How to Legally Raffle Off a Car

A raffle is an effective way to raise funds and generate publicity. Raffles that offer big ticket items such as a house or car can very quickly generate interest in your organization. But how do you legally conduct a raffle for a big ticket item? Unfortunately, if you live in the U.S. or Canada, there is not a single answer. This is because raffles are regulated locally (by states or provinces), so the rules and regulations widely differ.

This article explains how you can find information on how to legally raffle a big ticket item. Resources and tips have also been included that will help your raffle to be a success!

Difficulty: Moderate

Instructions

Things You'll Need:

• A directory and phone or an internet connection to conduct research.
• Raffle prizes.

1. Contact the organization within your state that regulates raffles. Raffles are usually regulated by the Tax Division, Attorney General, Gaming Board, or Licensing Center in your state. If you don't know where to start, check the website for the Attorney General's office for your state first. A resource for finding raffle information for your state also appears at the end of this article. Keep in mind that in some states, such as Hawaii and Kansas, raffles are illegal. Live in Canada? Contact your province's gaming commission.

2. If raffles are legal in your state, carefully investigate the rules. Most states only allow registered non-profit organizations and schools to conduct raffles. Others limit the amounts of money a charity can derive from raffles during a calendar year. Determine whether there are limitations on raffle ticket prices (some will not allow raffle tickets to be sold if they are more than $10, for example), who can sell or buy tickets, and particularly whether there are any specific rules concerning donations to your organization as related to the raffle. Make note of filing fees, licences, or permits that are needed. Also determine whether additional regulations are required for your city, county, or parish.

3. Next, check with the business or tax attorney for your organization to see whether the proceeds from the raffle will be considered "unrelated business income." This is particularly important for a non-profit organization because it could affect your tax-exempt status. If you don't have access to an attorney, you can also contact the IRS directly to ask them this information. However, getting advice from a knowledgeable attorney is strongly advised.

4. Armed with this information, convene your committee/board if you've not done so already and share the results of your research. Distribute the checklist of rules and regulations to the committee, since it might impact planning in all areas related to the raffle. Create a timeline that includes your organization obtaining any licenses or special permits that are required for you to legally conduct the raffle.

5. As you plan the raffle, consider the type of car to be offered very carefully. Make sure to select a car that is desirable but whose costs are within the legal guidelines for raffles rules in your area. Many people will probably be more interested in buying a ticket if you are raffling a new Mercedes convertible instead of a Ford Focus. But, if your state says that your organization can only derive $30,000 a year from a raffle and your organization must purchase the car, this might not be the best strategy.

6. Finally, document and archive all of the steps and in your process for future reference. If the IRS or other authorities ask questions about the raffle, having complete written documentation will allow you to address them quickly and easily, even if you are no longer active in the organization.

Tips & Warnings

• When you set your ticket price, think about how much profit you want to make. For example, if the car being raffled is worth $40,000, you might want to make $80,000. If your state laws limit you to $10 a ticket, then you may have to sell 8,000 tickets to meet your goals. (Generally, raffle tickets for luxury cars are approximately $10 to $20 per ticket.)
• If your organization purchases the car, try to negotiate a good deal for the dealer AND the organization. If the dealer can offer you a deal that is about 25 - 30% off the list price, it might allow him to make a slight profit. You can then offer an incentive, such as providing the dealer with free advertising during all promotional activities.
• Negotiate the terms of the contract with the organization or person who will be providing the car. Contact a lawyer to ensure that contractually, your organization will not be responsible for any issues concerning the car once it has been delivered. Carefully work out details concerning delivery ahead of time to avoid negative repercussions.
• Raffle smaller prizes in conjunction with the car. You can get donations of gift certificates and prizes from friends and local businesses.

Resources

• Raffle FAQ - A comprehensive resource for conducting raffles in the U.S.

[absnorth]

on 7/16/2009 That does sound strange. It seems like anyone associated with the raffle, including the person who donated the car should be disqualified from entering the raffle. I'm not sure what the laws are in your state, but maybe you can start with the church and voice your concerns (just to make sure that Salerno Duane was the person who actually donated the car) before you proceed further.

[dukeone]

on 7/15/2009 st joseph church mendham nj had a raffle 7/12/2009 for a new for mustang convertible $38,575. the owner of salerno duane of summit who provided the car, won the car. I think this is not right and should be investigated. I want my money back.