Tennessee collected $87.6 million in the first 12 months of their taxing sports betting handle

Last year, the Tennessee legislature made changes in their method of taxation for sports betting. Instead of their traditional nationwide levy on sports betting operators, Tennessee will offer taxation based on handle starting in the 2023-24 fiscal year. Twelve months later, the Tennessee Sports Wagering Council (SWC) reported $87.6 million in state taxes for the fiscal year they recently completed. Tennessee had a $342.2 million handle for June 2024 and collected $6.3 million worth of receipts. In total, that was $4.3 million more than they had in the fiscal year of 2022-23. SWC Director of Engagement David A. Smith had this to say.

“Regarding your question of whether tax collections have met expectations with relation to the switch – our answer is yes,” said David A. Smith. “This streamlined tax structure allows our regulatory agency to focus on issues outside of tax accounting that protect the public interest: underage wagering, sports betting integrity, illegal sportsbooks, and responsible gaming to name a few.”

How did Tennessee exceed its expectations in the first year of its new taxation method?

To begin, there were not many supporters of Tennessee’s previous method of taxation. That had more to do with the state-mandated and much-derided 10% hold required than the 20% rate on AGR. Several operators were willing to pay a five-figure fine for not reaching the desired win rate in 2022. That year, the state agency estimated they missed out on $11 million in tax receipts. Mobile sportsbooks could no longer deduct promotional bonuses and credits by shifting to a taxation method focused on the betting handle. Additionally, SWC needed to find a new way to forecast their tax revenue.

They had no way to compare the tax numbers from 2022-23 and 2023-24 because of the SWC switch to taxing a betting handle. The SWC no longer collected betting revenue figures in the 2023-24 fiscal year. That data was no longer relevant to how tax information is collected in Tennesee. In their initial estimates, the SWC predicted that there would be a 5% in the handle. However, the number turned out to be higher than 5% due to wagering volume increasing. As of now, Tennessee is the only state taxing handle.