A bill that would change how TN sports betting operators are taxed was recommended for House passage Tuesday after a similar bill passed the Senate last week.
In a move to generate more tax revenue for the state, the Tennessee Senate voted 30-0 to pass SB 475. The legislation would replace the 20% TN sports betting revenue tax with a 2% tax on handle. It would also remove the controversial 10% hold in Tennessee’s sports betting law that operators have struggled to comply with.
The House version (HB 1362) is slated for a full chamber vote this week after the House Finance Ways and Means Committee, though it is different from the Senate bill in one key spot. A pending amendment would tax handle at 1.85%, not 2% as seen in the Senate.
HB 1362 is recommended for passage as long as the amendment passes.
No more mandatory hold
Tennessee is the only state that requires operators to hold at least 10% of monthly handle.
Essentially, they must keep a $1 net return for every $10 a user bets. Between the randomness of sporting event outcomes, the impact of promotional bets, staying competitive on price and a myriad of other factors, the volatile nature of holds has made it challenging to comply.
Sportsbooks have largely rejected a payment option presented in response to their opposition to the hold and, instead, paid a $25,000 annual fine. That’s cost the state $22.5 million in taxes over the last two years, according to the Sports Wagering Advisory Council.
A handle tax could generate more taxes than the state’s made so far, though it would still produce more if operators could meet the minimum hold.
More TN sports betting changes incoming?
Before passing the bill, Senate lawmakers added an amendment that would allow operators to deduct the .25% federal tax on handle from what they would pay the state. Deductions would not be allowed promotional dollars.
Other proposed changes include ending a mandate for official league data. Betly and SuperBook have protested that data is not available on commercially reasonable terms.
The bill could also lower annual license renewal fees based on the prior year’s handle.
Tennessee legislative sessions typically last 90 days, thought this session is scheduled to end on Friday.