Jackson, Madison, and Ridgeland shouldn’t count on the state’s new lottery to boost sales tax revenues.
According to the Mississippi Tax Commission, sales of tickets aren’t subject to the traditional seven-percent tax.
More bad news for Jackson, since lottery tickets aren’t subject to sales tax, they’re also not subject to the city’s one-percent infrastructure sales assessment.
“Current law does not allow for the lottery to be taxed under the (state) sales tax law or the Jackson one-percent infrastructure (law),” said Kathy Waterbury, director of communications with the Mississippi Department of Revenue.
State lawmakers approved the lottery during a special session last summer.
Following the session, Mayor Chokwe Lumumba said the lottery would generate around $4 million a year in sales tax revenues for the capital city, as well as additional infrastructure sales tax monies.
At the time of the mayor’s announcement, DOR was still determining whether lottery ticket purchases would be assessed.
Among questions, state officials were looking into whether the sale of a ticket would be considered the sale of property, which would be subject to sales tax, or evidence of a bet being placed, which would not.
Months later, that question has been answered. “Lottery tickets are not taxable because you are buying a chance to win and not purchasing tangible personal property,” Waterbury said.
Jackson city officials planned to investigate the matter further.
“From what (we) understood, the legislation was written to have a sales tax that went to municipalities,” said Chief Administrative Officer Robert Blaine. “That was our understanding of the way the bill was structured.
“If it’s different, then we should know about it.”
Ridgeland Mayor Gene McGee said he hadn’t given lottery revenues any thought.
Madison Mayor Mary Hawkins Butler said since the city will not receive sales tax from the state lottery the case is closed.
The Alyce G. Clarke Mississippi Lottery Law went into effect on September 1. The law established a board of directors to govern the lottery and established rules to run it. The 132-page bill was approved during a special session of the legislature last summer.
Meanwhile, the Mississippi Lottery Commission hopes to have a lottery in place by late summer.
Last week, the commission took a major step in moving forward with plans by selecting a legal firm to represent the lottery corporation.
The legal firm will help the commission set up the corporate structure, secure initial funding for the lottery, and enter into an agreement with a national vendor that would help implement the lottery in the state.
The lottery itself is not funded by taxpayer money but does have state authority to secure monies from financial institutions. Those dollars will be used to pay the vendor, establish initial jackpots and the like. Any loans will be paid back with ticket proceeds, said Gerard Gibert, vice-chair of the lottery commission.
Gibert hopes to have the lottery vendor in place sometime this spring with the first tickets to go on sale in late summer. The first tickets likely to be available will be scratch-off, with number games to follow.
With scratch-off, there’s a little less work to be done on our part to roll that out,” he said. “We’ll rely on the game vendors for a fair amount of advice as well.”
No game designs had been finalized at press time, nor had the amounts that could be won via the scratch-off tickets.
Tickets will be sold at local retailers, like gas stations, who must apply for and pass a background check before being eligible to sell, Gibert said.
Some details, including how scratch-off and numbered tickets could be redeemed, had not been decided at press time.
Under state statute, no less than 50 percent of revenues brought in from lottery ticket sales have to be paid out in prizes and winnings. Administrative expenses for the commission and the lottery corporation cannot exceed 15 percent of revenues.
Gibert said states typically pay out around 55 percent of the funds generated and spend five to seven percent on administrative costs.
“The mission of the board is to maximize profit for Mississippi. The bad news is we’re the 45th state to (implement a lottery). The good news is we have 45 states to analyze and draw best practices from.”
Mississippi sales tax is seven percent. Cities receive 18.5 percent of all sales taxes generated in the capital city, as well as any revenues generated by a special one-percent infrastructure sales tax, which is placed on most commercial transactions in Jackson’s corporate limits.
In recent years, Madison and Ridgeland have seen significant increases in sales tax revenues. Last year, the city of Ridgeland brought in $13,448,739, about $110,000 more than the year before, while Madison brought in $8,396,127, about $350,000 more than the prior year.
In the fiscal year 2018, Jackson’s sales tax diversions totaled $28,946,815, down about a million from the year before, according to Department of Revenue statistics.
Jackson’s infrastructure tax generates about $14 million annually.
