After the raffle: the 5% lottery tax, clerk report and W-2G prizes

The 5% lottery tax

Under Massachusetts General Laws c.271 §7A, an organization that holds a raffle or bazaar files a return with the State Lottery Commission, on the Commission's form, within ten days after the event, and pays a tax of five percent of the gross proceeds. The AG's guidance stresses that this is the gross amount received, not the net after prizes and expenses. The Lottery sends the form after your permit is issued.

Easton's town clerk page makes the same point in plain terms: the tax is payable even for nonprofits, because it is a tax on wagering, not on income.

The annual report to the clerk

Within 30 days after the permit expires, the club files two copies of a report with the city or town clerk, on the approved form. The statute says the report covers:

• The number of raffles and bazaars held
• The amount of money received
• The expenses connected with them
• The names of the winners of prizes exceeding $250 in value
• The net proceeds, and how they were used

The statute says the report must be “certified to” by the three people named on the permit application as responsible for the raffle, and by an accountant. The statute does not define “accountant,” so ask your clerk what they accept well before the report is due. Failing to file the report is grounds to refuse a renewal.

A note on Easton's winner threshold

Easton's clerk page describes the report as listing winners of prizes valued at more than $25. The statute says prizes exceeding $250. The statute is the controlling text. Because the town's form may be built around the longer list, a club filing in Easton can ask the clerk, or simply list every winner above $25, which also covers everyone above the statute's $250 line. Easton also asks for the prior year's annual report with a renewal application.

Raffle prizes and Form W-2G

Raffle prizes can be federally reportable. The IRS instructions for Form W-2G say the rules for sweepstakes and lotteries apply to church raffles and charity drawings. The club files a W-2G for a winner when the prize meets the reporting threshold and is at least 300 times the wager.

• Reporting threshold for payments made in 2026: $2,000, adjusted for inflation in later years
• The ticket price is the wager; if tickets are sold five for $1, each ticket is a $0.20 wager
• Withhold 24% when the winnings minus the wager are more than $5,000
• For a noncash prize such as a TV or trip, use its fair market value and read the instructions on noncash payments
• Get the winner's name, address and taxpayer ID when the prize is claimed

Records to keep, and for how long

Keep the records that support the report: ticket stubs, seller lists, prize receipts and appraisals, permits, lottery returns, bank deposits and the signed report itself. The AG's guidance says to keep them at least one year after the report is submitted, or, for a public charity reporting to the AG, three years after the Form PC filing.

The raffle also shows up on the club's IRS return. On a 990-EZ, raffles are “gaming” on line 6a, and more than $15,000 of gaming income requires Schedule G, Part III.

1. 1.Within 10 days of each drawing: lottery return and 5% payment.
2. 2.At each drawing: winner details, and a W-2G if the prize requires one.
3. 3.Within 30 days after the permit expires: two signed copies of the report to the clerk.
4. 4.At year-end: raffle totals to the 990-series return and Form PC.
5. 5.Keep everything for the longer of the two retention periods.

Where we come in

Murphy can keep each raffle's income, prizes and lottery tax in the books, prepare the figures and supporting schedules for the clerk report, list any W-2G forms the prizes call for, and carry the totals to the club's 990-series return and Form PC. We give you a scope and a price in writing before anything starts.