California Tax On A Slot Machine Win

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No other segment of the gaming industry has benefited more from the technology revolution than the slot machine. Once considered the ugly stepdaughter placed on the gaming floor to appease the spouses of table players, the slot machine has been transformed into the fairy princess of the gaming world. With her, she has brought a dowry of riches no one would have imagined for the casino and a few lucky players as well. Over twenty years ago the slot machine accounted for 30 percent of the casinos' profits. Today it accounts for about 70 percent. Computer technology and the ability to play with little to no gambling knowledge makes it possible to offer life-changing jackpots big enough to turn a pauper into a king.

However, the fact that it doesn't take much gambling knowledge to play means that most people don't understand the inner working of the slots -- which makes it easy to explain a loss or a win with some false logic. Like any other 'wives tales' these are passed from person to person until they become gospel. Most of these myths and misconceptions are harmless but they can add to your frustration and take away some of the enjoyment of your casino visit. Let’s take a look at a few of the most popular myths and the truth behind them.

My total credit at that time should have been around $1500. The machine showed $782 and was told by the Casino manager that since the total was over $1200 it had to be a hand pay. OK-I understand that for tax purposes so was not concerned as I have gone through that process a few times. You may be required to withhold 24% of gambling winnings (including winnings from bingo, keno, slot machines, and poker tournaments) for federal income tax. This is referred to as backup withholding. You should backup withhold if: The winner doesn't furnish a correct taxpayer identification number (TIN). Any winnings subject to a federal income-tax withholding requirement If your winnings are reported on a Form W-2G, federal taxes are withheld at a flat rate of 24%. If you didn’t give the payer your tax ID number, the withholding rate is also 24%. Withholding is required when the winnings, minus the bet, are. She won $873,511playing the Wheel of Fortune penny slots in the C Concourse in Terminal 1. The airport reports this huge win comes nowhere close to its largest ever. The biggest jackpot ever won.


Myth #1

Someone hit a jackpot on the machine you just left -- so you would have won that jackpot if you kept playing.
This is probably one of the most common notions about slot machine gambling -- but it's patently false. The slot machines have a computer chip inside that runs the Random Number Generator (RNG). The RNG is continuously cycling through numbers even when the machine is not being played. These numbers correspond to the stops on the wheel that display the winning or losing symbols that you see when the reels stop. When you hit the spin button or pull the handle, the RNG picks the combination at that given microsecond. If you had stayed at the machine, it is highly unlikely that you would have stopped the RNG at the exact nano-second to display that same combination of numbers. In the time it takes to talk with a friend or sip your drink the RNG has cycled through thousands of combinations.

Myth #2

You can tell the odds of winning by counting the symbols on each wheel.
Actually, you can't. The RNG generates a number for each spin. There can be hundreds of virtual stops on each wheel even though you only see a few symbols. For example, you may see 20 symbols on each wheel of a three-reel machine. You figure 20 x 20 x 20 = 8,000 combinations and your chance of hitting the jackpot is 1 in 8000. In reality, the computer chip may program 256 stops for each wheel which makes the odds 256 x 256 x 256 =16,777,216 combinations. Being able to generate millions of combinations is the reason that slots can offer large paybacks.

Myth #3

Casinos can loosen or tighten the slot machines with the flip of a switch.
In actuality, the slot machines have a computer chip in them that determines the payback percentage. These are preset at the factory. In order for a casino to change the payback, they would have to change the chip. In most jurisdictions, there is paperwork that has to be filled and submitted to the Casino Control Commission for each machine if the chip is changed. It's time-consuming and the chips are very expensive. For this reason, it is more economical to decide on the payback percentages before purchasing the machines and having the factory ship them with the proper chip.

Myth #4

A machine that has not been paying out is due to hit.
There is no way to determine if a machine is due to hit. Each spin is a random occurrence and has no bearing on what has happened previously. Don't ever play more than you should because of this misconception -- it will be devastating to your bankroll if you do.

Myth #5

The temperature of the coins played will affect the way a machine pays.
Unfortunately, the machine is not affected by temperature. It doesn't matter if you play hot, cold, old or new coins. The coin slot is a mechanical device and has no feeling.

