Tennessee Seeks to Tax Betting Handle Instead of Revenue

After PASPA’s repeal in 2018, Tennessee legalized sports wagering in May 2019. Then, November 1, 2020, marked the launch of the legal online sports betting market in the state. Currently, sports betting operators are subject to a 20% tax on sports betting revenue. Moreover, to operate in the state, licensees are subject to meeting license conditions and paying a $750,000 initial license fee, followed by a $750,000 annual renewal fee.

Now, a new proposal seeks to change the taxation which currently stands at 20% with a 10% requirement hold for the sports betting operators. HB 1362 is a proposal that was introduced at the end of January this year. Since its introduction, it has been gaining traction until last week, when it was heard by the Finance, Ways, and Means Subcommittee.

“As introduced, revises and adds various provisions for purposes of regulating vendors of licensees; revises provisions relating to applications, fees, and penalties; authorizes the sports wagering council to keep certain moneys for administrative purposes; revises provisions relating to recordkeeping and inspections for licensees and registrants,“

reads HB 1362

The proposal calls to change the taxation model in Tennessee by adding a tax for sports betting operators’ handles, Legal Sports Report reveals. Under HB 1362, all licensed sports betting operators would be subject to a 1.85% tax on their handle. Besides the tax on the handle, the bill calls for changes within the official league data.

Additionally, HB 1362 proposes to change the licensing fees as well. The initial license fee of $750,000 would be kept, but the renewal fee will vary depending on the handle of the operator. For example, an operator with a $500 million handle would be subject to a $500,000 annual renewal fee, while sports betting companies that make less than $100 million in betting handle would be subject to a $250,000 annual renewal fee.

This is not the first state to try and implement a handle tax for sports wagering operators. In Kentucky, a proposal called for a 3% handle tax back in 2018. However, keeping in mind that the state is yet to legalize sports wagering, it remains unclear what the final taxation framework would be. Whether or not the proposal in Tennessee will gain further traction remains to be confirmed.