A bill seeking to make substantive changes to the tax structure on mobile legal sports betting in Tennessee didn’t gain ground on Wednesday among lawmakers.
Appearing in front of the House Finance, Ways and Means Subcommittee, R-Rep. Andrew Farmer announced a couple of amendments to HB 1362, which is looking to change taxing revenue from online sports betting sites to instead taxing the handle at a rate of 1.85%.
“The handle tax brings it from a complicated structure to something that’s very clear and concise,” Farmer told the subcommittee Wednesday. The amendments were heard but no vote was taken on the bill. Instead, the subcommittee placed the bill “behind the budget,” meaning it won’t pass the bill until the budget is heard and passed.
Farmer’s amendments relieve a mandate concerning leaked data and included removing “advisory” from the Tennessee Sports Wagering Advisory Council.
Unprecedented change
No legal state currently has a tax structure like the one proposed for sports betting in Tennessee. The current law in the Volunteer State requires sports betting operators to produce a 10% hold and pay a 20% tax on revenue.
If they can’t get to 10%, they are forced to pay a $25,000 fine, which typically falls well below what they would have to pay in taxes if they reach the required hold. The Sports Wagering Advisory Council (SWAC) believes that clause is costing Tennessee at least $10 million in tax revenue for the state. However, taxing the amount wagered at mobile sportsbooks is unprecedented nationally.
HB 1362 — which was passed by the State Government Committee on March 15 — isn’t scheduled to be heard again at this time. There’s also a bill working its way through the Senate that calls for a 2% tax on handle. SB 475 will be heard by the Senate Finance, Ways and Means Committee on March 28.
Nice, taxable handle
Tennessee legalized wagering back in 2019 and is seeing year-over-year growth in the sports betting market. Despite no casinos or retail sportsbooks, the Volunteer State’s mobile-only operators hauled in a handle of more than $720 million combined in the first two months of 2023.
FanDuel, DraftKings, BetMGM, and Caesars are among the 11 active sportsbooks operating in the Volunteer State, which recorded a handle of more than $2.5 billion in 2022.
