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Sports betting taxes, along with other forms of gambling, are being taxed by the government and are one of the highest grossing industries generating federal and state income. The Federal Government imposes the highest taxes on gambling winnings at the highest rates as permitted by law. It is one way of keeping peoples urge to gamble under check and dissuading them from getting addicted to gambling.
Gambling has become such an enormous business that the IRS receives nearly four million Forms W-2G and 5754 each year. In the casinos of Las Vegas where most of sport betting takes place, sport betting taxes are frequently collected by members of the IRS. Sports betting taxes are withheld from the total winnings thus the federal government is ensured that the taxes are collected even if the winner fails to file the necessary paperwork.