Myth #6

If you use your slot club card the machine will pay back less.
This may well be the most damaging myth of them all. There is no link between the card reader and the RNG, but by not using your player's card you are denying yourself valuable comps and sometimes cash back from the casino.

Let’s use that same 100 spin example. America coins slot machine.

Legislative Analyst's Office, January 1998


Gambling in the United States is a multibillion dollar industry and is rapidly expanding. Consumer spending on gambling activities nationwide has outpaced the growth in personal income over the past 14 years. Additionally, consumers have made a dramatic shift in the types of gambling activities they are participating in, with wagering on charitable games and horse races declining significantly. In this report, we outline the nationwide gambling industry, and discuss in more detail what is occurring in the California gambling industry. The California gambling industry includes the state lottery, card rooms, horse race wagering, charitable gambling, and gambling on Indian lands. With regard to gambling on Indian lands, we recommend the Legislature clarify the state's role in this area.

Table of Contents

  • What Kind of Gambling Is Allowed?
  • Size of the Gambling Industry
  • Indian Gambling
  • Lottery
  • Card Rooms
  • Horse Racing
  • Charitable Gambling
  • Indian Gambling

Gambling in the United States

What Kind of Gambling Is Allowed?

Size of the Gambling Industry

Figure 2
Gross Gambling Revenues by Industry Segment
United States 1982 and 1996
(In Billions)
Amount Percent of TotalAmountPercent of Total
Horse Racing2.
Card Rooms0.
California Tax On A Slot Machine Win

Indian Gambling

Gambling in California

Big win on slot machine


Figure 6
California State Lottery Games
As of December 1997
Super Lotto
Fantasy 5
Daily 3
Hot Spot
Big SpinTelevision Show

Card Rooms

New Slot Machine Wins

Figure 7
Location and Size of California Card Rooms by County
(As of October 1997)
Number of
CountyCard RoomsTablesRange of Number of Tables Per Card Room
Contra Costa121451-100
Lake 133
Los Angeles691444-300
San Benito122
San Bernardino12525
San Diego9641-25
San Joaquin7303-8
San Luis Obispo7162-3
San Mateo3483-35
Santa Clara6981-40
Santa Cruz8161-3
Santa Barbara144

Horse Racing

Figure 10
1996 California Horse Race Meetings
and Total Parimutuel Handle
(Dollars in Millions)
Track City (County)Meet Dates Handlea
Thoroughbred Race Meetings
Santa Anita Park Arcadia (Los Angeles)12/26/95-04/22/96 $820.6
Hollywood Park Inglewood (Los Angeles)04/26/96-07/22/96 589.3
Del MarDel Mar (San Diego)07/24/96-09/11/96425.7
Golden Gate FieldsAlbany (Contra Costa)03/27/96-12/22/96323.3
Bay MeadowsSan Mateo (San Mateo)01/24/96-11/04/96 305.7
Quarter Horse Race Meetings
Los AlamitosCypress (Los Angeles)04/19/96-12/22/96$169.1
Harness Race Meetings
Los Alamitos Cypress (Los Angeles) 12/22/95-04/07/96$56.0
Cal ExpoSacramento (Sacramento)04/12/96-07/21/96 28.5
Los Angeles County FairPomona (Los Angeles)09/12/96-09/30/96$92.9
Sonoma County FairSanta Rosa (Sonoma)07/24/96-08/05/9630.9
Alameda County FairPleasanton (Alameda)06/26/96-07/07/9629.9
San Mateo County FairBay Meadows Track (San Mateo)08/07/96-08/19/9628.4
Solano County FairVallejo (Solano)07/10/96-07/22/9625.4
California State FairSacramento (Sacramento)08/21/96-09/02/9617.8
San Joaquin County FairStockton (San Joaquin)06/12/96-06/23/9612.5
Fresno District FairFresno (Fresno)10/02/96-10/13/966.7
Humboldt County FairFerndale (Humboldt)08/08/96-08/18/961.6
aHandle as defined on page 2.

