Questions Regarding Prizing ARV
We are often asked by our clients and blog followers alike a variety of questions relating to online sweepstakes and contests. We thought it might be informative to highlight some of the questions here once a month in order to offer our insight on a broader scale. This month’s topic specifically relates to questions regarding prizing ARVs.
What does it mean when a sweepstakes refers to an ARV in the official rules?
When you win a sweepstakes prize over $600, you are required to pay income taxes on the amount won. The ARV stands for approximate retail value of the prize. If for instance, the sweepstakes you are entering has a cash prize, your winning income would be the exact dollar amount of the prize. If the offered prize includes non-cash items such as a television, or a service such as a trip, it’s up to the sponsor and/or administrator of the sweepstakes to determine the approximate retail value or the ARV of each prize. For more information on taxes and sweepstakes prizes, see our previous blog post here.
What determines if I need to bond and register my sweepstakes?
The rule of thumb is that if your sweepstakes has a total approximate retail value (ARV) of all combined prizing of over $5,000, you will need to bond and register your promotion at a minimum with the states of New York and Florida. There are also other factors involved where other state or federal authorities may have jurisdiction over your sweepstakes or that your organization may be exempt from this process, so it’s best to consult an expert in the field, such as Sync Marketing, to review your promotion structure and advise you on a case by case basis.
How do you determine an ARV for a sweepstakes at Sync Marketing?
There are several instances where we work with our clients to determine the approximate retail value (ARV) of a prize for a sweepstakes or contest. If it is an item that our client sells, we will designate the manufacturer’s suggested retail price (MSRP), which is the amount for which the company that produces a product recommends that it be sold for in stores. Here is an example of how one retailer, Diamond Candles, explained the ARV of prizing in their recent sweepstakes. When determining an ARV for a service such as a trip, we do our due diligence to research the average price of the trip elements to ensure that the ARV is on target.
Check back next month for another topic of interest regarding sweepstakes and contests. If you have any additional questions regarding this topic or another sweepstakes or contest question, feel free to send them to firstname.lastname@example.org and they may be featured in an upcoming blog post.