Is Your State Making a Push to Tax Legal Sports Betting?

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,...

By Ryan Prete

The U.S. Supreme Court has ruled that states can legally offer sports betting, and many states are currently pursuing the legalization and taxation of the activity.

The high court ruled in favor of New Jersey May 14 in Murphy v. NCAA, repealing the Professional and Amateur Sports Protection Act of 1992 (PASPA), which formally prohibited states from “authorizing” gambling related to professional and amateur sports leagues.

New Jersey—the petitioner in Murphy v. NCAA—could start taking legal wagers in the coming days or weeks. Many practitioners said they think the Garden State will take bets on the National Basketball Association and National Hockey League Championship series, which run through mid-June.

“I mean, I wouldn’t surprised if New Jersey even took bets tomorrow,” Marc Dunbar, a partner at Jones Walker LLP in Tallahassee, Fla., told Bloomberg Tax. “New Jersey is by far the most prepared state, with Mississippi not far behind.”

Five states—Mississippi, New Jersey, New York, Pennsylvania, and West Virginia—have already enacted legislation to legalize sports betting, but aren’t expected to begin taking bets for months.

As of May 15, there are 33 active pieces of legislation in 12 states. State measures and proposed tax rates, according to the American Gaming Association, are as follows:

California:

( A.C.A. 18)

  •  Tax rate: N/A
  •  Latest action: July 20, 2017, first read

Illinois: Five Pending Proposals

( H.B. 4214), ( H.B. 5186), ( S.B. 2478), ( S.B. 3125), ( S.B. 3432)

  •  Tax rates:
  •  H.B. 5186: 30 percent on adjusted gross receipts
  •  S.B. 3432: 12.5 percent of gross sports wagering revenue
  •  Latest action:
  •  H.B. 4214: Jan.16: referred to Rules Committee
  •  H.B. 5186: Feb. 16: referred to Rules Committee
  •  S.B. 2478: May 3: re-referred to Assignments Committee
  •  S.B. 3125: April 27: re-referred to Assignments Committee
  •  S.B. 3432: May 15: re-assigned to Gaming Committee

Louisiana: Three Pending Proposals

( H.B. 245), ( H.B. 873), ( S.B. 398)

  •  Tax rates:
  •  H.B. 873: 3 percent of any increase in state general fund (direct) monies from sports betting is dedicated to the Early Childhood Education Fund
  •  Latest action:
  •  H.B. 245: April 5: hearing held by Committee on Administration of Criminal Justice
  •  H.B. 873: May 7: hearing held by Appropriations Committee
  •  S.B. 398: March 12: referred to the Committee on Judiciary B

Massachusetts:

( S. 2273)

  •  Tax rate: 15 percent on gross revenue
  •  Latest action: Currently under consideration by the Joint Committee on Economic Development and Emerging Technologies

Michigan: Four Pending Proposals

( H.B. 4060), ( H.B. 4261), ( H.B. 4529), ( H.B. 4926)

  •  Tax rates:
  •  H.B. 4926: 15 percent on gross gaming revenue
  •  Latest action:
  •  H.B. 4060: March 8, 2017: hearing scheduled in Regulatory Reform Committee
  •  H.B. 4261: Feb. 21, 2017: referred to Regulatory Reform Committee
  •  H.B. 4529: April 26, 2017: referred to Regulatory Reform Committee
  •  H.B. 4926: Dec. 13, 2017: referred to second reading in Regulatory Reform Committee

Missouri: Six Pending Proposals

( H.B. 2320), ( H.B. 2406), ( H.B. 2535), ( S.B. 1009), ( S.B. 1013), ( S.B. 767)

  •  Tax rates:
  •  H.B. 2406: 6.25 percent on adjusted gross receipts
  •  H.B. 2535: 12 percent on adjusted gross receipts
  •  S.B. 1009: 6.25 percent on adjusted gross receipts
  •  S.B. 1013: 12 percent on adjusted gross receipts
  •  S.B. 767: 12 percent on adjusted gross receipts
  •  Latest action:
  •  H.B. 2320: April 4: public hearing held
  •  H.B. 2406: April 4: public hearing held
  •  H.B. 2535: April 4: public hearing held
  •  S.B. 1009: March 28: approved by Progress and Development Committee
  •  S.B. 1013: Feb. 28: hearing held by Progress and Development Committee
  •  S.B. 767: May 16: amendments added

New Jersey: Three Pending Proposals

( A. 3911), ( A. 774), ( S. 2602)

  •  Tax rates:
  •  A. 3911: eight percent on gross revenue; 12.5 percent of online gross revenue
  •  Latest action:
  •  A. 3911: May 7: introduced, referred to Assembly Tourism, Gaming and the Arts Committee
  •  A. 774: Jan. 9: introduced, referred to Assembly Tourism, Gaming and the Arts Committee
  •  S. 2602: May 14: introduced, referred to Senate Budget and Appropriations Committee

New York: Four Pending Proposals

( A.B. 10322), ( A.B. 5438), ( S.B. 1282), ( S.B. 7900)

  •  Tax rates:
  •  S.B. 7900: 8.5 percent of gross revenue
  •  Latest action:
  •  A.B. 10322: April 10: referred to Racing and Wagering Committee
  •  A.B. 5438: Jan. 31: referred to Judiciary Committee
  •  S.B. 1282: Feb. 15: referred to Judiciary Committee
  •  S.B. 7900: March 13: referred to Finance Committee

Pennsylvania

( H.B. 864)

  •  Tax rate: N/A
  •  Latest Action: April 24: hearing held in Community, Economic and Recreational Development Committee

Rhode Island: Two Pending Proposals

( H.B. 7339), ( S.B. 2045)

  •  Tax rates: N/A
  •  Latest action:
  •  H.B. 7339: Feb. 27: House Judiciary Committee recommended measure be held for further study
  •  S.B. 2045: May 15: hearing held in Senate Special Legislation and Veterans Affairs Committee

South Carolina: Two Pending Proposals

( H.J.R. 3102), ( S.J.R. 309)

  •  Tax rates: N/A
  •  Latest action:
  •  H.J.R. 3102: Jan. 10, 2017: introduced, referred to Judiciary Committee
  •  S.J.R. 309: Jan. 25, 2017: introduced, referred to Judiciary Committee

Connecticut

In 2017, Connecticut legislators passed a law authorizing sports betting. In 2018, the state’s lawmakers were supposed to provide more guidance ( H.B. 5307) to the state agency charged with drafting sports betting regulations, but they failed to do so before the session ended May 9.

Gov. Dannel Malloy (D) said in a May 14 statement that he would consider calling a special session to consider legalizing sports betting in Connecticut.

Integrity Fees

Professional leagues have largely supported the campaign to end PASPA, but that support has come with a price.

Sports leagues have lobbied for “integrity fees” of 1 percent of all wagers placed. The leagues have, in part, argued that the fee protects the integrity of the game, and that teams should benefit from the revenue created by bets.

Some states have attached an integrity fee to their sports-betting legislation. New York and Kansas have proposed a 0.25 percent integrity fee. Indiana, Kansas, and Missouri have proposed a 1 percent integrity fee.

With assistance from Aaron Nicodemus in Boston.

To contact the reporter on this story: Ryan Prete in Washington at rprete@bloombergtax.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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