Unique sports betting tax enacted in Tennessee

Sports bettors in Tennessee will soon be taxed on bettors’ money, not the revenue they generate, under a bill signed into law by Gov. Bill Lee on Wednesday.

From July, TN sports betting’s 20 percent tax on gross gaming revenues – the income pool traditionally taxed by legal betting states – will be replaced by a 1.85 percent tax on handball. It’s one of several sports betting changes lawmakers overwhelmingly approved this year under SB 475.

Tennessee will be the only state in the country to determine taxation based on taxpayers. It was also the only state to attempt to introduce a minimum holding period and that failure led to this change.

No minimum holding mandate anymore

Tennessee sportsbooks are no longer required to hold at least 10% of their bankroll each month, resulting in thousands of dollars in fines and lower tax revenues than the state had projected.

Nine of Tennessee’s 11 sportsbooks paid the state $25,000 for falling short of the minimum deposit, according to a tax return accompanying the bill. According to state revenue tracker LSR, sports betting has held a 7.9% share nationwide since the month after PASPA was repealed.

Napkin bills suggest the trades tax would have added about $15 million to the state since sports betting was introduced in November 2020. That number is still about $11 million less than if operators had met the minimum withholding under the original tax mechanism.

Is tax propagation to other states handled?

Over the years, handle tax proposals have appeared in the legislatures of West Virginia, Kentucky, and Minnesota. Everyone refused to enact it.

The only active handle tax in the country is the 0.25% federal excise tax, which existed before states outside of Nevada began legalizing sports betting in 2018.

“It’s a very simple and direct tax that’s relatively easy to administer and doesn’t depend on a lot of factors that might affect how much the state actually collects,” Adam Hoffer, director of excise policy at the Tax Foundation, said in a statement right-wing think tank in Washington DC. “If we see this working well in Tennessee, it’s the kind of model that other states could adopt.”

Tennessee sports betting market drops data mandate

In addition to the new tax, Tennessee is waiving its official data mandate for the league.

This change comes after Betly and SuperBook notified the Sports Wagering Advisory Council (SWAC) earlier this year that official Genius Sports league data was not available for NFL betting on commercially reasonable terms.

New operators still pay an initial license fee of $750,000. However, depending on how many bets you place, the annual renewal fee can be lower. Operators with less than $100 million in revenue would pay $250,000. Those with less than $500 million would pay $500,000.

SWAC is also dropping Advisory from its name.


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