Lottery retailers earn percentage of sales

By Thomas Wilson

   Cigarettes, a soda and six numbers.
   Those items could become the occasional purchases for convenience store patrons if Tennesseans vote to end a Constitutional ban on a state lottery in November.
   In addition to creating a new revenue stream, a state lottery could mean a small percentage of lottery revenues would be distributed among retailers who sell lottery tickets.
   "Most of our lottery tickets are sold in convenience store locations," said Ed Scarborough, public affairs spokesman for the Virginia Lottery in Richmond. "But you can't just sell lottery tickets; they have to sell other things, and most convenience stores do."
   The Commonwealth of Virginia has operated a lottery since 1988 when that state's General Assembly enacted legislation creating a lottery.
   In fiscal year 2002, the office of the Virginia Lottery reported sales of more than $1.1 billion and was able to turn over to the Commonwealth nearly $368 million.
   Lotto winners collected over $600 million in prize winnings while commissions paid to retailers selling lottery tickets was more than $62 million.
   Approximately 5,000 retailers sell some form of lottery tickets in Virginia, said Scarborough.
   Virginia appropriates 35 cents on the dollar to public education, 50 cents to winners, five cents to retailers, and roughly 7 cents to the program's operating expenses for fiscal year 2002, Scarborough stated.
   Retail businesses -- primarily convenience stores -- benefit from a state lottery by earning a percentage of a ticket they sell.
   "I'm going to wait and see what happens after the vote," said Byron Miller, owner of Cloudland Convenience Store in Roan Mountain, when asked if he would pursue the sale of lottery tickets.
   Another convenience store owner in Elizabethton who requested anonymity said he would pursue the option of selling lottery tickets if the referendum passed and a state lottery became law.
   Business owners in Virginia convenience stores are required to obtain a license from the state to sell lotto tickets.
   Scarborough said the lottery also performed a credit check and a security check on each applicant seeking a state license to sell lottery tickets. An applicant in Virginia could not have a criminal record of a conviction for a felony or gambling related offense or a crime involving moral turpitude, he said.
   Lottery sales are required to be placed in a separate bank account from other retail sales, Scarborough noted.
   A convenience market can lose its lottery sale license for a variety of reasons ranging from low revenues of a store to illegal ticket sales to minors.
   "It is not incredibly common for lottery retailers to actually lose their licenses," he said. "Many times businesses open, and businesses close."
   The lottery administration worked with large chain retailers to smaller convenience stores to market the lottery product.
   "Some of the mom-and-pop shops are some of our largest retailers, especially along the Virginia border," said Scarborough. "We want to make sure it is a viable business and a viable place to put the product."
   He added that the lottery administrators also examine an applicant store's sales volume. Some stores function as "full-service retailers" with lottery tickets and a variety of "scratch-off" lotto games.
   However, a few smaller retailers only sell lottery tickets for the $1 million drawings.
   "Part of any lottery's mission is to make their product convenient to the public," said Scarborough. "We want to have retailers that will sell our tickets and keep up a certain amount of sales that make it a good expense for us."
   The Virginia lottery sweetens the pot for some retailers with promotions for cash pay-outs to winners of prizes from $600 to $10,000.
   Scarborough said retailers were not permitted to market the sale of lottery tickets themselves.
   "They can wear buttons for the promotion so people can inquire about it, but we don't ask for the sale," he said.
   The state of Georgia's lottery has proven one of the biggest earners in the South since that state's lottery began operation in 1992.
   Lottery tickets are being sold at more than 7,000 authorized retailer locations in Georgia, according to the Georgia Lottery Corporation. The Corporation compensates lottery retailers with five percent of gross sales generated from lottery tickets.
   Like Virginia, state law requires Georgia retailers to acquire a certificate from the Corporation to sell lottery tickets. Georgia law also requires an applicant to be current in all state taxes, have no convictions on illegal gambling charges, or be a vendor or any employee or agent of any vendor doing business with the Corporation.
   Georgia saw record-breaking sales of over $2.4 billion for fiscal year 2002. Proceeds totaling $726 million were transferred to the Lottery for Education Account.
   A report issued by the Georgia Department of Audits and Accounts reported $1.4 billion in lottery revenues had been disbursed in retailing expenses including commissions, advertising and marketing from 1992-2000.
   Georgia Lottery proceeds are used to fund specific education programs of the HOPE scholarships that may be used at eligible public and private colleges and universities and Georgia's Pre-kindergarten Program as well as capital outlay projects for schools and universities.