PART 44—TAXES ON WAGERING; EFFECTIVE JANUARY 1, 1955 Authority: 26 U.S.C. 7805. Section 44.6060-1 also issued under 26 U.S.C. 6060(a); Section 44.6109-1 also issued under 26 U.S.C. 6109(a). Section 44.6109-2 also issued under 26 U.S.C. 6109(a); Section 44.6695-2 also issued under 26 U.S.C. 6695(g). Source: T.D. 6370, 24 FR 2614, Apr. 4, 1959, unless otherwise noted. Subpart A—Introduction § 44.0-1 Introduction. (a) In general. (b) Division of regulations. (c) Arrangement and numbering. [T.D. 6370, 24 FR 2614, Apr. 4, 1959, as amended by T.D. 7665, 45 FR 6090, Jan. 25, 1980] § 44.0-2 General definitions and use of terms. As used in the regulations in this part, unless otherwise expressly indicated: (a) The terms defined in the provisions of law contained in the regulations in this part shall have the meanings so assigned to them. (b) The Internal Revenue Code of 1954 means the Act approved August 16, 1954 (68A Stat.), entitled “An Act To revise the internal revenue laws of the United States”, as amended. (c) District director means district director of internal revenue. (d) The cross references in the regulations in this part to other portions of the regulations, when the word “see” is used, are made only for convenience and shall be given no legal effect. § 44.0-3 Scope of regulations. The regulations in this part apply to wagering activity on and after January 1, 1955. § 44.0-4 Extent to which the regulations in this part supersede prior regulations. The regulations in this part, with respect to the subject matter within the scope thereof, supersede Regulations 132, 26 CFR (1939) Part 325. Subpart B—Tax on Wagers § 44.4401-1 Imposition of tax. (a) In general. (b) Rate of tax; amount of wager Rate of tax. (2) Amount of wager. (ii) In the case of a “parlay” wager (i.e., a single wager made by a bettor on the outcome of a series of events, usually horse races), the amount of the taxable wager is the amount initially wagered by the bettor irrespective of whether the parlay is successful. In the case of an “if” wager, the amount of the taxable wager is the total of all amounts wagered on each selection of the bettor. For example, A makes a $10 wager on horse R with the understanding that if horse R wins, $5 is to be wagered on horse S and $5 on horse T. If horse R wins, the taxable wager is $20. If horse R loses, the taxable wager is $10. In determining the amount of a taxable wager involving the features of, or a combination of, “parlay” and “if” bets, such as wagers sometimes referred to as a “whipsaw” or an “if and reverse” bet, the rules set forth above relating to “parlay” and “if” bets are to be followed. For example, assume B wagers $10 on horse R with the understanding that if horse R wins, $5 is to be placed as a parlay wager on horses S and T. In such a case, if horse R loses, the taxable wager is $10; if horse R wins, there are two taxable wagers amounting in the aggregate to $15. (iii) In the case of punchboards with prizes of merchandise, cash, or free plays listed thereon, the amount of the taxable wager is the amount risked by the bettor for all chances taken by him, including the chances taken by the bettor in lieu of the acceptance of an equivalent amount in cash or merchandise. (iv) In determining the amount of any wager subject to tax there shall be included any charge or fee incident to the placing of the wager. For example, in the case of a wager with respect to a horse race, any amount paid to a bookmaker for the purpose of guaranteeing the bettor a pay-off based on actual track odds is to be included as a part of the wager. Similarly, in the case of a lottery, any amount paid to the operator thereof by the bettor for the privilege of making a contribution to the pool or bank is also to be included in the amount of the wager. However, the amount of the wager subject to tax shall not include the amount of the tax where it is established by actual records of the taxpayer that such amount of tax was collected from the bettor as a separate charge. § 44.4401-2 Person liable for tax. (a) In general. (2) Any person required to register under section 4412 by reason of having received wagers for or on behalf of another person, but who fails to register the name and place of residence of such other person (hereinafter in this subparagraph referred to as principal), shall be liable for the tax on all wagers received by him during the period in which he has failed to so register the name and place of residence of such principal. Subsequent compliance with section 4412 by the person receiving wagers for another does not relieve him of his liability and duty to pay such tax, nor will the fact that such person incurs liability with respect to the tax on such wagers, relieve his principal of liability for the tax imposed under section 4401 with respect to such wagers. Accordingly, both