Like every other business operating across the country, sportsbook operators are taxed on the amount of revenue made. One of the major motivations for state authorities to legalize sports betting is the potential huge tax revenue the activities would generate. Across the United States, sports betting brings an unprecedented revenue from state governments annually, and the rate continues to grow as more people are venturing into sports betting.
Tax rates for sportsbook operators vary across American states; it ranges from as low as 6% up to a massive 51%. Taxable revenue is calculated differently by state governments across the country. Some states give room for promotional deduction and loss-carryover which very much ensures a more effective and friendly taxation. Other states, however, levy taxes on sportsbook's gross income without consideration for some crucial factors.
In this article, we examine a good number of American states where sports betting is legal and operational, and how much sportsbook operators pay as taxes on their gross income.
Arizona: Sports betting activities entered the state of Arizona in September 2021. The state had earlier legalized it in April after a couple of legislative processes. There are currently 18 online sportsbooks operating in the state. Arizona charges sportsbook operators revenue tax of 8% in the retail space and 10% for the online.
Arkansas: Sport betting became legal in the state of Arkansas in November 2018 and retail betting commenced not long afterwards. The state expanded to the online space in March 2022. Arkansas charges sportsbooks a tax rate of 13% on the first $150 million revenue and 20% when it goes beyond.
Colorado: Sports betting in the online and retail space has been available in Colorado since May 2020. Process of legalization started with voters giving approval by a slim margin and the legislature passing the bill. The state of Colorado levies a 10% tax on revenue made by sportsbook operators within its borderline.
Connecticut: The state of Connecticut introduced sports betting in the retail space in September 2021 and expanded online the following month. The state charges online sportsbooks 13.75% revenue tax while retail sportsbooks pay 18%. Sportsbooks in both forms will pay 20% tax after five years of operation.
District of Columbia: Due to its unique political structure, the District of Columbia needed the approval of the United States Congress to legalize sports betting. It was eventually granted in May 2019 after a series of discussions at the federal level. The district levies a 10% tax on revenue made by sportsbook operators.
Illinois: The state of Illinois legalized sports betting in June 2019 after the state governors signed the bill which had gone through the state's legislature into law. Retail and online betting went live in 2020 within a couple of months from each other. Revenues made by sportsbooks within the state are subject to a 15% tax.
Indiana: The state of Indiana launched sports betting in the retail space in September 2019, and expanded to the online space a month after. There are currently 14 sportsbooks operating within the borders of the state. The state of Indiana applies a 9.25% tax on all revenues made by sportsbook operators.
Iowa: After the legalization of sports betting in Iowa was completed in May 2019, the state wasted no time by opening doors to sports betting activities in August. A total of 18 sportsbooks maintain operations within the state. Sportsbooks operating in Iowa pay a 6.75 tax on the revenues made within the state.
Kansas: The state of Kansas legalized sports betting in May 2022 and the law became effective in July. The state later opened the doors to online sports betting in September 2022. A good number of online and retail sportsbooks maintain operation within the state. Kansas levies a 10% tax on revenues made by operators in the state.
Louisiana: Sports betting was declared legal in the state of Louisiana in June 2021. Betting activities later launched within the state in January 2022. Sports betting is allowed in 55 of the state's 64 parishes in both the retail and online space. Retail sportsbooks in the state pay 10% revenue tax while the online operators pay 15%.
Michigan: The state of Michigan legalized sports betting in December 2019. The retail sportsbooks launched operations in the state in 2020. Online sports betting didn't come live in Kansas until January 2021. There are 14 sportsbook operators competing within the state. Michigan charges an 8.4% tax on sportsbook's revenue.
Maryland: Sports betting became legal in Maryland in April 2021 after the bill survived in the state legislature. Retail sportsbooks launched operations in December 2021. Online sports betting in Maryland only kickstarted in November 2022. Sportsbook operators in Maryland pay a 15% tax on revenue made in the state.
Nevada: Sports betting has been around for decades in the state of Nevada. The federal ban of sports betting instituted in 1992 did not affect the state. Nevada is a trailblazer in the American sports betting industry, boasting a big market in the retail and online space. The state charges a 6.75% tax on revenues made by sportsbook operators.
New Hampshire: Sports betting became legal in New Hampshire in 2019. There are currently three retail sportsbooks within the state. DraftKings holds a monopoly in the online space after striking a deal with the state's regulator in November 2019. The three retail sportsbooks pay a 50% revenue tax while DraftKings agreed to pay 51%.
New Jersey: The state of New Jersey legalized sports betting in 2012, after fighting against the federal ban on sports betting. The state thereafter faced a series of legal battles with American major sports leagues until the ban was overturned in 2018. Retail sportsbooks in New Jersey pay a 8.5 tax while the online ones are charged 13%.
New York: Despite retail sportsbooks kickstarting in New York in 2019, online sportsbooks didn't launch in the state until January 2022. The state has in no time become the biggest sports betting state by monthly handle in the country. New York charges retail sportsbooks 8.5% in revenue tax while the online operators are taxed 12%.
Ohio: Sports betting in the retail and online space only went live in the state of Ohio in January 2023. The state governor signed the sports betting bill into law in December 2021 after passage in the two chambers of the Ohio legislature. The state of Ohio has stipulated a 10% revenue tax for sportsbook operators within the state.
Pennsylvania: The state of Pennsylvania had legalized sports betting before the federal ban was overturned, becoming one of the few states to do so. The sports betting bill was signed into law in the state by the governor in October 2017 and it became active in 2018. There's a 34% revenue tax on sports betting revenue in Pennsylvania.
Rhode Island: Rhode Island was one of the first states where sports betting became legal after the overturn of the federal ban. There are two retail sportsbook locations currently in the state and a single operator in the online space. The state charges the three sportsbook operators 51% tax on revenue made within its borders.
Tennessee: The state of Tennessee only allows sports betting in the online space with no sign of that changing soon. The state is currently one of the two legal sports betting states in the United States without a retail location. Tennessee levies a 20% tax on revenues made by sportsbook operators within the state.
Virginia: Sports betting in the online space went live in the Commonwealth of Virginia in January 2021. The state expanded to retail sports betting in July 2022 when Hard Rock sportsbook opened a location in Bristol. Sportsbook operators in the Old Dominion pay a 15% tax on revenues made within the state.
West Virginia: The state of West Virginia had legalized sports betting with its borders before the federal ban was upended in 2018. The state was also one of the first across the country to accept online and mobile sports betting. West Virginia levies a tax rate of 10% on the revenue of legal sportsbook operators within the state.
Wyoming: The state of Wyoming launched sports betting in September 2021. Wyoming is one of the two legal sports betting states in the country without a retail location. There are currently four sportsbooks maintaining operations within the state. Wyoming levies a 10% tax on revenues made by sportsbooks in the state.
