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Audit: 3,000 NY lottery operators didn't pay state taxes

Nov 1, 2005, 7:23 am

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New York Lottery

More than 3,000 New York retailers licensed to operate lucrative state lottery machines failed to pay their state taxes, according to an audit released Monday.

State Comptroller Alan Hevesi said the lottery operators owed more than $23 million in unpaid taxes over two years ending in 2004, and 350 of the operators owed more than $10,000 each. Some of the operators did more than $1 million a year in lottery ticket sales.

One New York City area retailer owned $43,504 in taxes while using his state license to collect $72,763 in commissions on lottery sales of $1.2 million, Hevesi said.

An upstate retailer owed $37,794 in back taxes while he collected $66,669 in lottery commissioners in one year.

The state Lottery Division said it had suspended the routine checking of lottery operators with tax records after the Sept. 11 terrorist attacks in 2001 took a toll on New York businesses, said division spokeswoman Jennifer Mauer. She said the division, working with Hevesi, has resumed the practice.

Hevesi said the operators of 26 percent of all active retail outlets owed state taxes. That corresponds to 3,115 taxpayers.

"Selling lottery tickets offers individuals a potentially lucrative business opportunity," Hevesi said. "The Lottery Division is now doing what is needed to be done to ensure that their retailers pay taxes on the money they're making from that opportunity."

The Lottery Division disputes the severity of the cases. For example, the lottery feels just 7 percent of retailers owed state taxes — less than third of what Hevesi reported.

"The lottery and the tax department recently agreed to an improved process for reviewing and terminating retailers based upon their level of tax debt and have implemented this new process," said state lottery Director Nancy Palumbo. "Since implementation of the new process, retailers with outstanding tax liabilities have had their licenses revoked and we will continue to ensure that Lottery retailers remain current with their taxes."

Hevesi also found the division failed to terminate retailers who didn't meet minimum quotes. The lottery also suspended that practice after the 2001 terrorist attacks, but has resumed enforcement, Mauer said.

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