Sports Betting: Federal Bill Introduced to Remove Excise Tax

On Friday, July 24, Co-Chairs of the Congressional Gaming Caucus, Rep. Dina Titus (NV-1) and Rep. Guy Reschenthaler (PA-14) introduced bipartisan legislation to rid a federal excise tax of 0.25% (also known as “handle tax”) on legal sports betting.

The newly introduced legislation also includes that legal NJ online sportsbooks would benefit from not paying an annual tax or “head” tax of $50 for each individual employee who accepts or deals with bets.

Sports are back. Unfortunately, the penalty on making legal sports bets never left. The handle tax makes it more difficult for legal gaming establishments to compete with illegal operators. Repealing it will push more consumers out of the black market and into a well-regulated market. Forcing sportsbooks to pay a per-employee tax is the last thing we need when gaming establishments are still making announcements about new rounds of layoffs and furloughs.

Rep. Dina Titus (NV-1)

Unburdening the US Sports Betting Legal Operators

Notably, this is not the first time that Titus tried to repeal the sports betting handle tax. Her two previous efforts failed. However, the sports industry recently grinded to a halt due to the COVID-19 pandemic shutdown which means that this may be a more suitable time to gain support and momentum towards the cause.

Indeed, Rep. Reschenthaler stated “I’m proud to join my Gaming Caucus Co-Chair Rep. Dina Titus to introduce this important legislation that will eliminate an outdated tax and burdensome requirements on the gaming industry.”

About the Federal Excise and Head Taxes

According to the American Gaming Association (AGA), the federal excise and head taxes attributed to less than $33 million in federal tax revenue in 2019. Additionally, legal sportsbook operators already operate on an extremely low margin, citing Nevada's revenue as 5% of the total wagered.

There are certain types of sports bets exempted from the taxes, such as:

Horse racing
Sports betting operated by state-run lotteries

Titus was previously tasked with finding just exactly how the federal excise taxes are allocated by the federal government in 2014. Yet, after the inquiry, Titus concluded “The IRS couldn’t answer how the money was being used.”

AGA Testifies on Behalf of Legal Sportsbooks to Senate Judiciary Committee

Earlier, AGA CEO Bill Miller testified to the Senate with their trade association findings.

Essentially, Miller concludes that these taxes “generate little meaningful revenue for the government.” However, they do place legal sportsbook operators “at a significant competitive disadvantage against illicit gambling operations which skirt taxes and licensing fees.” Unfortunately, legal sportsbooks need to combat the undue burden of these taxes by offering “worse odds and payouts or reduce investment in promoting legal betting channels to the public.”

As sporting events kick off again and the sports betting industry revitalizes, it is imperative that legal sportsbooks operators obtain some type, any type of relief to recover from the coronavirus pandemic and its far reaching effects.