I-Team: Looking for new tax money? Critics say it's plugged in at your neighborhood store

By Randy Travis Published August 10, 2020 ATLANTA - The COVID-19 economy has meant a budget shortfall and growing pressure to eventually raise taxes. But prosecutors and attorneys across Georgia think they’ve already come up with a way to collect millions of dollars. How? Through unpaid taxes they say are likely sitting inside your corner convenience store. Can they prove it? “I think it’s really easy,” said attorney Michael Lambros. The issue involves those video gambling machines you see in gas stations and convenience stores across Georgia. There are 25,000 of them spread out across 5,000 locations. Critics call them one of the most addictive forms of gambling around. A surprising statement perhaps since, by law, stores are not supposed to offer cash prizes to the winners. The prizes are restricted to store credit, vouchers for customers to buy items like sandwiches, sodas, lottery tickets, or gasoline. They can’t use the vouchers for tobacco or alcohol. The Georgia Lottery monitors how much money goes into each machine and the value of prizes paid out. The Lottery keeps 10 percent of all revenues to help fund the HOPE scholarship and other programs. Last year, players spent $2.6 billion on the machines. Law enforcement agencies don’t believe that was to win soft drinks and candy bars. “It’s an illegal gambling enterprise industry and it is crooked and corrupt,” proclaimed Lambros. Here’s why he feels that way. Last year, the Lottery said $1.8 billion in prizes were paid out to video game winners. Let’s assume all of that was store vouchers and not cash because cash prizes would be illegal. Unless the vouchers were redeemed for gas or lottery tickets, the store has to pay sales taxes on those prizes. And when prosecutors began looking at the books, they found a big problem. According to racketeering lawsuits filed by attorney Michael Lambros on behalf of various district attorneys, the store owners and machine providers broke the law by not paying sales or other taxes on the prizes generated by those machines. One lawsuit showed $121 million going into the machines of one store chain, with $82 million in winnings going out. Yet no taxes paid. Lambros argues in that one case alone state and local governments are owed $3 million. “The stores can’t have it both ways,” he said. “They’re either paying out cash and they have to admit that. And you and I know they’re not going to admit that. Or they’re going to have to prove they’re giving redeemable gifts.” In many cases, store owners and machine providers have settled, avoiding prison time but coughing up millions of dollars. So far, Lambros says his lawsuits have forced 10 machine providers out of business. “In this economy, when the state of Georgia has cut its budget by 10-14 percent, there’s no excuse for the Department of Revenue, the Georgia Lottery, and other law enforcement not to go after these taxes,” said Lambros. “No excuse.” But attorney Chris Anulewicz has an excuse: there weren’t any taxes that had to be paid. He insisted authorities can’t prove that $1.8 billion in prizes didn’t go to buying lottery tickets and gasoline, the only two items that would not require the stores collect sales tax.