Mattress Mack and Gallery Furniture was brought up earlier. For a number of years during baseball season Mattress Mack has run a promotion with the following pitch: “Buy $3,000 worth of furniture, and if the Astros ‘win it all’ the furniture is free, free, free!!!”
Gallery Furniture is an official sponsor of the Astros, so the use of the team in the promotion is legit. Note that Mack never says “win the World Series” as he has no deal with MLB.
Now, seeing that you have to first buy a certain price level of furniture, and the promotion is based on a sporting competition outcome, could it be considered a type of lottery, with “free furniture” (actually a reimbursement) as a prize? Could that be considered gambling income, subject to taxes?
This reminds me of an incident with an advertiser for a station I was working at 40+ years ago. An RV dealer had a promotion in which a customer would first buy an RV, then would literally “spin the wheel” for a variety of additional savings. Well, the lawyers quickly shut that down, as it was considered an illegal lottery as you first had to buy the RV. The promotion was changed to where you spun the wheel first, then a deal was made. Cheesy, but a true story.
So how should the Gallery Furniture promotion be considered in terms of gambling?
The difference between the furniture promotion and the RV promotion is that spinning the wheel after buying an RV offered something extra that could be different for each person. I know it seems like a subtle difference, but it's enough of a difference to affect the legality, at least in many jurisdictions. "Buy a sandwich and get one free if the team wins" or "spend at least $50 on meat this weekend and get 50 cents/gallon off at our gas station" is seen one way while "buy a car and spin the wheel of prizes" is a lottery if you don't spin the wheel first. In Springfield, MO, I used to visit the Price Cutter liquor department every time I shopped there. It frequently offered deals where you could fill out a coupon, mail it in with your grocery receipt, and a beer or liquor company would reimburse a part of your purchase. I rarely ever bought the company's beverages because, in Missouri, requiring someone to purchase alcohol to participate in a promotion is illegal. Those coupons always had disclaimers in the fine print that said something to the effect of, "Purchase is only required in the following states," which it would then list.
When I lived in Kansas City, Brandsmart, which was an electronics and appliance store, used to offer a similar promotion, usually centered around the Kansas City Chiefs. I would usually be something like spend at least $400 the week before a certain game, and your purchase would be refunded if the Chiefs ran a kickoff back for a touchdown, blocked a punt, etc. during the next game. One year, it had to refund all purchases of $400 or more after the Chiefs shut out the San Diego Chargers. It was an insurance contest. Brandsmart would buy an insurance policy before the contest, and the insurance would cover at least the cost of the merchandise refunded if not the profit margin. During the time I lived in the area, Brandsmart only refunded merchandise that one time, and that insurance company wouldn't do business with the chain the rest of the year.
Not sure about the tax implications. As a general rule, Uncle Sam will take his cut if you win too much. I know Texas doesn't have an income tax, but, when I last lived there, my paycheck was my only income. So, I don't know if Texas has a tax on unearned income. Some states with no income tax distinguish between earned and unearned income. In other words, you don't pay income tax on your paycheck, but you do on dividends and capital gains.
(EDIT: Found a thread about a prior Gallery Furniture promo, and, if your purchase is refunded in said promo, you apparently receive a 1099 for the value of the furniture, which is not necessarily the retail cost. So, you would seem to be required to report and pay taxes on the furniture you won.)
