Critics say proposed tax on break-open tickets should be scratchedAlbert J. Marro / Staff Photo
Gov. Peter Shumlin proposed placing a tax on break-open tickets sold in many clubs and bars throughout the state.
Some people call them pull tickets. Gov. Peter Shumlin called them break-open tickets when he proposed to tax them, and in doing so raised a lot of interest in this largely unregulated recreation that exists somewhere at the nexus of gambling and philanthropy.
Break-open tickets are indeed a form of gambling: a piece of cardboard with perforated windows that, when opened, reveal symbols commonly associated with a slot machine. Match three cherries or four bells and win a prize, usually ranging from $1 to $150.
The tickets are sold by civic service groups, such as the Elks Lodge and the Veterans of Foreign Wars, and by for-profit businesses who sell the tickets on behalf of a nonprofit group. They are commonly found in bars, and at $1 a ticket, it’s a popular way to stay entertained while enjoying a drink.
In theory, after paying out prizes, all profits are supposed to go to charitable organizations. Currently, however, there is very little oversight to ensure the money goes where it should.
The state Department of Taxes currently has jurisdiction over break-open tickets, but any regulation or enforcement usually comes after the fact, said Tax Commissioner Mary Peterson.
“When we’ve performed audits, we’ve found these pull tickets are typically not reported,” Peterson said.
Shumlin made his proposal during his budget address to the state Legislature.
“My budget proposes to join our neighbors in Connecticut and Massachusetts by assessing a 10 percent surcharge on the retail value of break-open tickets and applying the $17 million raised to comprehensive energy program funding,” Shumlin said.
The funds would support the Low-Income Home Energy Assistance Program, and initiatives to promote alternative energy and energy efficiency.
The proposal also calls for greater accountability as it gives regulatory authority to the Department of Liquor Control, a natural fit, said DLC Commissioner Michael Hogan.
“Many of the establishments that sell them, they already sell alcohol,” Hogan said of the roughly 600 for-profit businesses that sell them. Under Shumlin’s plan, the businesses will be able to keep a portion of the proceeds, which is forbidden under the current policy.
“It’s going to be a win-win for everybody,” Hogan said. “The businesses will get to keep some money to cover their costs of selling them, and with more oversight, there will be more money going to the nonprofits.”
Currently, nobody really knows how many tickets are sold in the state annually, or even how many organizations are selling them. Shumlin’s $17 million figure comes from what Peterson called a “very rough estimate” from the Department of Taxes.
While about 600 bars sell the tickets, it is unknown how many of the state’s approximately 8,500 nonprofit organizations that can sell them are already doing so.
Even with a rough estimate — $170 million in annual sales — it is clear that break-open tickets are a popular form of gambling and fundraising, far more popular than they are in Connecticut and Massachusetts, where fees and taxes on the tickets generate revenues in the hundreds of thousands of dollars and nowhere near the $17 million anticipated in Vermont.
It is clear that many bars and service organizations that sell the tickets are reluctant to discuss the proposal, with most bartenders, patrons and service organizations declining to be interviewed for the story. Representatives with the American Legion, however, were adamant in their opposition.
“It’s going to affect the American Legion and other service organizations’ ability to raise money for charities,” said Robert Perham, department adjutant for the American Legion. “We’re meeting with other (service) groups and we’re going to go (to Montpelier) to testify.”
Perham’s wife, Linda Perham, is a past national vice commander for the American Legion.
“Governor Shumlin is using our money to support his programs,” she said. “We want to support our programs, which aren’t his programs. If we get a dip in sales, it will hurt the veterans and hurt the veterans we serve.”
Hogan acknowledged the tax, if passed on to the consumer, could lead people to buy fewer tickets.
“Well, you know, there could be a downward bump,” he said. “When we banned smoking, some people thought it would kill business at bars, and they’ve bounced back.”
Administration Secretary Jeb Spaulding said the break-open ticket industry needs better regulation.
“We’re talking about something that’s unregulated that generates hundreds of millions of dollars,” Spaulding said. “There are a significant number of ticket sales whose proceeds are not making it to the nonprofits. We actually believe there’s not likely to be a decrease in the number of sales.”
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