This article is limited to the one or more Federal tax issues addressed in the opinion. Additional issues may exist that could affect the Federal tax treatment of the transaction or matter that is the subject of this article and the article does not consider or provide a conclusion with respect to any additional issues. With respect to any significant Federal tax issues outside the limited scope of this article, the article was not written, and cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

One of my clients called me last week. He had just cashed at the L.A. Poker Classic, winning $25,000, but was annoyed at receiving only 93 percent of his winnings. The tournament director told him that since he's not a California resident, seven percent of his winnings would be withheld for state taxes. My client asked if withholding was required and whether he could get any of that money back on his own state's tax return.

The tournament director got it right: California requires seven percent withheld on a non-resident's poker tournament winnings. A non-resident can file Form 540NR, and if he has other gambling losses, potentially obtain a refund.

My client wasn't happy. "I'm a resident of Oregon, not California," he said. "Would Oregon withhold on a Californian who won a tournament here?" I told him that they might, but a Californian would still owe tax to Oregon for his win regardless of whether any money was withheld. And with the IRS sharing information with every state (except Nevada), the Oregon Department of Revenue would likely send a delinquency notice to a Californian who won in Oregon.

My client was the victim of the Jock Tax. Back in 1991, Michael Jordan and the Chicago Bulls beat the Los Angeles Lakers in the NBA championship. An unknown bureaucrat at the Franchise Tax Board heard about the money Michael Jordan was getting just for winning the championship and asked, "Why doesn't California get some of that? After all, he won that money in California." He went to his supervisor, and eventually the FTB sent Michael Jordan a tax bill.

The Illinois Department of Revenue wasn't happy with what California did and retaliated by sending tax bills to athletes from California who played in Illinois. Eventually, every state with a state income tax got in the act, and the Jock Tax was in full force. This really impacts athletes and entertainers. A major league baseball player might have to file 23 state and city income tax returns. Poker players are just ancillary casualties of the Jock Tax.

The non-profit Tax Foundation has campaigned against the Jock Tax, calling it deceptive, arbitrary, burdensome, and economically useless. However, given the budget crisis that California and many other states are in, the Jock Tax and similar taxes aren't going away.

I did tell my client the good news: Generally, you get a credit on your own state's tax return for the tax paid to the other state. The result of this is that you pay the higher of the two state's tax rates. You do need to be careful, though; sometimes the tax credit is taken on the other state's tax return. A Californian who wins a poker tournament in Oregon will discover that the credit is taken on the Oregon tax return rather than on California's.

The Jock Tax and similar laws are why I'm convinced I have lifetime employment. This will change when taxpayers realize that there is no such thing as a government sector of the economy. It's our money that funds the government.

Russell Fox is the co-author of "Mastering No-Limit Hold'em," "Why You Lose at Poker," and "Winning Strategies for No-Limit Hold'em." He's a federally licensed tax preparer specializing in gambling, with a blog at taxabletalk.com. E-mail Russ at rcfox@claytontax.com