Tennessee’s sports betting tax landscape experienced a notable shift in August, with the state collecting $4.4 million in sports betting taxes. This figure marked the first full month of operations under a revised tax system initiated by Senate Bill 475, which came into effect on July 1. The innovative tax structure in Tennessee taxes sports betting handle rather than revenue, making it the only state in the US to employ this approach. Despite a decline in collections compared to the previous year, the state witnessed a surge in sports betting activity, with a handle of $243.4 million, the highest August total since regulated sports betting was introduced in November 2020.
The Unique Tax System:
Under the new tax system, Tennessee imposes a tax rate of 1.85% on the total sports betting handle, differentiating it from the more common revenue-based tax models. A significant portion of the taxes collected, 80%, is allocated to benefit education, while 15% is directed to the state for distribution to local governments, and the remaining 5% is allocated to support mental health programs.
Comparing August 2023 to 2022:
Although August 2023 reported an 8.5% decrease in tax collection compared to the previous year, the sports betting handle witnessed a substantial 15.4% increase. This divergence highlights the impact of the new tax structure, as well as the evolving dynamics within Tennessee’s sports betting landscape.
Additional Legislative Changes:
Senate Bill 475 introduced various other modifications to Tennessee’s sports betting regulations. It replaced the flat $750,000 license renewal fee for operators with a tiered fee structure based on operator revenues, ranging from $375,000 to $750,000. The legislation also eliminated the requirement for sportsbooks to maintain a 10% hold, as regulators found that the majority of operators did not meet this threshold in 2022. Furthermore, the regulatory agency overseeing sports betting was renamed from the Sports Wagering Advisory Council to the Sports Wagering Council.
Tennessee’s sports betting industry continues to evolve, with the adoption of a unique tax system and a revised regulatory framework. The state’s commitment to channeling tax revenue towards education and public welfare programs underscores its dedication to leveraging sports betting for the benefit of the community. As sports betting activity thrives in Tennessee, the industry is poised for further growth and adaptation in the coming months.