IRS tax on slot pull winnings?

[Canuker]

The organizer of our on board slot pull has alerted us to the possibility of suffering (I'm guessing) withholding tax, of 15%, payable to the IRS should we hit the big time.

We will be in international waters at the time.

To any tax experts out there (I'd prefer facts rather than opinions, please):

1. Does this sound both reasonable and required?

2. Does it apply to participants who are not resident in the USA?

3. Who, on board, assumes custody of the 15% and responsibility to remit it?

 

Thanks,

Canuker

[ldubs]

7 minutes ago, Canuker said:

The organizer of our on board slot pull has alerted us to the possibility of suffering (I'm guessing) withholding tax, of 15%, payable to the IRS should we hit the big time.

We will be in international waters at the time.

To any tax experts out there (I'd prefer facts rather than opinions, please):

1. Does this sound both reasonable and required?

2. Does it apply to participants who are not resident in the USA?

3. Who, on board, assumes custody of the 15% and responsibility to remit it?

 

Thanks,

Canuker

 

Assuming your location is Canada, I'm not sure why IRS rules would apply to you at all.   

 

Looking forward to the answer.  

[LHT28]

I do not believe Canadians  will pay any tax  but  if they withhold  the 15%  there is a form you get from  the US  to claim  the 15%

 We have never had anything with held on our winnings on ships

 I believe  it is land based casinos  you need to worry

JMO

[1025cruise]

Any casino winnings at sea from a US based port will be reported to the IRS if applicable.

[LHT28]

2 minutes ago, 1025cruise said:

Any casino winnings at sea from a US based port will be reported to the IRS if applicable.

Are you saying if the ship sails from Miami  they will report the winnings to IRS?

 

 Maybe they do not bother  with Canadians as  we never had any issues  when I won  onboard

[ldubs]

Just now, 1025cruise said:

Any casino winnings at sea from a US based port will be reported to the IRS if applicable.

 

I wonder when it would it be applicable.   If not a US citizen and in international waters, it seems the IRS is out of luck even if the ship departed from a US port.  However I guess I would not be surprised if the IRS felt otherwise. 

[klfrodo]

Canadian citizens are exempt from paying casino winnings that are taxable in the US.

"Jackpot" winnings on a slot machine over $1199 USD will be reported to the IRS. When this happens, the machine stops working, the slot attendants verify the win, they pay in cash after verifying your identity (age, citizenship, etc), then reset the machine and off they go. 

The casino doesn't keep the taxes. The person responsible (winner) will receive a form 1099G from the casino. Then it is up to the individual to claim this as "Earned Income" when they complete their individual tax return.

 

I don't join slot pulls for various reasons, but this would be a reason to have a Canadian running the slot pull and using his/her/they/them/their card.

Edited April 16, 2023 by klfrodo

[lenquixote66]

I do not know if this still applies but in the 80’s if people one large sums from legal gambling they would have an elderly person collect their winnings.

[Ann from SC]

My opinion is that any slot pull winnings will be the winnings of the slot pull organizer whose card is in the machine...and, if that person is American, then yes, those winnings will be subject to income tax by the IRS.  The slot pull organizer will have to pay taxes on those winnings, so it is reasonable for him to withhold funds to cover those taxes from the winnings.  

 

Also, I speculate that the organizer of the slot pull will not want to relinquish his card in the machine to, for example, a Canadian, because he wants to further his status in the Blue Chip Club and possibly earn free cruising.  

[Elaine5715]

41 minutes ago, Ann from SC said:

My opinion is that any slot pull winnings will be the winnings of the slot pull organizer whose card is in the machine...and, if that person is American, then yes, those winnings will be subject to income tax by the IRS.  The slot pull organizer will have to pay taxes on those winnings, so it is reasonable for him to withhold funds to cover those taxes from the winnings.  

 

Also, I speculate that the organizer of the slot pull will not want to relinquish his card in the machine to, for example, a Canadian, because he wants to further his status in the Blue Chip Club and possibly earn free cruising.  

This is correct.  Slot pull wins over $1200 are taxable if the card in the machine belongs to a US Citizen which is why a Canadian citizen's sail card (or other non taxable country) is used when possible.  The points accumulated on a slot pull is very little.  Not using a card is an option but one person, not the group, will be paid after providing identification  and will assume all tax liability. 

[BruceMuzz]

The American IRS will tax casino winnings by any nationality passenger on a ship that departed from a US port. If a German National flies to Miami to cruise back to Europe, and is lucky enough to win over US$1200 in the Casino in the middle of the Atlantic Ocean, the cruise line and the casino operator are required by the US Government to withhold the estimated income tax from the winnings and report it to the IRS.

