What does "void where taxed" mean?

Many contest & sweepstakes rules state "void where taxed." There's also several contest templates online that have this language in them. This seems like a very common thing for contest & sweepstakes. Just google 'contest void where taxed' or 'sweepstakes void where taxed' to see for yourself.

But if a contest restricts jurisdiction to the 50 states & DC and then says it's "void where taxed," and since prize winnings are taxed by the IRS as income, would that make the contest invalid everywhere and thus false advertising?

Surely, all these contests and templates are not invalid, right?

If someone were to defend their contest by saying this:

Of course, everything taxable that a person receives during the year should be claimed on their end of the year tax form (such as the 1040 form).
However, what we are referring to by "void where taxed" is any special and/or additional taxes that would apply to sweepstakes. From our research, we don't believe there are any of these additional taxes in the 50 states and DC. We are merely covering our tails in case there is some hole-in-the-wall county somewhere that has some special tax for sweepstakes.

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...what would you think? Is that actually what "void where taxed" refers to?

Sweepstakes winnings are always taxed federally and in most places locally.

I believe the "where taxed" means where entering is subject to a tax.

Thanks for your reply.