Missouri is the latest state to launch sports betting only to see little by way of tax dollars from the first few months due to deductible promotions.
Rep. Jeff Knight introduced HB 3533 in order to get those tax dollars flowing. Knight wants to see a 24% tax on adjusted gross receipts from sports betting, which the bill defines as an operator’s revenue after paying out winnings but before any promotional costs are deducted.
The tax would not replace the 10% tax on net Missouri sports betting revenue. Casino licensees also face new remote wagering fees under the proposal.
The Missouri Legislature runs through May 15.
Missouri sports betting light on taxes
The first two months of sports betting in Missouri have not bolstered the state’s coffers as many would have hoped.
Operators have paid a combined $659,120 in tax dollars since the market opened Dec. 1. That is due to the operator-friendly taxation model, which allows unlimited promotional deductions as well as carrying forward any net losses to future months.
In other words, sportsbooks are incentivized to push promotions so heavily that they wind up in the red for the month.
Missouri missing out on millions
Without promotional deductions, Missouri would have received $15.8 million in tax dollars for its first two months of sports betting.
Under Knight’s proposal, the 24% adjusted gross revenue tax would have brought in $37.8 million in tax dollars.
Biggest books = sustained losses
It should not come as a surprise that the most popular US sportsbooks in DraftKings and FanDuel lead the way in heavy promotion deductions according to the state’s reports.
FanDuel, for instance, reported a loss of $7.2 million in December despite $212.7 million in handle and $166.5 million paid out to customers. The $53.2 million handed out in promotions helped drag that bottom line under water.
That loss was carried forward into January, where FanDuel was lighter on promotions, especially with the Kansas City Chiefs watching the NFL playoffs from home. FanDuel was left with $6.3 million in revenue after all deductions but still paid no taxes because the loss from December was carried forward.
DraftKings’ reports tell a similar tale. After posting a loss of $16.9 million in December, which included $48.5 million in promotions deducted, DraftKings posted $13.2 million in revenue for January.
That December loss was carried forward, though, leaving DraftKings without paying taxes as it reported an aggregated loss of $3.7 million.
Casino licensees hit with sports betting fee, too
Missouri’s casinos are on the line for some sports betting taxes, too, under the proposal.
Along with raised admission fees unrelated to sports betting, the casino partners of online sports betting operators would have to pay a 1.5% remote wagering access fee on the monthly handle taken by those sportsbooks.
BetMGM, Caesars, Fanatics and theScore Bet are partnered with casino licensees. DraftKings and Circa won the right to offer sports betting without a partner while bet365 (St. Louis Cardinals) and FanDuel (St. Louis City SC) are partnered with professional sports teams.
That 1.5% handle tax would have generated $2.2 million based on $146.4 million in handle through the first two months.
