KRS 154A.400: Statewide network of lottery retailers -- Criteria for selection -- Uniform

fees -- Suspension, revocation or termination of contract -- Purchase or lease of

on-line equipment -- Contracts not transferable or assignable -- Certificates --

General Assembly members not prohibited from being retailers -- Payment of

prize -- Sales tax exemption.

(1) (a) The General Assembly hereby recognizes that to conduct a successful lottery,

the corporation must develop and maintain a statewide network of lottery

retailers that will serve the public convenience or promote the sale of tickets,

while insuring the integrity of the lottery.

(b) To govern the selection of lottery retailers, the board shall, by administrative

regulation, develop a list of objective criteria upon which the selection of

lottery retailers shall be based. Separate criteria shall be developed to govern

the selection of retailers of instant tickets and on -line retailers. In developing

these criteria the board shall consider such factors as the appl icant's financial

responsibility, security of the applicant's place of business or activity,

integrity, and reputation; however, the board shall not consider political

affiliation, activities, or monetary contributions to political organizations or

candidates for any public office. The criteria shall include, but not be limited

to the following:

1. The applicant shall be current in payment of all taxes, interest and

penalties owed to any taxing subdivision where the lottery retailer will

sell lottery tickets;

2. The applicant shall be current in filing all applicable tax returns and in

payment of all taxes, interest and penalties owed to the Commonwealth

of Kentucky, excluding items under formal appeal pursuant to applicable

statutes;

3. No person, partnership, unincorporated association, corporation, or other

business entity shall be selected as a lottery retailer for the sale of instant

tickets or on-line games who:

a. Has been convicted of a felony related to the security or integrity

of the lottery in thi s or any other jurisdiction, unless at least ten

(10) years have passed since satisfactory completion of the

sentence or probation imposed by the court for each felony;

b. Has been convicted of any illegal gambling activity in this or any

other jurisdiction, unless at least ten (10) years have passed since

satisfactory completion of the sentence or probation imposed by

the court for each conviction;

c. Has been found to have violated the provisions of this chapter or

any administrative regulation adopted hereunder, unless at least ten

(10) years have passed since the violation;

d. Is a vendor or an employee or agent of any vendor doing business

with the corporation;

e. Resides in the same household as an officer of the corporation; or

f. Has made a statement of material fact to the corporation, knowing

such statement to be false, unless at least ten (10) years have

passed since the statement was made.

4. Retailers shall be afforded the same exceptions to disqualification as

provided for vendors in KRS 154A.600(4)(a) and (b) or (c).

5. In addition to the provisions of subsection (3) of this section, no person,

partnership, unincorporated association, corpor ation, or other business

entity shall be selected as an on-line lottery retailer who:

a. Has been denied a license to sell instant tickets on the basis of

objective criteria established by the board, or any provision of this

chapter; or

b. Has failed to se ll sufficient instant tickets to indicate that the

location of an on -line game at his outlet would be of economic

benefit to him or the lottery corporation.

6. The applicant shall not be engaged exclusively in the sale of lottery

tickets. However, this par agraph does not preclude the corporation from

contracting for the sale of lottery tickets with nonprofit, charitable

organizations or units of local government in accordance with the

provisions of this chapter.

(c) Persons applying to become lottery retail ers shall be charged a uniform

application fee for each lottery outlet. Retailers chosen to participate in on-line

games shall be charged a uniform annual fee for each on-line outlet.

(d) Any lottery retailer contract executed pursuant to this section may, for good

cause, be suspended, revoked, or terminated by the president if the retailer is

found to have violated any of the objective criteria established by the board as

provided in subsection (1) of this section. Review of such action shall be in

accordance with the procedures outlined in KRS 154A.090. All lottery retailer

contracts shall be renewable annually after issuance unless sooner canceled or

terminated.

(2) (a) A retailer who has been denied an on -line game for reasons other than

financial responsibility, security, or integrity shall be permitted to purchase or

lease the equipment necessary to operate such a game from the corporation in

a manner consistent with the corporation's manner of acquisition. A retailer

need not file an appeal before bein g permitted to purchase or lease on -line

equipment.

(b) After one (1) year of operation, any retailer who purchased or leased on -line

equipment pursuant to paragraph (a) of this subsection and whose sales are

equal to or greater than the statewide average of sales of on-line retailers, shall

be reimbursed the cost of the purchase or lease by the corporation. The board

may purchase the terminals of other retailers who purchased their equipment if

the board determines that such purchase is in the best interest of the lottery.

(3) No lottery retailer contract awarded under this section shall be transferable or

assignable. No lottery retailer shall contract with any person for lottery goods or

services except with the approval of the board.

(4) Each lottery reta iler shall be issued a lottery retailer certificate which shall be

conspicuously displayed at the place where the lottery retailer is authorized to sell

lottery tickets. Lottery tickets shall only be sold by the retailer at the location stated

on the lottery retailer certificate.

(5) A member of the General Assembly who meets the same requirements as any other

applicant to be a retailer may be granted a retail contract to sell lottery tickets or

participate in any other lottery game operations. No member of the General

Assembly shall be entitled to preference over any other applicant for a contract.

(6) For the convenience of the public, all retailers shall be authorized to pay winners up

to six hundred dollars ($600) after the retailer performs validation p rocedures

appropriate to the lottery game involved. Lottery tickets shall be exempt from the

Kentucky sales tax.