization. However, if a valuable prize is won by
a member or someone on your executive board, be prepared for negative
comments.
As long as your procedures for safeguarding and drawing winning tickets
are fully disclosed and conducted in an open manner, the public should
be less likely to feel there was some sort of collusion or fraud involved.
If your organization chooses to limit purchases within your membership,
be sure this information is disclosed to those members so there will
be no hard feelings or misunderstanding. You may also wish to print
this information on your raffle ticket.
Q: How do we choose the person to draw the winning ticket?
A: Your best option may be to have someone independent of your
organization draw the ticket; perhaps a local dignitary such as the
mayor, police chief, or church leader. You want to avoid any perceptions
of impropriety.
What would the public think if your organization's president drew his/her
own ticket or that of a family member? This relates again to perceptions.
Q: What should we do if no one claims the prize?
A: The law has a term called "due diligence." This is the standard
that you should follow to indicate that you made an honest effort to
locate the winner. The greater the prize, the more "diligence" you should
be able to show.
We suggest that you send a certified or return receipt letter to the
address on the winning ticket. The letter should state that the winner
must respond within a specific (and reasonable) time period in order
to claim the prize or it will be forfeited back to the organization
(or given to another purpose such as a local charity).
If the person responds that the organization may keep the prize, you
may wish to issue a receipt to the winner to indicate they have made
a charitable donation to the organization.
If the letter is returned as undeliverable, run an ad in the local newspaper.
Retain the evidence of all these attempts along with the rest of your
raffle records.
Q: If a prize is unclaimed, can the person with the next winning
ticket claim the prize?
A: We only recommend that you do this if the raffle is conducted
in the format of "need to be present to win." The winner has a reasonable
time to come forward during the drawing, and, if not, the organization
can draw the next name to claim the prize.
It would be logistically impractical to attempt to contact all winners
subsequent to an unclaimed prize and start "trading their prizes up."
You would also have to deal with the problem of redeeming previously
claimed prizes to redistribute them.
If your organization has made reasonable efforts to identify a winner
and deliver the prize, but is unsuccessful, you are required to make
the proper notation within your raffle records and retain the prize
for proper disposition. Proper disposition must be in keeping with the
organizational purposes of the organization. Do not simply tell your
raffle manager to take the prize home unless there is some way you can
justify that to your organizational purposes (and that is unlikely).
Remember to fill out the prize inventory log as required. You may choose
to award the prize in another gambling activity such as a bingo game
or sell it. If you sell it, be sure that you do not select a price that
is less than a fair market value.
Q: Which prize should we draw first?
A: Traditionally, the highest valued prize is drawn first. However,
there is no rule for which prize is drawn first.
You may want to draw the highest prize last for the suspense factor.
In the past, there have been complaints about using this method, too.
It was pointed out that since you drew a ticket for one of the lower
prizes before the highest valued prize ticket was drawn, that early-drawn
ticket was removed from the chance to win the large prize.
One way to accommodate this type of complaint, yet keep the suspense
factor, is to draw the tickets first, then announce them in reverse
order. If you do this, be sure that the tickets cannot be switched or
you will likely receive complaints.
Q: If we don't want to deal with unclaimed prizes, may we draw
back-up tickets?
A: Yes, but again, be sure you retain good control regarding
the order in which the extra tickets were drawn. If someone chooses
not to claim an expensive prize, you may have a problem if a back-up
winner feels that you picked someone else out of order over them to
claim the prize.
Remember, you are not required to give the unclaimed prizes to anyone
other than the original winner. Your organization may retain the unclaimed
prize and use it again for another raffle, provide it as an item for
bid in an auction, or sell it at fair market value. Be sure to complete
the prize inventory log to indicate the eventual use for the item. For
example, if you have stuffed toys left over and donate them to a local
hospital, request documentation of the donation from the hospital.
Whatever use the prize is put to, be sure that it meets your organization's
stated goals and purposes. Any revenue raised belongs in your organization's
bank account.
Q: What should I do if the winner does not want to accept the
prize?
A: That is certainly the prerogative of the winner. Because the
winner now owns the prize, if it is given back to the organization,
it qualifies as a charitable donation. If the item has a substantial
value, it would be appropriate to issue the winner a letter or receipt
that could be kept for their tax records.
The winner also would have the option to take the prize and give it
to a friend or family member. If you would really rather not deal with
having the prize returned, you may wish to suggest these other alternatives
to them.
Q: What should I do if I cannot read the information printed
on the raffle stub?
A: It would be a good idea to state that winner information must
be CLEARLY printed in order to ensure that winners can be contacted.
You should also train your ticket sellers to review the tickets for
clearly written names and addresses. Sometimes abbreviations that are
commonly known in one community will mean nothing to those conducting
the raffle.
Q: Are there ways we can increase our net return by cutting down
on some of the expenses?
A: The most obvious method of cutting down on expenses is finding
sponsors who will donate prizes or sell them to you at a reduced cost.
Anyone donating a prize for your raffle will probably request that you
give them positive publicity by noting their donation on the advertising
for the raffle and/or on the raffle tickets. You should also be prepared
to give the sponsor a receipt for their tax records.
Another method to off-set costs is to approach local vendors to help
with the cost of printing tickets. They may be interested in paying
for the printing costs if you allow them to place promotional coupons
for their product on the back of your raffle tickets.
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