Tennessee lawmakers passed a bill Friday that would set the TN sports betting tax apart from every other state’s.
Under the bill, SB 475, Tennessee sportsbooks would pay a 1.85% tax on handle, or the total dollar amount of bets in a month, as opposed to the revenue they make. The change is meant to squeeze more for the state, which has fallen short on tax projections, thanks in part to a controversial mandatory hold.
Senate Adopts Higher Tax Rate
The bill was concurred by the Senate after passing the House on Friday, the legislature’s self-imposed deadline for the year. Previously the Senate had sought a slightly higher 2% handle tax.
Bill sponsor Sen. John Stevens indicated the higher rate would prevail just before the vote.
“It is my intent to concur in the changes the House made,” Stevens said. “I consulted with representatives of the Sports Wagering [Council] and impacted industry representatives prior to reaching that decision. With significant regulatory and tax legislation, it is my experience that all parties involved must compromise so that the state/regulators are not picking winners and losers.“
The Senate sign-off sends the bill to Gov. Bill Lee, who approved Tennessee’s legal sports betting bill in 2019.
No more ‘picking winners and losers’
The new tax mechanism would also repeal Tennessee’s minimum 10% hold, which sportsbooks have struggled to keep up with.
Sportsbooks have held about 7.7% since June 2018, the month following the end of PASPA, according to LSR’s state revenue tracker. The unpredictability of sporting events makes consistently delivering on a fixed number difficult and thus hold typically fluctuates month to month.
In Tennessee, nine of 11 sportsbooks have paid $25,000 fines for failing to meet the minimum hold, according to the bill’s fiscal note, which says that’s led to Tennessee falling $26 million short of tax expectations.
Napkin math indicates the handle tax could generate more taxes since the state’s November 2020, though sportsbooks meeting the 10% hold would still be the most lucrative:
| Taxation method | Total taxes |
|---|---|
| 20% with operators missing minimum hold | $126.4 million |
| 1.85% handle tax | $141.2 million |
| 20%, minimum 10% hold from each operator | $152.6 million |
Other TN sports betting changes
The bill makes several additional changes to Tennesse’s sports betting law:
- Sportsbooks can deduct the 0.25% federal excise tax on wagers from the state’s handle tax
- License registration upped from annually to three years
- Sports Wagering Advisory Council changed to “Sports Wagering Council”
