You must file IRS Form 730 and pay taxes on wagers if you:
• Are in the business of accepting wagers (this form is NOT for individuals placing wagers, it is for entities accepting wagers).
• Conduct a wagering pool or lottery.
• Are required to be registered and you received wagers for or on behalf of another person but didn’t report that person’s name and address. Even is you are an exempt organization i.e. 501 or 521, you are generally not exempt from the tax on wagering or the occupational tax, accordingly you must file.
The tax applies only to wagers accepted in the United States. An odd caveat is that if a wage is placed in the U.S. with a U.S. citizen or resident, it is taxable.
Taxable wagers include those placed:
• On a sports event or contest with a person engaged in the business of accepting wagers on a sports event or contest.
• In a wagering pool on a sports event or contest if the pool is conducted for profit.
• In a lottery conducted for profit, including the numbers game, policy, punchboards, and similar types of wagering.
The tax isn’t imposed on the following five items:
• Pari-mutuel wagering, including horse racing, dog racing, and jai alai, when it’s licensed under state law.
• Coin-operated devices, such as slot machines, pinball machines, or video games.
• Sweepstakes, wagering pools, or lotteries that are conducted by an agency of a state, if the wager is placed with the state agency or its authorized agents or employees.
• Games of the type in which all persons placing wagers in the game are present when wagers are placed, winners are determined, and prizes or other property are distributed.
• Drawings conducted by an organization exempt from tax under sections 501 and 521, as long as the net proceeds of the drawing don’t benefit a private shareholder or individual.
Download form 730 from the IRS here: https://www.irs.gov/pub/irs-pdf/f730.pdf