If I would have a cash prize for a website contest, would the receiver have to pay tax or anything? Is that why most websites offer products for prizes instead?
The tax situation is different depending on country. Most countries do not tax contest winnings, USA does. In theory you would still have to pay tax on a product but I'm not a CPA so you should probably ignore my advice
in europe, in most countries, it depends on the value of the prize, having to pay tax only when it's value overcomes a price. But usually no tax.
In the US, recipients must pay tax for winnings over $500. The IRS (Internal Revenue Service) will determine how much.
Thanks for the replies, guys. I'm in Iceland and the prize is only $200 ( typical for a site start up contest ). I think money would be the best prize, the site targets all audiences. I can't find anything online about this and to be honest I'm not really sure who I could contact about this question.
You can give cash prizes for contests via Paypal. Many new (or old) startups, offer prizes to bring traffic, get refferals, etc. for random cash prizes. Receiver will have to deal with taxes when they withdraw money from Paypal.
yes but you can use credit card transfers, or even let the costumer choose a method from the ones you have available : paypal, creditcard , moneybookers, etc. LEt them choose. Plus , as a reply to arkidas - majority of those who use paypal, keep their money as investments on their account, like me.
That may be in a good economy, but we're in a global recession. To many, cash would be much more appealing than appearal.
Depends on the Country, the amount of Cash prize ( in India you can even deduct TDS and pay the remaining amount to winner )