By the time they read this, Tennessee sportsbooks will see revenue generated taxes in the back mirror. Instead, as of July 1, a new law will replace the 20 percent tax on gross gaming revenue with a 1.85 percent tax on handle, or the amount wagered, according to Legal Sports Report.
Tennessee was also the only state which tried a minimum hold requirement. The hold carried mandatory fines for a violation of a hold more than 10 percent.
Of Tennessee’s 11 sportsbooks, nine paid a $25,000 fine. National hold has averaged 7.9 percent since the sportsbooks first formed.
According to a rough calculation, a handle tax from the beginning would have resulted in $15 million more for the state. Yet the figure is $11 million less than sportsbooks meeting the minimum hold amount.
Handle tax proposals have popped up in West Virginia, Kentucky and Minnesota, but none passed the required legislation.
However, there is a federal 0.25 percent version known as the excise tax, which existed even before states outside of Nevada began legalizing sports betting in 2018.
“It’s a very simple and direct tax, relatively easy to administer, and doesn’t rely on a lot of factors that could change how much the state actually receives,” Adam Hoffer, Director of Excise Tax Policy at the Tax Foundation, in Washington D.C. told LSR. “If we see this work well in Tennessee, it’s the kind of model that other states could adopt.”
Tennessee also ended its official league data mandate.
The change resulted after Betly and SuperBook told the Sports Wagering Advisory Council earlier this year that Genius Sports‘ official league data for NFL betting is way too costly.
New operators will still pay a $750,000 initial license fee, though depending on how many bets they take, their annual renewal fee could be less. Operators with less than $100 million in handle would pay $250,000 for a license renewal. Those with less than $500 million would pay $500,000.
