The new sports wagering taxation rules in Tennessee, which came into effect on July 1, 2023, may prove to be not so conducive for the state. The fact that it has only been three months makes it difficult to come to any real conclusion. However, the current figures do nothing to raise hopes.
It was in 2019 that Tennessee joined the list of states that had legalized sports wagering. After two years, mobile sports wagering was introduced across the state.
Previously, per Tennessee’s sports wagering tax rules, sportsbook operators were obligated to remit a 20% tax on the entirety of their revenue generated from gaming activities. Online gaming sites in Tennessee generated a total of $392.7 in wagers in March 2023. The amount in question constituted $43.7 million in revenue generated from sports wagering.
Duly, the online operators were required to pay a 20% tax, which earned the state $8.8 million in taxes. As per the old rules of taxation on sports wagering, operators needed to hold 10% of their yearly handle.
The Tennessee Legislature brought in SB 475 in the form of an amendment to the sports wagering rules in January 2023. It went through the House and Senate with ease and was formally introduced in July 2023.
In terms of the alterations carried out to the Tennessee taxation rules, the holding of 10% was done away with. This decision went in total favor of the operators in Tennessee. The next change was paying taxes on total wagers, which were on gross revenue earlier. If the past is to be considered, the taxation amount would have been $392.7 million instead of $43.7 million.
The reduction in the taxation rate from 20% to 1.85% applies to the wagered handle. Similarly, instead of Tennessee generating $8.8 million through sports wagering taxation under the previous system, the state could have potentially earned $7.2 million through online operator deductions.
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As per the Tennessee Sports Wagering Council (SWAC), in July 2023, the state witnessed a rise in tax earnings via sports wagering. The tax collection, when compared to the same period in 2022, went up by 7.7%.
In August 2023, the handle went up by 12.8%, with a taxable gross handle of $241.8 million as compared to the previous month. There was an amount of $4.46 million in taxes paid by the operators of online sports wagering. In actuality, as compared to the previous year, revenue saw a decline of $400,000.
The month of September 2023 should have been lucrative for the state as it was the beginning of the football season. Considering there was a rise in wagering, it failed to turn into revenue for the sportsbook operators. The figures stood at $420 million via gross bets, which meant an increase as compared to the previous year, which brought in $337 million.