the person receiving the wagers and his principal shall be liable for the tax on such wagers until the tax is paid. Payment of the tax on such wagers shall not relieve the person receiving wagers of any penalty for failure to register as required by section 4412. This subparagraph has application only to wagers received after September 2, 1958. (b) In business of accepting wagers. (c) Lay-offs. § 44.4401-3 When tax attaches. The tax attaches when (a) a person engaged in the business of accepting wagers with respect to a sports event or a contest, or (b) a person who operates a wagering pool or lottery for profit, accepts a wager or contribution from a bettor. In the case of a wager on credit, the tax attaches whether or not the amount of the wager is actually collected from the bettor. However, if an amount equivalent to the amount of the wager is paid to the bettor prior to the close of the calendar month in which such wager was accepted, either because of the cancellation of the event upon which the wager was placed, or because the wager was cancelled or rescinded by mutual agreement, the wager need not be reported on the taxpayer's return for such month. Where such cancellation or rescission takes place in a month subsequent to the month in which the wager was accepted, credit or refund of the tax paid with respect to such wager may be made subject to the provisions of § 44.6419-1. § 44.4402-1 Exemptions. (a) Parimutuel wagering enterprises. (b) Wagering machines In general. (i) So-called “slot” machines that operate by means of the insertion of a coin, token, or similar object and that, by application of the element of chance, may deliver, or entitle the person playing or operating the machine to receive cash, premiums, merchandise, or tokens; and (ii) Machines that are similar to machines described in paragraph (b)(1)(i) of this section and are operated without the insertion of a coin, token, or similar object. (2) Examples. (i) A machine that is operated by means of the insertion of a coin, token, or similar object and that, even though it does not dispense cash or tokens, has the features and characteristics of a gaming device whether or not evidence exists as to actual payoffs. (ii) A so-called crane machine, claw, digger, or rotary merchandising type device that is operated by the insertion of a coin and adjustment of a control lever for the purpose or removing from the machine, by gripping, pushing, or other manipulation articles such as figurines, lighters, etc., in the machine. (iii) A pinball machine equipped with a pushbutton for releasing free plays and a meter for recording the plays so released, or equipped with provisions for multiple coin insertion for increasing the odds. (iv) Pinball machines in connection with which free plays are redeemed in cash, tokens, or merchandise, or prizes are offered to any person for the attainment of designated scores. (v) A coin-operated machine that displays a poker hand or delivers a ticket with a poker hand symbolized on it that entitles the player to a prize if the poker hand displayed by the machine or symbolized on the ticket constitutes a winning hand. [T.D. 8328, 56 FR 188, Jan. 3, 1991; Redesignated and amended by T.D. 8442, 57 FR 48186, Oct. 22, 1992] § 44.4403-1 Daily record. Every person liable for tax under section 4401 shall keep such records as will clearly show as to each day's operations: (a) The gross amount of all wagers accepted; (b) The gross amount of each class or type of wager accepted on each separate event, contest, or other wagering medium. For example, in the case of wagers accepted on a horse race, the daily record shall show separately the gross amount of each class or type of wagers (straight bets, parlays, “if” bets, etc.) accepted on each horse in the race. Similarly, in the case of the numbers game, the daily record shall show the gross amount of each class or type of wager accepted on each number. For additional provisions relating to records, see section 6001 and § 44.6001-1. § 44.4404-1 Territorial extent. (a) In general. (b) Examples. Example 1. A syndicate which maintains its headquarters in a foreign country has representatives in the United States who receive wagers in the United States for or on behalf of such syndicate. For the purposes of section 4404, such wagers are considered as accepted within the United States, the syndicate is considered to be in the business of accepting wagers within the United States, and such wagers are subject to the tax. This is true regardless of the nationality or residence of the members of the syndicate. Example 2. A Canadian citizen employed in Detroit, Michigan, telephones a horse race bet to a bookmaker who is a United States citizen with his place of business located in Windsor, Canada. The wager is taxable since it is made by a person