Today we’re going to discuss whether the prize you plan to give as part of your Sweepstakes on your YouTube channel is legally permitted. As always, lets start with what YouTube says … and surprise, surprise, YouTube says nothing except that you must adhere to all laws. What about the law? What does the law say? A great deal!
GUNS: Some states strictly forbid using firearms and ammunitions as sweepstakes and contest prizes. Some restrict specific types of firearms or high capacity magazines. All have age and background restrictions. But beyond these restrictions, the real difficulty of using firearms as sweepstakes prizes is that you can’t deliver the giveaway prize directly to winners. You have to go through a federally licensed Federal Firearms License (FFL) dealer.
ALCOHOL: Some states strictly regulate sweepstakes and contests involving alcohol. Obviously there are age limitations on using alcohol as sweepstakes prizes. Some states restrict behavior such as requiring participants to visit alcohol retail locations or allowing alcohol to be used as part of the sweepstakes entry (like drinking as a way of entering the giveaway). There are also some restrictions that prevent alcoholic beverages from being the sole prizes awarded in a sweepstakes; rather they must be an "incidental part of a prize package."
TOBACCO. Some states prohibit tobacco-related promotions, sweepstakes and giveaways. Federal law also restricts usage of tobacco as a sweepstakes prize. Exceptions exist when the sweepstakes prize is a discount on the tobacco (like a coupon) as opposed to tobacco as a stand alone giveaway prize. Again your sweepstakes will be subject to minimum age and ID requirements.
MINORS. There are restrictions you need to consider when including minors as participants in your youtube sweepstakes. For example, if the sweepstakes prize is a trip you need to consider whether or not you need adult approval and companion.
DANGEROUS: This brings out issues related to giving away sweepstakes prizes that may be dangerous. What if the sweepstakes prize is an item that can cause injury such as skateboard, what liabilities will you face?
VALUES OVER $600. When you give a sweepstakes prize or series of prizes during any single year in excess of $600 (in retail value), you would need to collect social security numbers so that you can issue a 1099 tax form to the winners. You don’t need to pay taxes on the sweepstakes prizes, but you need to properly report such prizes.
VALUES OVER $5,000. If the value of all sweepstakes prizes given out during a specific period of time (and that can change depending on the specifics) will exceed $5,000 you may be prohibited from extending the sweepstakes to residents of Florida and New York without first registering your promotion with the States and purchasing insurance bonds to cover the value of the sweepstakes prizes.
WEIRD RESTRICTIONS. There are some restrictions on using dairy products and gasoline in sweepstakes. Why? These involve unrelated restrictions in providing certain products at discount rates. As a result, you may not be able to use them as sweepstakes prizes.
So think about the sweepstakes prizes you're giving away. They might be prohibited, restricted or simply subject to registration and tax reporting.