Charitable Gambling

Indian Gambling

Figure 12
Indian Gambling Operations in California
As of July 1997
CountyFacility NameCity Owner/Operator
AmadorJackson Indian Bingo and CasinoJacksonJackson Rancheria Band of Miwuk Indians
ButteFeather Falls CasinoOrovilleMooretown Rancheria
Gold Country CasinoOrovilleTyme Maidu Tribe of the Berry Creek Rancheria
ColusaColusa Indian BingoColusaColusa Band of Wintun Indians
Del Norte Golden Bear CasinoKlammathCoast Indian Community of the Resighini Rancheria
Elk Valley CasinoCrescent CityElk Valley Rancheria
Lucky 7 CasinoSmith RiverSmith River Rancheria
FresnoMono Wind CasinoAuberryAuberry Big Sandy Rancheria
Table Mountain Rancheria Casino and BingoFriantTable Mountain Rancheria
HumboldtHoopaLucky Bear Casino and BingoHoopa Valley Tribe
Cher-Ae Heights Bingo and CasinoTrinidadTrinidad Rancheria
ImperialParadise CasinoWinterhavenQuechan Indian Tribe
InyoSierra Spring CasinoBig PineBig Pine Paiute Tribe of the Owens Valley
Konocti Vista Casino and BingoFinleyBig Valley Rancheria of Pomo Indians
Paiute Palace Casino--Bishop Paiute Tribe
KingsThe Palace Indian Gaming CenterLemooreSanta Rosa Band of Tachi Indians of the Santa Rosa Rancheria
LakeTwin Pines CasinoMiddletownLake Miwok Indian Nation of the Middletown Rancheria
Robinson Rancheria Bingo and CasinoNiceRobinson Rancheria of Pomo Indians
LassenNorthern Lights CasinoSusanvilleSusanville Indian Rancheria
MendocinoRed Fox Casino and BingoLaytonvilleCahto Tribe of the Laytonville Rancheria
Shodaki Coyote Valley Casino--Coyote Valley Band of Pomo Indians
Hopland Sho-ka-wah CasinoHoplandHopland Band of Pomo Indians
Black Hart Casino--Sherwood Valley Rancheria
RiversideSpa Hotel and CasinoPalm SpringsAgua Caliente Band of Cahuilla Indians
Cabazon Bingo Inc., Fantasy Springs CasinoIndioCabazon Band of Mission Indians
Cahuilla Creek Rest and Casino--Cahuilla Band of Mission Indians
Casino MorongoCabazonMorongo Band of Mission Indians
Soboba Legends CasinoSan JacintoSoboba Band of Mission Indians
Pechanga Entertainment CenterTemeculaTemecula Band of Luiseno Mission Indians
Spotlight 29 CasinoCoachellaTwenty Nine Palms Band of Mission Indians
San BernardinoHavasu Landing Resort and CasinoHavasuChemehuevi Indian Tribe
San Manuel Indian Bingo and CasinoHighlandSan Manuel Band of Mission Indians
San DiegoBarona Casino and BingoLakesideBarona Band of Mission Indians
Sycuan Indian Bingo and Poker CasinoEl CajonSycuan Band of Mission Indians
Viejas Casino and Turf ClubAlpineViejas Band of Mission Indians
Santa BarbaraChumash CasinoSanta YnezSanta Ynez Band of Mission Indians
ShastaBurney CasinoBurneyPit River Tribe
Win-River Casino BingoReddingRedding Rancheria
TulareEagle Mountain Casino--Tule River Tribe of the Tule River Indian Reservation
TuolumneChicken Ranch BingoJamestownChicken Ranch Band of Me-Wuk Indians
YoloCache Creek Bingo and CasinoBrooksRumsey Indian Rancheria
Source: National Indian Gaming Commission.

Slot Machines For Sale California

AcknowledgmentsThis report was prepared by Megan M. Atkinson, under the supervision of Gerald Beavers. The Legislative Analyst's Office (LAO) is a nonpartisan office which provides fiscal and policy information and advice to the Legislature. Publications
To request publications call (916) 445-2375.
This report and others are available on the LAO's World Wide Web site at http://
The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814.

How To Win On Slot Machines Tips