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Tennessee collected $7.15 million in privilege taxes on online sports betting in May. The figure is almost $2 million more than the state would have gathered under a new tax structure. The figure also represents an 11.02% increase compared to April’s privilege taxes of $6.44 million.
Tennessee is the only US state that will tax sportsbooks according to their gross wagers, also called a betting handle. Most US states that allow gambling tax sportsbooks according to their adjusted gross income (AGI), also known as gross gaming revenue.
The big change for Tennessee happens in July.
Tennessee sportsbooks see a monthly drop in a betting handle in April
According to the latest report from the Tennessee Sports Wagering Advisory Council (SWAC), sportsbooks in the state took in $279.8 million in May. The figure is a 12.1% decrease from the $318.4 million generated in April.
In the meantime, the operators in the state generated $37.7 million in adjusted gross revenue, an 8.84% monthly increase from April’s $32.8 million.
Tennessee’s new tax structure begins in July
The new structure is set to begin on July 1. Tennessee sportsbook operators currently pay:
- 20% taxes on adjusted gross income (AGI)
But that is about to change to be:
- 2% tax on gross wagers (handle) beginning next month
Tennessee’s Sports Wagering Council will meet today to talk about the specifics of rules for the new laws. The regulators will also discuss the registration fee specifics for new operators entering the state.
New operators would still have to pay a $750,000 initial licensing fee. But their annual renewal fee could be less depending on how many bets they take.
Operators earning less than $500 million would pay $500,000, while those with less than $100 million in the betting handle would pay $250,000.
Tennessee sportsbooks will no longer have to hold 10%
Lawmakers in Tennessee initially put a 10% hold requirement on monthly revenues to ensure that the state would collect tax revenue from sports betting.
But even the top-performing sportsbooks had difficulty hitting the 10% hold, while the $25,000 fine wasn’t making a difference.
Since most Tennessee operators struggled to exceed the 10% profit mark required by the state for two years, the state decided to modify the requirements.
The new 2% total handle tax removes the 10% hold requirement.
