Tennessee sports betting operators will soon be taxed on the money bettors wager as opposed to the revenue they generate due to a bill signed into law Wednesday by Governor Bill Lee.
Beginning in July, the 20% tax on gross revenue from TN sports betting games – the revenue pool traditionally imposed by legal betting states – is replaced with a 1.85% tax on the handful. This is one of several sports betting changes passed overwhelmingly by the Legislature this year under SB 475.
Tennessee will become the only state in the country to impose the neck tax. It was also the only state to attempt a minimum restraint requirement, and that failure led to this change.
No more minimum detention warrant
Tennessee sportsbooks will no longer be required to hold at least 10% of the handle each month, resulting in thousands of dollars in fines and less tax revenue than expected by the state.
According to a tax memo attached to the bill, nine of Tennessee’s 11 sportsbooks paid the state $25,000 for failing to meet the minimum withholding. Nationally, sports betting has held a 7.9% hold since the month following the repeal of PASPA, according to LSR’s state revenue tracker.
Towel calculations indicate that the grip tax would have translated to around $15 million more for the state since it launched sports betting in November 2020. That figure is still around $11 million. dollars less than if operators met the minimum withholding under the original tax mechanism.
Will handle the tax spread to other states?
Over the years, grip tax proposals have popped up in the legislatures of West Virginia, Kentucky, and Minnesota. Everyone refused to adopt it.
The only active handful tax in the country is the 0.25% federal excise tax, which existed even before states outside of Nevada began legalizing sports betting in 2018.
“It’s a very simple and straightforward tax that’s relatively easy to administer and doesn’t rely on a lot of factors that could change how much the state actually gets,” said Adam Hoffer, director of policy at excise tax at the Tax Foundation, a right-wing think tank in Washington DC said. “If we see it working well in Tennessee, that’s the kind of model other states could adopt.”
Tennessee sports betting market drops data mandate
In addition to the new tax, Tennessee is dropping its official league data mandate.
The change comes after Betly and SuperBook told the Sports Wagering Advisory Council (SWAC) earlier this year that official league data from Genius Sports for NFL betting is not available on commercially reasonable terms.
New operators will still pay an initial license fee of $750,000, although depending on how many bets they take, their annual renewal fees could be lower. Operators with less than $100 million on hand would pay $250,000. Those with less than $500 million would pay $500,000.
The SWAC is also dropping Advisory from its name.