within the United States with a person who is a United States citizen. Example 3. A United States citizen while visiting Tijuana, Mexico, makes a wager on the outcome of a horse race with a bookmaker who is also a United States citizen located and doing business in Tijuana. The wager is not taxable since both parties to the wager, though United States citizens, were outside the United States at the time the wager was made. Subpart C—Occupational Tax § 44.4411-1 Imposition of tax. (a) In general. (1) Who is liable for the tax imposed by section 4401, or (2) Who is engaged in receiving wagers for or on behalf of any person who is liable for the tax imposed by section 4401. (b) Examples. Example 1. A, who is engaged in the business of accepting horse race bets, employs ten persons to receive on his behalf wagers which are transmitted by telephone. A also employs a secretary and a bookkeeper. A and each of the ten persons who receives wagers by telephone on behalf of A are liable for the special tax. The secretary and bookkeeper are not liable for the special tax unless they also receive wagers for A. Example 2. B operates a numbers game and has an arrangement with ten persons, who are employed in various capacities, such as bootblacks, elevator operators, news dealers, etc., to receive wagers from the public on his behalf. B also employs C to collect from the ten persons referred to, the wagers received by them on B's behalf and to deliver such wagers to B. C performs no other services for B. B and the ten persons who receive wagers on his behalf are liable for the special tax. C is not liable for the special tax since he is not engaged in receiving wagers for B. (c) Cross references. § 44.4412-1 Registration. (a) In general. (b) Information to be reported on Form 11-C. (2) Each person engaged in the business of accepting wagers on his own account shall report on Form 11-C the name and address of each place where such business will be conducted and the name, address, and number appearing on the special (occupational) stamp of each agent or employee who may receive wagers on his behalf. Thereafter, a return shall be filed on Form 11-C, marked “Supplemental”, each time an additional employee or agent is engaged to receive wagers. Such supplemental return shall be filed not later than 10 days after the date such additional employee or agent is engaged to receive wagers and shall show the name, address, and number appearing on the special (occupational) stamp of each such agent or employee. As to a change of address, see § 44.4905-2. (3) Each agent or employee who receives wagers for or on behalf of a person engaged in the business of accepting wagers on his own account shall report on Form 11-C the name and residence address of each person (i.e., individual, partnership, corporation, etc.) on whose behalf wagers are to be received. Thereafter, the agent or employee shall file a return on Form 11-C, marked “Supplemental”, each time he is engaged or employed to receive wagers for a person or persons other than the person or persons previously reported on Form 11-C. Such supplemental return shall be filed not later than 10 days after the date he is engaged to receive wagers and shall show the name, business address, or, if none, the residence address of the person or persons by whom he is engaged to receive wagers. As to a change of address, see § 44.4905-2. (c) Time and place for filing Form 11-C. § 44.4413-1 Certain provisions made applicable. For regulations under sections 4901, 4902, 4904, 4905, and 4906, as extended and made applicable to the special tax imposed by section 4411 and to the persons upon whom such tax is imposed, see Subpart D of this part. Subpart D—Miscellaneous and General Provisions Applicable to Taxes on Wagering Miscellaneous Provisions § 44.4421-1 Definitions. (a) Wager. (1) Any wager placed with a person engaged in the business of accepting wagers upon the outcome of a sports event or a contest; (2) Any wager placed in a wagering pool with respect to a sports event or a contest, if such pool is conducted for profit; and (3) Any wager placed in a lottery conducted for profit. (b) Lottery In general. Provided, (2) Certain games excluded Cards, dice, etc. a b c (ii) Drawings conducted by an organization exempt from tax under section 501 or 521. (c) Other terms used Wagering pool. (2) Sports event. (3) Contest. (4) Conducted for profit. § 44.4422-1 Doing business in violation of Federal or State law. Payment of any special tax within the scope of the regulations in this part in nowise authorizes the carrying on of any business in violation of a law of the United States or the law of any State. The special tax stamp is not a license or permit and affords no protection from prosecution for violation of any Federal or State law. See also section 4906. General Provisions