Changes are coming for sports betting in Tennessee, as a bill that would alter the taxation of sports betting companies in the state was recommended for House approval Tuesday after passing the Senate the week before.
By a vote of 30-0, the Tennessee Senate approved Senate Bill 475 (SB 475). It would tax instead of income and eliminate the mandatory 10% withholding.
Sports Betting Handle Would Be Taxed – Not Revenue
Sports betting operators in Tennessee currently pay a 20% tax on their sports betting revenue. The new bill, however, calls for a change in that tax rate. Instead of a 20% tax on sports betting revenue, the proposal recommends a 2% tax on sportsbooks’ betting handle.
Mandatory Hold Would Be Eliminated
It would also eliminate Tennessee’s contentious 10% hold, which businesses have found difficult to follow. This comes as no surprise, given that the state’s gambling regulator, the Tennessee Sports Wagering Advisory Council (SWAC), acknowledged that the majority of the state’s operators couldn’t hold to 10% of the handle.
This meant that the operators had to pay a $25,000 fine or consider paying the 10% hold. Unsurprisingly, most operators chose to pay a minor fine rather than face a million dollars or more fines.
S.B. 475 would eliminate the required hold entirely in lieu of a handling tax. It would be illegal for operators to remove the value of free bets and other bonuses from their handle.
Additional Amendment Added to the Bill
Before the bill was passed, Senate members introduced an amendment that would enable operators to deduct the .25% federal tax on handling from what they would pay the state.
Other proposed changes include the repeal of a rule requiring official league data. Data are not available in commercially fair conditions, according to Betly and SuperBook.
“This issue is really complex, to say the least,” SWAC Executive Director Mary Beth Thomas said during a council meeting on March 1. “As you all know, Tennessee is the only state with a mandate worded in the way that ours is, that requires the use of official league data for in-play wagering in this manner. Other states have official league data requirements that can be triggered by league requests, but to our knowledge, our state’s unique in our statutory mandate.”
The bill may also reduce annual license renewal prices based on the previous year’s handling.
A First in Tennessee and the United States
If passed, SB 475 would be the first handle tax imposed by a state in the United States.
According to lawmakers, the proposed move is for the better because it is expected to boost Tennessee’s tax income. Given the proposed legislative amendments, the changes are expected to generate an additional $7.3 million annually.
House Bill 1362 Also Gaining Support
While SB 475 is gaining traction in Tennessee, another proposal, House Bill 1362, offers similar reforms and is also being considered by state lawmakers.
After the House Finance Ways and Means Committee meets to discuss the bill, the whole chamber will vote on HB 1362, which differs from the Senate plan in one crucial area. In contrast to the Senate’s 2% tax rate, a proposed amendment would impose a 1.85% handling tax.
What’s Next for Tennessee Sports Betting Bills?
So, there are multiple bills under consideration. Tennessee legislative sessions are normally 90 days long, allowing legislators until the first week of May to pass new legislation.
*Bookmakers Review will continue to monitor any new developments that take place in Tennessee. We will keep you posted.
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