Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
Interactive fantasy sports operators like DraftKings Inc. and Fan Duel Inc. are waiting for proposed regulations from the New York Gaming Commission to spell out exact requirements for operating in the state.
Draft regulations are under administrative review and will be published as proposed rules in an upcoming issue of the New York State Register, Lee Park, a spokesman for the commission, told Bloomberg BNA in an Aug. 22 email.
Park said he couldn’t speculate on when the rules would be published. DraftKings and Fan Duel were granted temporary permits to operate last year.
Only a small number of states have promulgated fantasy sports regulations, so other states are looking to New York as a potential model, Jason Feingertz, an attorney with Reed Smith LLP who specializes in sports business and tax law, told Bloomberg BNA Aug. 23.
According to the Fantasy Sports Trade Association (FSTA), other states that have legalized and tax or impose fees on daily fantasy sports are Arkansas, Delaware, Indiana, Maine, Mississippi, Missouri, Tennessee, Vermont, and Virginia.
Other states that have legalized the industry but don’t impose a tax or fee include Colorado, Kansas, Maryland, Massachusetts, and New Hampshire. Attorneys General in Rhode Island and West Virginia have issued opinions saying fantasy sports are legal in their states, but their respective legislatures haven’t passed legislation.
Under the 2016 New York state law, interactive fantasy sports operators must pay a tax equivalent to 15 percent of their interactive fantasy sports gross revenue generated in the state. They also must pay a tax of 0.5 percent of revenue, up to $50,000.
The draft rules cover tax requirements, consumer safeguards for contestants, reporting requirements for operators, and procedures for registering as an interactive fantasy sports operator.
Industry spokesmen declined to comment on the draft regulations.
Feingertz said the draft regulations provide “good guidance,” but additional clarity would be helpful. For instance, it’s unclear what constitutes a New York player for tax liability purposes. He would also like to see more guidance on the procedures for auditing fantasy sports operators.
“It never hurts to have more clarity,” he said. “It helps both taxpayers and tax practitioners.”
Feingertz said fantasy sports players could be “caught off guard at the end of the year” because there’s no requirement that operators withhold taxes on winnings. He said players will probably get a 1099 at the end of the year with winnings.
He said the tax requirements for operators will work like those for withholding payroll taxes. Under the draft, operators must remit their taxes and a report on gross revenue to the gaming commission on a monthly basis.
Alex Kaganovsky, co-founder of the full-season fantasy football site For Players-By Players LLC, said the regulations should take into account that “there are big and small fantasy game operators and the smalls simply cannot afford the same regulatory costs that the bigs can.”
“DFS [daily fantasy sports] and season-long are very different game formats, even though both are being regulated by the NYGC,” he told Bloomberg BNA in an Aug. 22 email.
To contact the reporter on this story: Gerald B. Silverman in Albany, N.Y. at GSilverman@bna.com
To contact the editor responsible for this story: Jennifer McLoughlin at email@example.com
Text of the draft regulations is at http://src.bna.com/rWF.
Copyright © 2017 Tax Management 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 firstname.lastname@example.org.
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 email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)