Relating to Occupational Taxes § 44.4901-1 Payment of special tax. (a) Condition precedent to carrying on business. (b) Computation of special tax. (2) The tax year begins July 1 and ends June 30 of the following calendar year. Persons commencing business between August 1 and June 30 (both dates inclusive) shall pay a proportionate part of the annual tax. “Commencing business” means the initial acceptance by a person of a wager subject to the tax imposed by section 4401 or the initial receiving of a taxable wager by an agent or employee for or on behalf of some other person. Persons in business for only a portion of a month are liable for tax for the full month, i.e., a person first becoming subject to the special tax on, for example, the 20th day of a month, is liable for tax for the entire month. (c) Tax payment evidenced by special tax stamp. (2) District directors will distinctly write or print on the stamp before it is delivered or mailed to the taxpayer the following information: (i) The taxpayer's registered name, and (ii) the business or office address of the taxpayer if he has one; if not, the residence address. Special tax stamps will be transmitted by ordinary mail, unless it is requested that they be transmitted by registered mail in which case additional cost to cover registry fee shall be remitted with the return. (3) District directors and their collection officers are forbidden to issue receipts in lieu of stamps representing the payment of special taxes. (d) Cross references. § 44.4902-1 Partnership liability. Any number of persons doing business in copartnership shall be required to pay but one special tax. The district director may issue a special tax stamp to a copartnership in a firm or trade name, provided the names and addresses of all members of the partnership are disclosed on Form 11-C. § 44.4905-1 Change of ownership. (a) Changes through death. (b) Changes from other causes. (c) Changes in firm. (d) Change in corporation. § 44.4905-2 Change of address. (a) Procedure by taxpayer After June 30, 1963. (i) He engages in any wagering activity at the new address, or (ii) The termination of a 30-day period which begins on the day after the date of such change, whichever occurs first. The taxpayer's special tax stamp shall accompany the supplemental return for proper notation by the district director. As to liability in case of failure to register a change of address, see § 44.4905-3. (2) Before July 1, 1963. (b) Procedure by district director; removal within district. (c) Procedure by district director; removal to another district. [T.D. 6656, 28 FR 5720, June 12, 1963, as amended by T.D. 7087, 36 FR 505, Jan. 14, 1971] § 44.4905-3 Liability for failure to register change or removal. Any person succeeding to and carrying on a business for which the special tax imposed by section 4411 has been paid, and any taxpayer changing his residence address or his place of business, without registering such change as provided in §§ 44.4905-1 and 44.4905-2 shall be liable to an additional tax, and to the penalty prescribed in section 6651 for failure to make a return. (For regulations under section 6651, see the Regulations on Procedure and Administration (Part 301 of this chapter).) § 44.4906-1 Cross reference. For provisions relating to the applicability of Federal and State laws, see section 4422 and § 44.4422-1. Subpart E—Administrative Provisions of Special Application to the Taxes on Wagering § 44.6001-1 Record requirements. (a) In general. (i) Separately, the gross amount of wagers: ( a ( b ( c (ii) With respect to wagers laid off with others, the name, address, and registration number of each person with whom the laid-off wagers were placed, and the gross amount laid off with each such person, showing separately the gross amount of laid-off wagers with respect to each event, contest, or other wagering medium, as, for example, the gross amount laid off on each horse in a race; and (iii) The gross amount of tax collected from or charged to bettors as a separate item. (2) If a taxpayer has any agents or employees receiving wagers on his behalf, he shall maintain a separate record showing the name and address of each agent or employee, the period of employment, and the number of the special tax stamp issued to each such agent or employee. (3) A duplicate copy of each return required by § 44.6011(a)-1 shall be retained as part of the taxpayer's records. (b) Records of agent or employee. (c) Record of claimants. (d) Place for keeping records. (e) Period for retaining records. [T.D. 6370, 24 FR 2614, Apr. 4, 1959, as amended by T.D. 6568, 26 FR 7545, Aug. 15, 1961] § 44.6011(a)-1 Returns. (a) In general. (b) Return on Form 11-C. § 44.6060-1 Reporting requirements for tax return preparers. