Fantasy Sports Entry Fees Not Taxable in New Jersey

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By Leslie A. Pappas

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).

Limited Ruling

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

To contact the editor responsible for this story: Ryan C. Tuck at

For More Information

The letter ruling is at

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