This keeps coming up but it's not true. You don't pay taxes on the gift card. The taxes are paid as you USE the gift card. Ever go into a store to buy a gift card? notice that there's no taxes on it? That's why. Your taxes are counted against the value of the card.
Except in this case, the gift card is considered a prize and is subject to federal and possibly state income taxes.
From the contest rules:
Except as specifically included in the prize description, each winner is solely responsible for all applicable taxes, fees and surcharges associated with prize receipt and/or use.
Relevant: http://www.forbes.com/sites/robertw...gger-taxes-and-you-cant-pay-irs-in-doughnuts/