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Sports wagering taxes projected to rise after one-year drop

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(The Center Square) – Tennessee’s Sports Wagering Council is expecting this fiscal year to show a one-year dip in sports wagering taxes collected before seeing that total rise again next fiscal year.

Tennessee collected $82.1 million in privilege tax on mobile sports wagers last year with $78.8 million this fiscal year and $82.7 million next year before reaching $86.9 million in taxes next year.

That comes from a 1.85% tax on gross wagers, which replaced a 20% tax on adjusted gross income that was in place until July.

That taxing change led to $1 million less in taxes collected in the most recent available month’s data from September compared to September 2022 despite an increase in bets from $420 million in gross wagers in September compared to $337 million in gross wagers in September 2022.

“From our end, it’s certainly a much cleaner and a much more efficient process,” Council Executive Director Mary Beth Thomas told the Tennessee State Funding Board while presenting future tax estimates. “We are not constantly checking deductions and consistency.”

Tennessee sends 80% of its sports wagering taxes to the Lottery for Education Fund to pay for things such as the Hope Scholarship while 15% goes to the general fund of local governments and 5% goes to the state’s Department of Mental Health.

That means $37.1 million to Lottery for Education in 2021-22, $65.7 million in 2022-23, $63 million projected for 2023-24, $66.2 million in 2024-25 and $69.5 million in 2025-26.

Thomas told the board that, due to a confidentiality agreement, she could not reveal how much each of the state’s 12 licensed sportsbooks are seeing in wagers individually or which sportsbooks are seeing the most bets in the state.

Thomas said that there are roughly 2 million unique devices with sportsbook accounts in the state of just less than 7 million residents.

Thomas noted that the data has shown dips in the number of bets along state lines as Kentucky recently began legalized sports gambling. She expects North Carolina to go live with the same in early 2024 and Georgia to have a strong legislative push for legalized sports gambling in 2024.

Thomas was also asked if Tennessee was considering adding brick-and-mortar sportsbooks, particularly sportsbooks in professional sports facilities such as the Nashville Predators arena or a new Tennessee Titans stadium, set to open in 2027.

“I have not heard anything from that,” Thomas said. “Frankly, it’s more accessible when it’s mobile than it is in person.”

Thomas said the largest group of sports gamblers in Tennessee are males ages 24 to 35 who are professionals and college graduates.

She began the presentation by noting that 35 other states and the District of Columbia have legal sports betting while 25 states and D.C. have legalized mobile sports betting but none are directly comparable to Tennessee.

Wyoming is the only other state with just mobile sports betting and Wyoming has 1/10th of Tennessee’s population, no major professional sports teams and the University of Wyoming is the main college team compared to Tennessee’s larger number of major college programs.

She noted that this year’s tax change removed risk from the state in only taxing sportsbook revenue previously to taxing all wagers now and that several sportsbook operators in the state have had zero revenue over recent years, meaning they did not pay taxes.

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