I managed ships for years and we always had to do this.

Edited April 16, 2023 by BruceMuzz

[klfrodo]

1 hour ago, BruceMuzz said:

The American IRS will tax casino winnings by any nationality passenger on a ship that departed from a US port. If a German National flies to Miami to cruise back to Europe, and is lucky enough to win over US$1200 in the Casino in the middle of the Atlantic Ocean, the cruise line and the casino operator are required by the US Government to withhold the estimated income tax from the winnings and report it to the IRS.

I managed ships for years and we always had to do this.

Interesting.

I've had a couple of small (but Jackpot none the less) and was hand paid each time. At the end of the cruise, I received my 1099G. No taxes were withheld by the cruise line. It was my responsibility to claim as "Earned Income" on my 1040. (Of course, I was able to write off the losses and wipe out any owed tax) This was on Carnival and Royal in the Caribbean for myself. My wife experienced the same on a Royal cruise in the Med.

[Aquahound]

5 hours ago, BruceMuzz said:

The American IRS will tax casino winnings by any nationality passenger on a ship that departed from a US port. If a German National flies to Miami to cruise back to Europe, and is lucky enough to win over US$1200 in the Casino in the middle of the Atlantic Ocean, the cruise line and the casino operator are required by the US Government to withhold the estimated income tax from the winnings and report it to the IRS.

I managed ships for years and we always had to do this.

 

I'm trying to wrap my head around that.  A non-US citizen on a non-US flagged ship on the high seas enroute to Europe has to pay US income taxes because the ship left a US port?  I'm struggling to understand the legality of that, and I can't seem to find in law where that is required.  Are the casino operators American?  

[navybankerteacher]

36 minutes ago, Aquahound said:

 

.. Are the casino operators American?  

Yes, for IRS purposes.

[BruceMuzz]

3 hours ago, Aquahound said:

 

I'm trying to wrap my head around that.  A non-US citizen on a non-US flagged ship on the high seas enroute to Europe has to pay US income taxes because the ship left a US port?  I'm struggling to understand the legality of that, and I can't seem to find in law where that is required.  Are the casino operators American?  

You need to understand Maritime Law. Often, there is a grey area in legal coverage of just about anything that occurs on an international ship in international waters.

To simplify it a bit, the legal codes of the last country / port visited - or the next country / port to be visited - take precedence.

[Aquahound]

27 minutes ago, BruceMuzz said:

You need to understand Maritime Law. Often, there is a grey area in legal coverage of just about anything that occurs on an international ship in international waters.

To simplify it a bit, the legal codes of the last country / port visited - or the next country / port to be visited - take precedence.

It’s funny you say that because I’m actually a SME on maritime law. What I’m having a hard time with is associating US income tax law to a non citizen on the high seas, and requiring the ship to withhold it. I’d like to see that law. 

[ldubs]

10 hours ago, BruceMuzz said:

The American IRS will tax casino winnings by any nationality passenger on a ship that departed from a US port. If a German National flies to Miami to cruise back to Europe, and is lucky enough to win over US$1200 in the Casino in the middle of the Atlantic Ocean, the cruise line and the casino operator are required by the US Government to withhold the estimated income tax from the winnings and report it to the IRS.

I managed ships for years and we always had to do this.

 

Thanks for sharing this.  I said back in post #16 I wouldn't be surprised, and I guess I'm not.   It does make sense that if the last port visited establishes "jurisdiction", then the winnings would be reported as income regardless of the winner's citizenship.  Huh, who woulda thought!  😀 

[BruceMuzz]

3 hours ago, Aquahound said:

It’s funny you say that because I’m actually a SME on maritime law. What I’m having a hard time with is associating US income tax law to a non citizen on the high seas, and requiring the ship to withhold it. I’d like to see that law. 

It gets much crazier than that.

The US Navy claims jurisdiction over any ship anywhere in the world if that ship is carrying US Citizens.

The US Public Health Service claims jurisdiction over any ship - anywhere - that:

1. Sells passage tickets in the USA.

2. Calls at a US Port - ever.

3. Has a sister ship that calls at a US Port

4. Carries American Passengers.

[Zach1213]

10 hours ago, BruceMuzz said:

To simplify it a bit, the legal codes of the last country / port visited - or the next country / port to be visited - take precedence.

So if, for example, the ship went from Miami to Nassau and then didn't stop again until, say, France or Pakistan for that matter, would it default to Bahamian law and thus negate any fact that it left the USA? 

[Zach1213]

5 hours ago, BruceMuzz said:

The US Navy claims jurisdiction over any ship anywhere in the world if that ship is carrying US Citizens.

