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Game show prizes are subject to several different types of taxes, depending on where you live and where you participated in the game show. Sales and use taxes are generally collected by your home state, however, and since the prizes were not sold and may not be subject to sales tax, you may owe use tax in your home state on the value of these prizes, if your state collects such taxes.
A sales tax is imposed on goods sold -- usually in the state where the sale occurs. Game show prizes are not sold, so generally they are not subject to state sales taxes.
Most states that charge a sales tax also have a provision for a use tax. This means that the state will charge a tax on goods acquired in another state that are used, stored or consumed in your home state. Game show prizes fall under this category and must legally be reported on your state income tax or use tax return.
Game shows report prizes at the suggested retail price, which may be higher than the actual price you would pay for the prize. If you report the value of prizes at less than what the game show reported for the use tax, keep documentation showing why your reported value is correct in case you are audited.
You will need to pay both federal and state income taxes on your winnings. The state where you won the money will charge its own income taxes, so you must file a return in that state for the year. In addition, you must pay state income taxes in your home state on the winnings, although in most states you can claim a credit for the taxes you have already paid. If your home state's taxes are higher, you need to pay the difference.
Cash prizes are not subject to sales or use taxes. When you spend your winnings, the merchants will collect the sales taxes when you make your purchases.
The value of your game show winnings are reported on a Form 1099-MISC. The total value of prizes will be shown on Line 3 of the form. This will include cash and prize values. Depending on the mix of cash and prizes you won, the total amount reported may not be subject to sales and use taxes.
- carnival game booth image by Janet Wall from Fotolia.com