A new report on the USBets.com website indicates that in some states, promotional credits being claimed by sportsbook operators are dramatically reducing the taxable amount of operator revenue.
According to the report, states including Virginia, Connecticut and Louisiana are addressing the problem either through legislation or by implementing “creative ways to limit the amount of revenue operators can count as off-limits.”
Nine states allow operators to claim a portion of promotional credits as untaxable revenue, the missing government revenue gets noticed more, according to USBets.
“In states where a percentage of promotional credits can be exempt from taxation, such offers were made widely available by operators and voraciously accepted by bettors,” the USBets report said. “Three states—Michigan, Pennsylvania, and Colorado—exceeded $20 million in untaxed promotional credits, while Virginia was less than $400,000 shy of making it a quartet.
“Michigan, Pennsylvania, and Colorado also finished with negative adjusted gross revenue for February, with Pennsylvania and Michigan ranking eighth and ninth, respectively, for gross gaming revenue, but 24th and 26th in adjusted gross revenue. Newcomers Arizona and Louisiana also flashed some free cash, topping $10 million in promotional credits.”
The report stresses that the level of loss from promotional tax credits varies according to the state tax rate, but states with higher tax rates are losing the most. Pennsylvania, which has a 34 percent tax rate and the second-highest amount of promotional credits at $22.6 million, had nearly $7.7 million in unrealized tax revenue. By contrast, Michigan, with an 8.4 percent tax but led the nation with $26.5 million in promotional credits, lost $2.2 million in unrealized taxes.
