On July 1, Tennessee will become the first state to tax sports betting handle. That means the Volunteer State's tax take will be based on based on the total amount of money wagered, instead of revenue collected.
For a few more days, Tennessee will impose a 20 percent tax on adjusted gross gambling revenue (AGR). Next month, it will tax sports betting handle at 2 percent.
The reason is, of course, money.
Millions more to collect: A Tennessee General Assembly Fiscal Review Committee financial summary of the bill making the taxing methodology change notes that more than $3.77 billion was bet on sports in Tennessee in 2022.
The AGR on gambling proceeds last year was $338.7 million, which at the current 20 percent rate returned $67.7 million in taxes to the Tennessee treasury.
But if the about-to-be-enacted 2 percent tax on the handle had been in place instead, Tennessee would have collected $75.4 million on bets in 2022.
The fiscal impact report projects that the Volunteer State's annual sports betting tax revenue under the new tax system will increase by nearly $7.4 million by the fiscal year 2023-2024.
That's a lot of numbers, but the one that gets this weekend's By the Numbers recognition is the new 2 percent sports betting handle tax.
Subdued industry reaction so far: Since the 2018 U.S. Supreme Court ruling that let states decide whether to allow sports wagers within their borders, 37 states and Washington, D.C., have authorized such transactions.
Tennessee legalized sports betting in 2020. It is available there only through online wagering. The state has no brick-and-mortar operations.
Twelve operators are licensed to take bets in Tennessee. They are Bally Bet, Barstool Sportsbook, Betly, BetMGM, Caesars Sportsbook, DraftKings, Fanatics, FanDuel, Hard Rock, SuperBook, Tennessee Action 24/7, and WynnBET.
Casino.org says the gambling industry appears to be taking a muted approach to the new Tennessee law.
It also remains to be seen whether the handle tax approach will serve as a model for other states.
Individual winnings taxable at federal level: Since Tennessee now is one of eight states that don't tax personal income, winners of sports bets there don't have to worry about the state getting a cut of their good luck.
I know you're wondering about the no-tax states. In addition to Tennessee and my native Texas, they are Alaska, Florida, Nevada, South Dakota, Washington, and Wyoming. New Hampshire only taxes individuals' interest and dividend income, but that's being phased out. On Jan. 1, 2027, the Granite State will become the ninth without a personal state income tax.
However, at the federal level, the U.S. Treasury expects bettors wherever they call home to report all gambling proceeds. That includes payouts from legal sportsbooks, as well as those from illegal wagers.
You also might find these items of interest:
- Ways to reduce tax due on lottery & other gambling winnings
- Reporting Super Bowl and other gambling winnings on IRS Schedule 1
- Las Vegas lawmaker seeks higher slot machine tax reporting threshold
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