Pa.’s Tax Rate On Sport Betting Is Highest In The Nation, Unlikely To Deter Casinos

TheComputerGroup · May 19, 2018

https://www.google.com/amp/pittsbur.../pennsylvania-sports-betting-tax-highest/amp/

PITTSBURGH (KDKA) — When sports betting comes to Pennsylvania, at least for the casinos, this state will have the highest tax rate in the nation.

“It’s not even close,” says Prof. Chuck Berry, who teaches sports entertainment at Point Park University. “Most of the states are somewhere between 10 and 20 percent. Nevada is around 7 percent. And we’re going to be at 34 percent plus an extra 2 percent, 36 percent, and that doesn’t include the federal excise tax as well.”

Berry says the high tax is not likely to deter the casinos from getting into the lucrative sports gambling business.

“Maybe, but I doubt it,” he said.

Illegal sports gaming is already estimated to be a $150 billion industry, and it can only grow when legalized.

Gaming companies have complained that Pennsylvania’s 36 percent tax is much too high, compared to the 10 percent tax over the line in West Virginia.

“They’re going to complain about it, but at the end of the day, they have a choice,” said PA Sen. Jay Costa, the Democratic Senate Leader, appearing at a taping of the KD/PG Sunday Edition show. “They can decide not to participate in this type of gaming. They are going to be 9 or 10 or 11 other entities that would participate here.”

Under Act 42, which set the tax, the casinos are the only outlets who can apply for a $10 million license fee to provide sports gambling at the casinos or online sports gambling through an app.

As for the state tax, it’s paid by the casino out of their profits, not the person betting.

“That tax is not going to impact the individual bettor,” says Berry.

But Berry adds the devil is the details of sports betting regulations yet to be written.

Pennsylvania is still a ways off from implementing sports betting under Act 42 passed late last year.

The Pennsylvania Gaming Control Board says it will take its time to implement the best rules and regulations to protect Pennsylvanians who bet on sporting events.

“We want to do this thing right, and we are not going to rush through it,” says Commissioner Sean Logan, a member of the Pa. Gaming Control Board.

BillyRayValentine · May 19, 2018

I dont think Jay Costa has ever owned or ran a business. I know he has JD degree but did he own a law firm or even work at one? If a sportsbook, or a bookie for that matter, has to pay 36 % on all winning wagers with no make up that is not a profitable business model. If that's the case, I predict there will be no sportsbooks in PA.

tatehill2000 · May 19, 2018

Billy Ray Valentine said:
I dont think Jay Costa has ever owned or ran a business. I know he has JD degree but did he own a law firm or even work at one? If a sportsbook, or a bookie for that matter, has to pay 36 % on all winning wagers with no make up that is not a profitable business model. If that's the case, I predict there will be no sportsbooks in PA.

lol,, what a jackass,, lol, the only sportsbetting will be RAN BY THE STATE,, lol, and it will be nonprofitable,, lolol because WH, and whomever wont take that risk,,

kindof like our shit state AZ, and our marjuana law,,, You can get a MJ license ONLY IF YOU sign a document GIVING UP YOUR RIGHT TO EVER OWN A GUN THE REST OF YOUR LIFE,, lolol,,

fkn ashats,,

TheComputerGroup · May 19, 2018

Billy Ray Valentine said:
I dont think Jay Costa has ever owned or ran a business. I know he has JD degree but did he own a law firm or even work at one? If a sportsbook, or a bookie for that matter, has to pay 36 % on all winning wagers with no make up that is not a profitable business model. If that's the case, I predict there will be no sportsbooks in PA.

Yeah, I don't know why anyone would pay 34-36% tax rates.......I think the casinos would pay the outrages $10 million license fees if the tax rate was like 8%-10%......but maybe the reason they made both numbers so high is to keep it with casinos .....maybe they know something most people don't? Maybe they don't care about making a profit?

I thought casinos were in it to make profits

Acebb · May 20, 2018

Let’s walk through an example.

A sports book with a handle of $10,000,000, a hold of 4.16% producing revenue of $416,000.

The federal government receives $25,000 (0.25% times $10,000,000).
The state receives $149,760 (36% times $416,000)

The total in taxes would be $174,760. The operator gets to keep $241,240 ($416,000 minus $174,760).

So either they are expecting a higher hold or much more in handle (both assumptions can be wrong). Because it is going to take a hell of a long time to pay off that $10 million dollar license fee making $240K per year before paying for equipment, infrastructure and employees!

One note: Vegas had a hold of 5.1% in 2017. But I used 4.16 as an estimate based on a 10-year average.

TheComputerGroup · May 20, 2018

Acebb said:
Let’s walk through an example.

A sports book with a handle of $10,000,000, a hold of 4.16% producing revenue of $416,000.

The federal government receives $25,000 (0.25% times $10,000,000).
The state receives $149,760 (36% times $416,000)

The total in taxes would be $174,760. The operator gets to keep $241,240 ($416,000 minus $174,760).

So either they are expecting a higher hold or much more in handle (both assumptions can be wrong). Because it is going to take a hell of a long time to pay off that $10 million dollar license fee making $240K per year before paying for equipment, infrastructure and employees!

One note: Vegas had a hold of 5.1% in 2017. But I used 4.16 as an estimate based on a 10-year average.

Population of Nevada is 3 million......Pennsylvania 13 million........Pa's handle will be a lot more than what Vegas gets after California legalizes their state.

Now Pa tax rate under Act 42 states its taxing the 34% profit, now does that mean differently than other states that say gross revenue? You decipher it........

