When Tennessee created a tax structure for sports betting regulations, the state included a 10 percent hold mandate, something most jurisdictions stayed away from.
Operators failed to meet the mandate and instead accepted a $25,000 penalty. Tennessee lost revenue in the transactions. As a way to make up for the decrease, the state scrapped a 20 percent tax on gross adjusted income on July 1 in favor of a 1.85 percent handle tax, also a rarity.
Let’s look at some early results:
September 2023 generated $1 million less in taxes from mobile sports betting compared to September 2022. Tennesseans bet $83 million more in September 2023.
Tennessee also experienced a tax revenue decline in August. Again $37 million more was wagered.
During the first nine months, the state enjoyed a roughly 40 percent increase in sports betting tax revenue generation compared to the same period in 2022, Tennessee Sports Wagering Council (SWC) Executive Director Mary Beth Thomas said. The first six months were under the 20 percent tax.
“We are still looking to see how our taxes are shaping up for this year,” Thomas said at a recent SWC meeting.
The SWC will meet with the State Funding Board in early November to discuss tax revenue sources.
“It’s going to be, as far as the forecasting situation, a little bit difficult to give a true estimate of where the growth might go,” Thomas said.
It may take a few more months before the SWC better understands the impact of the new tax structure. It’s not certain whether the new tax approach will result in more tax revenue.
For what it’s worth, Sports Handle did the math and it showed that the 1.85 percent handle tax would have led to a $3.18 million tax revenue increase in 2022.
