Oklahoma Gambling Tax Rate

Lottery players beware: Federal and state income taxes could eat as much as 42 percent of your winnings.

Even worse, if you win a large prize and die before seeing the cash, your heirs' tax bill could exceed 90 percent.

That message came Wednesday during a Webcast seminar for Oklahoma lawyers on how to represent lottery winners and retailers.

Presenter Susan Shields, an Oklahoma City attorney, said the federal and state income tax rates on lottery winnings can hit 35 percent and 7 percent, respectively, depending on the prize amount, for a total tax bite of 42 percent.

Under federal law, the Oklahoma Lottery Commission must withhold 25 percent of winnings on prizes exceeding $5,000, Shields said.

Therefore, you won’t pay the same tax rate on the entire amount. The tax brackets are progressive, which means portions of your winnings are taxed at different rates. Depending on the number of your winnings, your federal tax rate could be as high as 37 percent as per the lottery tax calculation. State and local tax rates vary by location.

These provisions most likely will affect winners of the multistate Powerball game and large Oklahoma based online games.

The most recent Powerball winner, for instance, was an Air Force sergeant from New Mexico who won $93.4 million.

Such winners have a choice: the entire prize paid as an annuity over many years, or a much lower lump sum in this case, $52.2 million.

• If you withheld state income tax on a payment of gambling winnings, you may enter it in box 15 of Form W-2G. If you do, also complete boxes 13 and 14. A state identification number (box 13) is assigned by each individual state. If a state tax department requires you to send it a paper copy of Form W-2G, use Copy 1 for that purpose.
• In Oklahoma, the combined state-local sales tax rate on a bottle of water averages 8.94 percent, but the state fee on casino slot machines is just 6 percent. That’s not the only comparison in.
• Withholding on Gambling Winnings Gambling winnings are subject to withholding for federal income tax at a rate of 24% as of 2020 if you win more than $5,000 from sweepstakes, wagering pools, lotteries, or other wagering transactions, or anytime the winnings are at least 300 times the amount wagered.
• Cities and/or municipalities of Oklahoma are allowed to collect their own rate that can get up to 5.1% in city sales tax. Every 2020 combined rates mentioned above are the results of Oklahoma state rate (4.5%), the county rate (0% to 3%), the Oklahoma cities rate (0% to 5.1%). There is no special rate for Oklahoma.

Shields said many winners choose the lump sum for tax reasons.

For instance, if a Powerball winner dies, his heirs would be subject to a 47 percent estate tax, plus 42 percent in combined income taxes, plus interest, she said.

'That is a pretty bad result for the winner ... but also for his family, who won't inherit very much, Shields said.

The annuity option in such a case leaves the heirs even less, she said.

Here's the good news, Shields added almost half jokingly: The cost of the winning ticket is tax-deductible.

Unlike Texas and some other states, Oklahoma doesn't allow a winner to sell his lottery annuity to a brokerage house or even to assign it to a relative without a judge's order, she said.

However, Oklahoma's lottery law allows the commission to garnish prize money from winners who owe debts and to deduct delinquent child support payments.

'This may be a reason someone might not want much publicity about winning, Shields said.

She said Oklahoma lottery winners who subsequently divorce would have to split the money.

Presenter Armand Paliotta said the application process for retailers hoping to sell lottery tickets is 'fairly burdensome.

They must disclose all owners, officers and operators and notify the Lottery Commission of ownership changes.

Retailers also must be current in state tax filings and payments and cannot have a felony conviction.

Paliotta advised lawyers to have clients sign the back of any large winning ticket.

'That would prevent someone else who finds it from cashing it, he said.

Although lawyers will want to help their clients remain anonymous for various reasons, that will be easier said than done, Paliotta said.

Archive ID: 2644860

Lawmakers in Oklahoma are clashing with Native American Tribes over the casino industry. Governor Kevin Stitt suggests that tax fees for tribes operating casinos should be reevaluated. Oklahoma and tribes are both claiming the other is being unfair.

It’s a tough situation, yet not one that’s entirely unusual. We’ve seen a number of states clash with Native American tribes over the past several months. Let’s look at what exactly the governor is calling for, and why tribes in this state are pushing back.

Casino Gambling Laws in Oklahoma

Oklahoma is not typically thought of as the most liberal state in the US. When it comes to gambling though, lawmakers here have taken a very progressive stance. Today, most forms of gambling are completely legal and regulated here.

Oklahoma has the highest per-capita number of Native American residents. Under the Indian Gaming Regulatory Act of 1988, the tribes in this state have the ability to operate casinos. Oklahoma allows these tribes to run Class II and Class III category casino establishments.

Oklahoma Gambling Tax Rate Certificate

Unsurprisingly, Oklahoma has one of the largest selections of casinos in the US. There are gaming establishments located all over the state. Some are fully-functional casinos offering a wide variety of slots and table games. Others are small and only provide limited electronic poker gaming options.

Oklahoma casinos earn huge amounts of money for the state. Now, the governor is asking for a reevaluation of the current tax structure. Why are tribes pushing so hard against this?

Oklahoma and Tribes Pushing Against Each Other Over Casino Revenue

There are more than 130 casinos spread around Oklahoma. As we already mentioned, all of these establishments are run by Native American Tribes. Last year, these tribes paid nearly $139 million to the state in taxes off of more than $2 billion in total gaming revenue.

At the moment, the tax structure calls for tribes to pay between 4% to 10% on their total gambling revenue. For years, this deal between Oklahoma and tribes has worked out for both parties. Governor Stitt is now calling for this structure to be reevaluated.

Obviously, this is not sitting well with tribal leaders. Many of these tribes argue that they contribute much more than just revenue for the state. They are one of the largest employers in Oklahoma and invest millions into healthcare, education, and infrastructure.

Oklahoma Gambling Tax Rate Comparison

John Berrey, chairman of the Quapaw Nation, vented his frustration to the media this week.

“What I don’t understand, in any of his op-ed, there’s no recognition of the true value of the tribes,” he said. “(Native American tribes) are one of the largest employers in the state. We provide benefits for our employees. We’re probably the most philanthropic group in the state.”

Are Oklahoma Casino Tax Rates Going to Change?

It’s not entirely clear yet. Right now, the governor is simply asking for the state’s Gaming Board to review the current rates that casinos pay. There is no indication that these tax rates are set to officially change.

Governor Stitt may have gone about this in the wrong way. Instead of contacting the tribes directly, he voiced his opinion to the local news company. Some also feel that an agreement between Oklahoma and tribes isn’t completely necessary right now.

Under the current set of gambling laws, these casinos are granted 15-year licenses to operate. The governor believes that before the next license renewals can be granted, the state and tribal leaders must agree on new tax rates. Many tribes feel that if an agreement is not reached, these licenses will be automatically renewed.

Spokeswoman Donelle Harder claims the governor recognizes the huge contributions that the tribes make to the state. She also believes Stitt will be fair and open in creating a new agreement that benefits both the state and tribes operating casinos here.

Oklahoma Gambling Tax Rate 2020

Negotiations will take place over the next several months. Hopefully, these two parties can take part in healthy and constructive negotiations. Stay tuned for more updates on the situation between Oklahoma and tribes as they come out!