THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, May 1, 1996 TAG: 9605010548
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN AND JUANITA RAISOR, STAFF WRITERS
LENGTH: Medium: 69 lines
When a package of documents arrived three weeks ago from the Municipal Tax Collection Bureau, Bruce Cohen wasn't sure what the Trenton, N.J., company wanted.
A cover letter said Cohen had done business in New Jersey and owed back taxes to the state.
``I didn't have a clue about what they were referring to,'' the Virginia Beach resident said Tuesday.
Then he remembered winning a $10,000 slot-machine jackpot at an Atlantic City, N.J., casino in 1991.
It turned out that the New Jersey Division of Taxation wanted 2 percent of that $10,000 and had hired the Municipal Tax Collection Bureau to help get it. The collection company was trying to round up tax revenue from several sources, including casino winnings.
But instead of stroking a check to New Jersey for $200, Cohen fired off angry letters to its governor, the head of the state's tax division and to a New Jersey newspaper, The Trenton Times.
One thing that irked him, Cohen said, was the lack of notification in a casino that he would have to pay taxes to New Jersey on his winnings.
Each time he has won a slot-machine jackpot, the casino took his Social Security number and provided a Form 1099 for reporting the income on his tax returns, Cohen said. He reported his winnings on his federal and Virginia tax returns but wasn't aware of any obligation to pay New Jersey too, he said.
Many states, including Virginia, give their residents credit for certain taxes they have paid to other states. Cohen, however, would have difficulty getting a break on taxes he pays New Jersey on his Atlantic City winnings.
``The credits in Virginia are limited to earned or business income or a gain on the sale of a principal residence,'' said Neil Rose, a tax attorney in Norfolk with the law firm Mezzulo & McCandlish P.C.
For a Virginia resident to get credit for taxes paid on gambling winnings, he would have to prove gambling is a business, said Rose, who teaches tax courses for attorneys and accountants.
And a professional gambler has to demonstrate a few things to Virginia's Department of Taxation to get credit for these taxes.
``They would have to be organized as a business'' and have a federal identification number, said Robert P. Schultze, the tax department's assistant commissioner of compliance. ``They'd have to file a Schedule C, which shows business income and business losses.''
When he complained to the Municipal Tax Collection Bureau about its pursuit of taxes from casino winnings five years ago, he was told he could offset the $200 he owed with his gambling losses in 1991, Cohen said. He figured this would reduce the amount he owes New Jersey to $60 or $70.
New Jersey wants that money by June 1, but Cohen said he has not yet decided whether to pay. One thing he has decided is not to return to Atlantic City, he said. ``It's the principle of the thing,'' said Cohen, who estimated that he has been traveling to the gambling mecca at least twice a year since the early 1980s.
By Cohen's estimates, he and other out-of-state gamblers have left behind much more in New Jersey in tax revenues and spending for hotels, food and tolls than they have taken out of the state in winnings. ILLUSTRATION: A LOSING GAMBLE
FILE PHOTO
by CNB