06/04/2013 2:11PM

Suffolk Downs: Five percent withholding charged to high-payout wagers

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Suffolk Downs has begun withholding 5 percent of the winnings on any bet generating a net payout of greater than $600 in order to comply with an order by the Massachusetts Department of Revenue, according to track officials.

Suffolk, which opened on June 1, was notified on May 20 about the requirement to withhold the money, according to a memo from the Department of Revenue provided by Suffolk. The memo said that a change to tax laws regarding gambling winnings passed by the Massachusetts legislature in 2011 required the withholding as of the start of 2013.

The automatic withholding applies to any wager that generates more than $600 in net profit, according to Chip Tuttle, the chief operating officer of Suffolk. In other words, a $50 win bet on a horse that is any longer than 12-1 would trigger the withholding, as well as a $1 trifecta wager that returned higher than $601, regardless of whether the ticket used multiple combinations.

The withholding is only being applied to Massachusetts residents, Tuttle said. However, the withholding applies to any wager that a Massachusetts resident makes, so if a player at Suffolk or a Massachusetts account-wagering customer cashes a bet on an out-of-state race that exceeds the threshold, the withholding is triggered, Tuttle said.

Suffolk Downs is displaying parimutuel payoffs without accounting for withholding on its tote board and television monitors, Tuttle said. As a result, some players have been unaware that some payouts are being subjected to withholding until they cash their winning tickets.

“It hasn’t taken very long for most of our customers to figure out that it might be advantageous to place ten $20 win bets rather than one $200 win bet,” Tuttle said. The track is running a notice in its racing programs alerting customers to the new withholding requirement, according to Tuttle.

Because the withholding requirement applies to any gambling payoff in Massachusetts, including slot machines and lotteries, the insertion of the language into a 2011 bill appears to be the work of a group or groups opposed to the expansion of gambling in the state. In 2011, the Massachusetts legislature authorized casinos in the state, and it is in the process of evaluating licensees. Suffolk has applied for a license in partnership with Caesars Entertainment.

When the casinos are up and running, the withholding requirement will likely cause havoc. Slot machines frequently pay off at amounts exceeding $600, and the requirement would also require casinos to withhold money from a $500 blackjack bet if the player drew a face card and an ace, since a two-card blackjack typically pays off at 3-2. Single plays on a roulette wheel pay off at 35-1, meaning an $18 winning bet at the roulette table would trigger the withholding as well.

Federal tax law requires gamblers to declare any winnings in excess of $600 for bets that pay off at 300-1 or higher. Federal taxes are automatically deducted from any payoff in excess of $5,000 when the odds are 300-1 or higher.

Tuttle said Suffolk is hoping to work with legislators to reverse the decision to apply the withholding.

“Regardless of its negative and impractical implications for casino gaming, in real time it’s put Suffolk and the other parimutuel facilities in a very uncompetitive position, and we will be seeking to change it as soon as possible,” Tuttle said.