 

 

The best part of being a dual citizen is that you get to have two people fighting over which one loves you more 🙂

[BruceMuzz]

4 minutes ago, Zach1213 said:

So if, for example, the ship went from Miami to Nassau and then didn't stop again until, say, France or Pakistan for that matter, would it default to Bahamian law and thus negate any fact that it left the USA? 

Seems logical - but it is neither that simple, nor that clear.

As I mentioned, this is a very grey area. No single rule or law covers this situation. Depending on what legal issue crops up, who is involved, the flag of the ship, the owner of the line, the individual legal entities who are invited - and many more details - one or more legal authorities steps forward and claims jurisdiction. On other occasions, NO legal authority wants to get involved.

[LHT28]

Well all I can say is  no one gave me  a form  nor with held any of my winnings

So far  15 yrs later  the IRS has not come knocking

[chengkp75]

12 hours ago, Aquahound said:

It’s funny you say that because I’m actually a SME on maritime law. What I’m having a hard time with is associating US income tax law to a non citizen on the high seas, and requiring the ship to withhold it. I’d like to see that law. 

I agree with you, Paul.  I've never heard of anything like this

 

8 hours ago, BruceMuzz said:

It gets much crazier than that.

The US Navy claims jurisdiction over any ship anywhere in the world if that ship is carrying US Citizens.

The US Public Health Service claims jurisdiction over any ship - anywhere - that:

1. Sells passage tickets in the USA.

2. Calls at a US Port - ever.

3. Has a sister ship that calls at a US Port

4. Carries American Passengers.

Sorry, Bruce, but this is not close to right.  The US Navy has no jurisdiction over any civilian ship, regardless of what flag it flies, or what nationality passenger it carries.

 

No, the USPH only claims jurisdiction over cruise ships, not "any" ship (CBP has sanitation officers that inspect foreign cargo ships).  And, the USPH only has jurisdiction over ships coming into the US.  Under a non-VSP regime, the cruise ship would be inspected every single time it enters the US.  But, if the ship decides to adhere to the VSP, then the ship agrees to follow the VSP requirements throughout the voyage.  As for a ship that does not call at any US port, the USPH has absolutely no jurisdiction over that ship, it falls under other agencies, like the EU ShipSan (regulated by the EU member nations), or the "Port State" using their own sanitation regime, or the WHO ship sanitation regime.

11 hours ago, ldubs said:

 

Thanks for sharing this.  I said back in post #16 I wouldn't be surprised, and I guess I'm not.   It does make sense that if the last port visited establishes "jurisdiction", then the winnings would be reported as income regardless of the winner's citizenship.  Huh, who woulda thought!  😀 

No, that isn't even close to correct.  Only if the casino winnings were made while the ship was in port, or in the country's territorial waters, would the port state have any jurisdiction.  This is why the casino's on cruise ship are not regulated by anyone other than CLIA.

[ldubs]

3 minutes ago, chengkp75 said:

 

No, that isn't even close to correct.  Only if the casino winnings were made while the ship was in port, or in the country's territorial waters, would the port state have any jurisdiction.  This is why the casino's on cruise ship are not regulated by anyone other than CLIA.

 

Well, your answer sure makes more common sense.   Then again I'm not surprised by anything when it comes to the IRS.  

 

The question might remain, if someone won big in international waters, per CLIA would the cruise line make any record for tax purposes.  

[BruceMuzz]

I was Hotel Director on several Princess ships in the 2010's. On many of our voyages, there was a slot pull contest that awarded a new BMW to the winner.

Princes was - and is - owned by Carnival Corp, and flagged in Bermuda.

The Princess Casinos were - and are - operated by Carnival Casinos, based in Panama.

 

Most of the BMW winners were Americans, as that is the majority of Princess' clientele.

They had the option of receiving the title to the automobile, and then paying the required taxes to the IRS later - or they could accept a cash payment, minus the income taxes owed on the cash. The ship withheld the taxes, filled out the required paperwork, and Princess paid the taxes to the IRS through Corporate in California.

If a non-US Citizen happened to win the car, we were required to follow exactly the same procedures - regardless of where that person lived or what country they were from.

 

Today I work for a company connected to the US Public Health Service. Although USPH is not legally allowed to have jurisdiction over ships that do not call at US Ports, they do it anyway.

If they get wind that a foreign flag ship that does not call at US Ports is flagrantly violating USPH Standards, they threaten to retaliate against any sister ships that do call at US Ports. This is very hush-hush,and very effective. Big cruise lines cannot afford the negative publicity attached to a USPH inspection failure. They cave in.