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In Bars & Clubs

Paying out winnings on video poker machines is a risky gamble for area bar owners.

Video gambling a game of chance for bar owners


"Bar Month" at OnMilwaukee.com is back for another round! The whole month of February, we're serving up intoxicatingly fun bars and club articles -- including guides, unique features, drink recipes and more. Grab a designated driver and dive in!

At bars all over the Milwaukee area, patrons sit down, order a drink and take their chances at a video gambling machine.

In just about every bar, you can find one of these machines. And for every machine, there is at least one patron willing to dump in money for hours on end, despite labels proclaiming "for entertainment use only."

Many times, though, the label is as decorative as beer advertisements on the wall. The fact is a large percentage of bars offer payouts for gamblers, in direct violation of Wisconsin state statutes.

Under a 1999 agreement that reduced penalties for operating illegal machines, enforcement is now handled solely by the state Department of Revenue, which makes sure bar, restaurant and hotel owners are paying appropriate taxes on revenue generated by machines.

Before then-Gov. Tommy Thompson revised the state law, violators faced felony charges, fines of up to $10,000, loss of liquor license and prison time. The current state law allows bars to have up to five video poker machines and paying out winnings is a civil offense, carrying a $500 fine and no loss of license.

Bars with more than five machines, however, could face criminal charges, according to Department of Revenue Communications Officer Jessica Iverson.

Regulating the machines is big business for the DOR, which has brought in nearly $23 million in taxes since the law went into effect in 2003. Proceeds generated through video gaming machines are taxable income, and the gross receipts are subject to the state's sales tax.

To keep things in check, the department relies heavily on tax audits and also enlists the help of Alcohol and Tobacco Enforcement agents.

"Our ATF agents come across the illegal machines through the course of normal inspection as well as in the course of investigating other tobacco or alcohol law violations," Iverson says. "We also, of course, conduct tax audits of businesses. If auditors identify gambling operations during the course of those audits, they will enlist the help of ATF agents to enforce that part of the statute, as well."

In addition to the tax implications, the Wisconsin statute 945.01 (c) makes it illegal to operate any machine that affords a player to win something of value determined by a game of chance.

The threat of audits, fines and licensing issues aside, bar owners are willing to make the illegal payments because the machines bring in a big chunk of money.

"People sit down when they're bored," said one bar owner who spoke with OnMilwaukee.com under the condition of anonymity. "They're more inclined to spend more time and buy more drinks when they're at the machines and have a chance to win some money.

"A lot of people, if there's nobody at the bar, will sit at a machine and make a couple bucks to pass the time."

At this particular establishment, players receive a ticket when done that they can redeem at the bar for their winnings. The bar owner knows he's taking a chance, but there's big money to be made, especially important in the current economy.

"It's a little bit scary, yeah," he said. "But it's a risk you take."

Earlier in the decade, the Tavern League supported a measure introduced by Rep. Terry Musser (R-River Falls) that would have legalized the machines, generating as much as $380 million in revenue. Other supporters of the bill wanted to prevent Wisconsin Native American tribes, legally operating casinos under a compact with the state, from having a monopoly on gaming.

Some states are reconsidering their stances on video gambling in an effort to patch up growing budget deficits.

In Pennsylvania, Gov. Ed Rendell proposed legalizing some forms of video gambling as a means to fund free college tuitions at the 28 campuses in his state. Officials there estimate that roughly 17,000 video poker machines are operating illegally. Those machines, if legalized, could generate as much as $550 million, according to Gov. Rendell's plan.

"This is not an expansion of gaming," Pennsylvania Revenue Secretary Stephen Stelter told The Philadelphia Inquirer earlier this month. "It is the recognition that video poker is already a thriving industry."

Talkbacks

jhill0129 | Feb. 24, 2009 at 1:25 p.m. (report)

I think one thing worth mentioning is that the bar owner has to "know" you. An owner's not going to pay a complete stranger. If someone unfamiliar to the establishment tries to collect winnings, they'll either get "the machines are for entertainment purposes only" excuse or "come back in a couple days to get paid" line.

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