For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
Oct. 7 — Entry fees paid to participate in online daily fantasy sports contests aren’t subject to New Jersey sales and use tax.
An Oct. 5 letter ruling by the New Jersey Division of Taxation concerns an Austin, Texas-based taxpayer that operates an online daily fantasy sports website and charges entry fees for each contest a player enters.
“The charge by Taxpayer is not for the information it provides to its contestants but for the entry fee to online daily fantasy sports contests,” the letter concludes. “As such, the service provided is not an enumerated service, and therefore is not subject to New Jersey sales and use tax.”
The ruling comes as states grapple with how to regulate and tax fantasy sports. Tennessee recently issued new rules, effective Dec. 25, that require fantasy sports operators to register and pay a 6 percent tax on earnings. In Missouri, a hearing will be held Nov. 2 on emergency code amendments related to fantasy sports; Indiana issued emergency rules effective Sept. 12. And under a new state law in New York, fantasy sports companies must pay a tax equivalent to 15 percent of their interactive gross fantasy sports gross revenue in the state, and also a tax equivalent of 0.5 percent of revenues, up to $50,000 (191 DTR H-2, 10/3/16).
The letter ruling from New Jersey doesn't apply to all fantasy sports operators. A letter ruling in New Jersey is limited and binds the Division of Taxation only with respect to the entity to whom the letter is issued, the document said.
According to the letter, New Jersey sales and use tax doesn't apply to the entry fees for online fantasy sports because it isn't an enumerated service under the New Jersey Sales and Use Tax Act (N.J.S.A. 54:32B-1 et. seq.).
While the law would normally require sales tax on information services, “the contestant is not paying an entry fee for the information,” the letter notes. “The information provided by the Taxpayer is not being sold, nor is the customer seeking the information itself. Rather the fee is to enter the online daily fantasy sports contest.”
About 57.4 million people played fantasy sports in the U.S. and Canada this year, spending an average of $556 annually, according to the Fantasy Sport Trade Association, a Chicago-based trade association representing more than 200 member companies.
To contact the reporter on this story: Leslie A. Pappas in Philadelphia at LPappas@bna.com
To contact the editor responsible for this story: Ryan C. Tuck at firstname.lastname@example.org
The letter ruling is at http://src.bna.com/jeY
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)