Tennessee Lawmakers Pass Bill to Tax Sportsbooks By Handle
Posted on: April 21, 2023, 12:17h.
Last updated on: April 22, 2023, 05:35h.
Tennessee is on its way to changing how it taxes sportsbooks.
On Friday, the state House of Representatives voted 75-7 to pass an amended version of Senate Bill 475. The bill calls for the state to switch from a 20% tax on revenues to a 1.85% tax on handle, the amount wagered each month.
While the federal government places a .25% excise tax on each wager, Tennessee would be the first state in the nation to tax handle instead of revenue.
The bill also addresses a couple of other items. It officially changes the name of the Tennessee Sports Wagering Advisory Committee by removing “Advisory” from it, since as state Rep. Andrew Farmer (R-Sevierville) told colleagues on the House floor Friday, the SWAC is no longer really “in an advisory position.”
The bill also changes the flat $750K annual renewal fee for operators and replaces it with a tiered structure.
The amended version of SB 475 passed by the House essentially changed that bill to mirror House Bill 1362, the reform bill filed by Farmer. SB 475 passed unanimously in the Senate on April 13 and will now return to that body.
It is my intent as the sponsor to concur with the House amendments,” said state Sen. John Stevens (R-Huntingdon), SB 475’s sponsors, told Casino.org in an email Friday after the House vote.
It’s uncertain when that will occur and whether Gov. Bill Lee (R) will sign it into law.
UPDATE (5:45 pm ET): The Senate voted to approve the House’s changes to both the tax and the renewal fee, which the SWC will set between $375,000 and $750,000 based on operator revenues.
Sports Betting Handle, Revenue Up in March
In March, the SWAC reported that bettors wagered $392.7 million through sports betting apps. That’s up $65.3 million from February, with that increase likely fueled by the NCAA Men’s Basketball Tournament.
The licensed sportsbooks reported $43.7 million in revenues for the month, and the 20% tax means the state will receive $8.8 million. That’s an $11.9 million increase from the revenue they received in February.
March’s betting activity was also up $22.4 million, or 6%, from March 2022. The year-to-year revenue totals were $21 million more this year, a 92.2% increase from last year.
The state does not breakdown handle or revenue totals by the operator.
Tennessee is the only state that allows online sports betting without an in-person brick-and-mortar component. Currently, a dozen operators are licensed in the state: Bally Bet, Barstool Sportsbook, Betly, BetMGM, Caesars Sportsbook, DraftKings, Fanatics, FanDuel, Hard Rock, SuperBook, Tennessee Action 24/7, and WynnBET.
Will Tennessee Benefit, or Sportsbooks?
Farmer told colleagues Friday that it was his understanding that switching to a handle tax would not decrease the funding the state receives.
However, an analysis by Casino.org shows that if the House’s 1.85% handle tax was in place for the 2022-23 fiscal year, then the state would have received $58 million, or 11% less than the $65.1 million Tennessee has received since last July. Instead of the $8.8 million it received in March, the handle tax would have generated $7.2 million.
If the bill is signed into law, it would also eliminate the 10% required hold for sportsbooks. However, in recent months, those operators have been able to meet or exceed that requirement more often. Since last July, the overall hold – calculated by dividing the reported revenue by the reported handle – has been 10% or higher in six of the last nine months. In the 20 months prior to that, the requirement was met just twice.
As noted above, the state does not report individual operator data, so it’s uncertain which operators have been meeting the handle requirement and which ones have not. However, a fiscal analysis of the bill reported that nine of the then 11 operators did not meet the 10% hold requirement in 2022.
The legislation comes as the state’s licensed sportsbooks have reported the highest revenue totals since wagering began in November 2020. The top seven monthly revenue totals overall have come within the last seven months.
The analysis indicates that as sportsbooks increase their promotion of parlay wagers, including same-game parlays, they are likely going to reduce their tax liability moving forward.
Critics argue if the bill becomes law, it would not benefit bettors.
This can’t actually pass can it? Why would a lawmaker insist on creating terrible odds for their constituency? https://t.co/w1zz2jrwnI
— Alex Kane (@a_kane47) April 21, 2023
It’s not been a good few weeks (Ribs hung it up, my friend Steve Penny passed away) in my gambling space. Now, a tax on handle? Worst thing for people like myself that swear by high volume/low hold prophecy. Why were operators, who have immense lobbying power, on board with this? https://t.co/N1CJtHSsdJ
— Rex Beyers (@Rex_Beyers) April 21, 2023
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Source: casino.org