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78456, Dec. 22, 2008] § 44.6071-1 Time for filing return. (a) Return on Form 730. (b) Return on Form 11C. (2) For additional provisions relating to the return on Form 11-C, see § 44.4412-1 and §§ 44.4901-1 to 44.4905-3, inclusive. § 44.6091-1 Place for filing returns. (a) In general. (b) Returns of individuals outside the United States. (c) Returns filed with service centers. (d) Hand-carried returns. [T.D. 6370, 24 FR 2614, Apr. 4, 1959, as amended by T.D. 7630, 44 FR 40498, July 11, 1979; T.D. 8442, 57 FR 48185, Oct. 22, 1992; T.D. 9156, 69 FR 55746, Sept. 16, 2004] § 44.6107-1 Tax return preparer must furnish copy of return to taxpayer and must retain a copy or record. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78456, Dec. 22, 2008] § 44.6109-1 Tax return preparers furnishing identifying numbers for returns or claims for refund. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78456, Dec. 22, 2008] § 44.6151-1 Time and place for paying taxes. The taxes imposed by sections 4401 and 4411 shall, without assessment or notice and demand, be paid to the internal revenue officer with whom the returns are required to be filed at the time fixed for filing returns. For provisions relating to the time for filing returns, see section 6071 and § 44.6071-1. For provisions relating to the place for filing returns, see section 6091 and § 44.6091-1. § 44.6419-1 Credit or refund generally. (a) Overpayment of wagering tax; in general. (b) Statement supporting credit or refund. (c) Limitation on credit or refund. § 44.6419-2 Credit or refund on wagers laid off by taxpayer. (a) Laid-off wagers; in general. (b) Claim for refund. (c) Credit or refund not allowed. (d) Certificate required. Certificate (In support of credit or refund with respect to laid-off wagers under section 6419(b) of the Internal Revenue Code.) I hereby certify that I, or the __________ (Corporation, partnership, or syndicate) of which I am an officer or member, doing business at ________________________, (Address) registered with the District Director of Internal Revenue at ____________________, ____________________ under Registration No. ________ as a person accepting wagers within the meaning of section 4401 of the Internal Revenue Code, accepted laid-off wagers, in the amounts and on the dates indicated below, from __________________, (Name) ________________, (Address) during the month of ________________, 19____. Date Amount of laid-off wager Subject of laid-off wager (Identify horse and track, particular contest, or contestant, etc.) (Attach supplemental sheets for additional entries, if necessary.) The undersigned further certifies that he, or the corporation, partnership, or syndicate of which he is a member will make return of and account for the tax, under section 4401 of the Internal Revenue Code, with respect to the laid-off wagers so accepted. It is understood by the undersigned that this certificate is given for the purpose of enabling the person from whom the laid-off wagers were accepted to claim credit with respect to the tax due on such laid-off wagers or to claim credit or refund of the tax, if any, paid on such laid-off wagers. It is further understood that the fraudulent use of this certificate will subject the undersigned and all guilty parties to a fine of not more than $10,000 or to imprisonment for not more than five years, or both, together with costs of prosecution. (Signed) (Date) (Title) (Owner, President Partner, Member, etc.) § 44.6694-1 Section 6694 penalties applicable to tax return preparer. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78456, Dec. 22, 2008] § 44.6694-2 Penalties for understatement due to an unreasonable position. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78456, Dec. 22, 2008] § 44.6694-3 Penalty for understatement due to willful, reckless, or intentional conduct. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78457, Dec. 22, 2008] § 44.6694-4 Extension of period of collection when preparer pays 15 percent of a penalty for understatement of taxpayer's liability and certain other procedural matters. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78457, Dec. 22, 2008] § 44.6695-1 Other assessable penalties with respect to the preparation of tax returns for other persons. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78457, Dec. 22, 2008; 74 FR 5106, Jan. 29, 2009] § 44.6696-1 Claims for credit or refund by tax return preparers. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78457, Dec. 22, 2008] § 44.7262-1 Failure to pay special tax. Any person liable for the special tax who does any act which makes him liable for such tax, without having paid the tax, is, besides being liable for the tax, subject to a fine of not less than $1,000 and not more than $5,000. § 44.7701-1 Tax return preparer. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78457, Dec. 22, 2008]