TheComputerGroup · May 20, 2018

Also, New York state has 20 million people, New Jersey 9 million.......east coast will be jumping with sports betting.

HarryCaray · May 20, 2018

The Computer Group said:
Population of Nevada is 3 million......Pennsylvania 13 million........Pa's handle will be a lot more than what Vegas gets

Tourism.

You think Nevada only books sports bets from its residents?

HarryCaray · May 20, 2018

Acebb said:
Let’s walk through an example.

A sports book with a handle of $10,000,000, a hold of 4.16% producing revenue of $416,000.

The federal government receives $25,000 (0.25% times $10,000,000).
The state receives $149,760 (36% times $416,000)

The total in taxes would be $174,760. The operator gets to keep $241,240 ($416,000 minus $174,760).

So either they are expecting a higher hold or much more in handle (both assumptions can be wrong). Because it is going to take a hell of a long time to pay off that $10 million dollar license fee making $240K per year before paying for equipment, infrastructure and employees!

One note: Vegas had a hold of 5.1% in 2017. But I used 4.16 as an estimate based on a 10-year average.

Where did you get your estimation of handle?

TheComputerGroup · May 20, 2018

HarryCaray said:
Tourism.

You think Nevada only books sports bets from its residents?

Lol, no......thats my whole point! Once Cali & other west coast states legalize sports betting, Vegas handle will go down while other states go up compared to what Vegas was ever taking in......its simple math.

HarryCaray · May 20, 2018

The Computer Group said:
Lol, no......thats my whole point! Once Cali & other west coast states legalize sports betting, Vegas handle will go down while other states go up compared to what Vegas was ever taking in......its simple math.

I still don't see your point. Of course Vegas handle is going to go down, but that is inconsequential to his illustration. He just used historical Vegas hold numbers as an estimate of what any book might expect to experience.

HarryCaray · May 20, 2018

Billy Ray Valentine said:
I dont think Jay Costa has ever owned or ran a business. I know he has JD degree but did he own a law firm or even work at one? If a sportsbook, or a bookie for that matter, has to pay 36 % on all winning wagers with no make up that is not a profitable business model. If that's the case, I predict there will be no sportsbooks in PA.

I'm assuming net profit would be taxed, not every individual wager. Massive difference.

Acebb · May 20, 2018

The Computer Group said:
Population of Nevada is 3 million......Pennsylvania 13 million........Pa's handle will be a lot more than what Vegas gets after California legalizes their state.

Now Pa tax rate under Act 42 states its taxing the 34% profit, now does that mean differently than other states that say gross revenue? You decipher it........

Yeah, but as Harry points out, they get more tourists in Vegas. Vegas did $158 million handle on this past Super Bowl. You could put a sports book in the middle of Philly and it won't do $158 million in a month. For scale: Vegas had $4.87 billion in sports book wagers in 2017.

The tax in PA is on the gross revenue like other states. It is what they do on table games.

Acebb · May 20, 2018

HarryCaray said:
Where did you get your estimation of handle?

I just made it up using a round number. Maybe it is a good per month estimate. Though I have a hard time believing that a sports book in Erie will do $10 million per month in sports wagers.

PatsFan1283 · May 20, 2018

The big corporations that will be in every state might try to play hardball but eventually they will pay a hefty fee and ongoing tax to book bets in Pennsylvania.

35% is not going to be that much of a deterrent. It basically means they will get 3.3% of all money bet instead of 5% of all money bet. And that will be a lot of money since it will only be chopped up 5-6 ways at most.

HarryCaray · May 20, 2018

Acebb said:
Let’s walk through an example.

A sports book with a handle of $10,000,000, a hold of 4.16% producing revenue of $416,000.

The federal government receives $25,000 (0.25% times $10,000,000).
The state receives $149,760 (36% times $416,000)

The total in taxes would be $174,760. The operator gets to keep $241,240 ($416,000 minus $174,760).

So either they are expecting a higher hold or much more in handle (both assumptions can be wrong). Because it is going to take a hell of a long time to pay off that $10 million dollar license fee making $240K per year before paying for equipment, infrastructure and employees!

One note: Vegas had a hold of 5.1% in 2017. But I used 4.16 as an estimate based on a 10-year average.

I'm assuming any state tax would be levied against net profits, not gross profits. All operating expenses (wages, depreciation, federal taxes, etc) would come out of the 416k prior to determining the state's taxable amount.

HarryCaray · May 20, 2018

Acebb said:
The tax in PA is on the gross revenue like other states. It is what they do on table games.

No shit? That's fucked up

Acebb · May 20, 2018

No Harry, in my example the operator has to pay all other expenses, including other taxes, such as property and income taxes with what is left.

PatsFan1283 · May 20, 2018

The fee is just to operate in the state I'm sure, not per physical location. So WilliamHill pays the fee then has like 5 sportsbooks, 30 kiosks and it is even possible everyone will be able to bet on their smartphone.

10m is not that much. Every housewife and Asian is gonna be putting $50 on the Steelers and Eagles games.

It isn't like we're talking start-ups trying to get licenses here, it's going to be all major corporations scaling their operations throughout the state.

Acebb · May 20, 2018

So let’s say the sports book in Harrisburg gets $25 million in bets a year, revenue of $1,205,000 ($25,000,000 times a hold of 4.82%)

Excise tax: $30,215
PA Taxes: $433,800

$740,985 Leftover. Take into account all expenses and all other taxes (25%?) – you’re looking at a net of $560,000 a year or 2.2%