If you have watched a sporting event in a state with legal sports betting in the last year, you would know that operators like to offer promotional bets-in fact, they offer a lot of them. States reporting tax collections will often report GGR, which only tells us how much has been staked on bets minus how much money has been paid out to winning bettors. However, this figure does not necessarily indicate actual gross revenue. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding.Įs, which presumably would target sports betting operators’ gross receipts or gross gaming revenue (GGR).

Instead, states have designed gross receipts tax A gross receipts tax is a tax applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. Unfortunately, no states do this as they generally only dedicate a miniscule amount of tax revenue to handle problem gambling and transfer the vast majority of the money to the general fund or unrelated spending programs. On wagering, as it is a reasonable proxy for the negative externalities (problem gambling) associated with this activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. A low-rate ad valorem tax base would make sense if the states were looking to design an excise tax An excise tax is a tax imposed on a specific good or activity. Most states levy ad valorem (value-based) taxes on gross gaming revenue. Most recently, online sports betting went live in New York with a whopping 51 percent tax rate on gross gaming revenue.

A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates.ĭesign. A narrow tax base is non-neutral and inefficient. States that have yet to legalize, but which may do so, should pay attention to the impact of tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.ĭesign in states that already have legal and taxed sports betting-specifically tax base The tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority.

Since 2018, 30 states and the District and Columbia have legalized and imposed taxes on sports betting.

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