New Tennessee Gross Wager Gambling Tax Could Cost State Money
Image Credit: OliverCardall / Pixabay / CC
The Center Square [By Jon Styf] –
Tennessee’s new system for taxing sports wagering will begin July 1.
The move comes a year after the state’s Sports Wagering Advisory Council sent notice to sportsbooks it would be adjusting the way it counted adjusted gross income.
The new taxing structure will collect a 1.85% tax on gross wagers placed in the state instead of the former 20% tax on AGI.
Had the new tax been in place since wagering began in November 2020, the state would have collected $154 million compared to the $142 million it has collected.
But those numbers have changed in recent months.
In April, for example, the state collected $6.4 million but would have collected just $5.9 million under the new system.
For the first four months of 2023, the state has collected $28.8 million in taxes compared to the $26.8 million it would collect under the new system.
In 2022, sportsbooks paid $68.0 million in privilege tax. Under the new plan, that would have been $69.7 million.
Since the accounting changes were put into place on July 1, 2022, Tennessee has collected $71.5 million. Under the new 1.85% gross wager tax, it would have collected $64 million over that same time period.
Tennessee Gov. Bill Lee signed the sports wagering changes into law in May. That came after the Legislature decided to go with the House’s version of the bill and a 1.85% gross wager tax instead of 2%.
A 2% tax over the first four months of 2023 would have been nearly equal to the state’s actual 2023 collections at $29.0 million and, since July 2022, that number would have been $69.2 million.
A concern over taxing gross wagers instead of AGI, making Tennessee the first state to tax gross wagers, is that it could hurt individual gamblers as the sportsbooks are now incentivized to make a larger AGI and not be taxed based on profits.
In 2022, only two of the state’s 11 sportsbooks hit the state’s 10% AGI requirement. The new law has removed that requirement.
The state’s sports gambling taxes are divided up as 80% of the taxes go to education, 15% goes to the state for distribution to local governments and 5% goes toward mental health programs.
About the Author: Jon Styf, The Center Square Staff Reporter – Jon Styf is an award-winning editor and reporter who has worked in Illinois, Texas, Wisconsin, Florida and Michigan in local newsrooms over the past 20 years, working for Shaw Media, Hearst and several other companies. Follow Jon on Twitter @JonStyf.
