One of the core motivations for states to legalize sports betting was the potential tax revenue the activity would generate.
And so far, it’s “mission accomplished” regarding tax revenue.
That said, individual results may vary. Sports betting tax rates range from 6% to more than 50% in several locales. Additionally, states calculate taxable revenue differently. Some allow promotional deductions and loss-carryover, producing effective tax rates far below the imposed rate.
Below, BettingUSA compares official sports betting tax rates by state, and compares licensing fees to effective tax rate based on publicly available tax revenue data. As the following chart demonstrates, there is sometimes a significant difference between a state’s official tax rate and what it actually collects after accounting for deductions.
Sports Betting Taxes By State
| State | Tax % (Retail) | Tax % (Online) | Effective Tax %* |
|---|---|---|---|
| Arizona | 8% | 10% | 3.6% |
| Arkansas [i] | 13%/20% | N/A | 14% |
| Colorado | 10% | 10% | 4.5% |
| Connecticut | 13.75% | 13.75% | 10.5% |
| Delaware | 50% | 50% | 51.4% |
| Illinois [ii] | 15% | 15% | 15% |
| Indiana | 9.5% | 9.5% | 9.5% |
| Iowa | 6.75% | 6.75% | 7.3% |
| Kansas | 10% | 10% | - |
| Louisiana | 10% | 15% | 10% (retail-only) |
| Maine | 10% | 10% | - |
| Maryland | 15% | 15% | 14.8% (retail-only) |
| Massachusetts | 15% | 20% | - |
| Michigan | 8.4% | 8.4% | 3.4% |
| Mississippi | 12% | N/A | 12% |
| Montana [iii] | Varies | Varies | - |
| Nebraska | 20% | N/A | - |
| Nevada | 6.75% | 6.75% | 6.75% |
| New Hampshire | 51% | 51% | 46.2% |
| New Jersey | 8.5% | 13% | 12.4% |
| New Mexico [iv] | Varies | Varies | - |
| New York | 10% | 51% | 42.3% |
| North Carolina | N/A | N/A | - |
| Ohio | 20% | 20% | - |
| Oregon [v] | Varies | Varies | - |
| Pennsylvania | 36% | 36% | 23.6% |
| Rhode Island | 51% | 51% | 51% |
| South Dakota | 9% | N/A | 9% |
| Tennessee [vi] | N/A | 1.85% | N/A |
| Virginia | 15% | 15% | 7.1% |
| Washington | N/A | N/A | - |
| Washington DC | 10% | 10% | 10% |
| West Virginia | 10% | 10% | 8.5% |
| Wisconsin | N/A | N/A | - |
| Wyoming | N/A | 10% | 3.1% |
- i 13% on the first $150 million, 20% above $150 million
- ii +2% for sportsbooks in Cook County and +2% for sportsbooks in Chicago
- iii Montana keeps all revenues from sports betting with sales agents receiving 6% of total handle
- iv New Mexico’s sports betting reporting doesn’t specify tax revenue
- v The Oregon Lottery runs the state’s sports betting industry
- vi Tennessee assesses a 1.85% tax on each operator’s total betting handle
- * See below for a discussion about effective tax rates on sports betting
Licensing Fees By State
Sports betting licensing fees vary dramatically from one state to the next.
Some states, like Pennsylvania, approved sky-high fees for sports betting licenses and generated a quick revenue boost as a result. Others priced their licenses much lower – just enough to cover the costs of investigations and background checks.
| State | License Fee |
|---|---|
| Arizona | $750,000 |
| Arkansas | N/A |
| Colorado | $73,000 online / $12,300 retail |
| Connecticut | $250,000 [i] |
| Delaware | N/A |
| Illinois | Varies [ii] |
| Indiana | $100,000 |
| Iowa | $45,000 |
| Louisiana | $750,000 |
| Maine | $200,000 online / $4,000 retail |
| Maryland | Varies [iii] |
| Massachusetts | $5,000,000 |
| Michigan | $150,000 |
| Mississippi | $5,000 |
| Montana | N/A |
| Nebraska | N/A |
| Nevada | $500 |
| New Hampshire | N/A |
| New Jersey | $100,000 |
| New Mexico | N/A |
| North Carolina | N/A |
| Ohio | Varies [iv] |
| Oregon | N/A |
| Pennsylvania | $10,000,000 |
| Rhode Island | N/A |
| South Dakota | $2,000 |
| Tennessee | $700,000 |
| Virginia | $250,000 |
| Washington | N/A |
| Washington DC | $500,000 |
| West Virginia | $100,000 |
| Wisconsin | N/A |
| Wyoming | $100,000 |
- i Connecticut: Tribal operators do not pay licensing fees, but online gaming operators they partner with must pay a $250,000 initial licensing fee
- ii Illinois charges: Racetracks, the lesser of 5% track handle from previous year or $10 million; Casinos, the lesser of 5% GGR from previous year or $10 million; $10 million for sports stadia; $20 million for an online-only license
- iii Maryland: Initial licensing fees range from $50,000 to $2 million depending on the type of license
- iv Ohio: Initial licensing fees range from $500,000 to $3.3 million depending on the type of license and number of third-party operators land-based licensees will partner with to offer online sports betting
What Are Sportsbooks Really Paying In Taxes?
The legalization of sports betting was sold to legislatures in part as a way for states to increase tax revenue. Every state, big and small, was told they were sitting on an existing multi-billion-dollar industry (when measured in handle) that already exists and was currently serviced by the black market.
Not surprisingly, lawmakers jumped at the opportunity. After all, the offer sounded too good to be true: generate tax revenue from a relatively non-controversial product many of their constituents desired while providing existing gambling operators with a new revenue stream.
For the most part, sports betting has delivered as promised. One exception would be on the tax revenue front. The state’s cut has been underwhelming in many locales, as promotional deductions and loss-carryover provisions have eaten way at taxable revenue. That has led to a marked difference in the tax rate set by the state, and the effective tax rate operators are paying.
You’ll find a ten-state sample of effective tax rates below.
New Jersey Sports Betting Tax Revenue
Since the inception of legal sports betting in 2018, the Garden State has collected $169.5 million in taxes from $1.35 billion in sports betting revenues. That’s good for an effective tax rate of 12.5%, which matches the state’s bifurcated tax rates of 8.5% on retail betting and 14.25% on mobile betting.
That should come as no surprise, as New Jersey sports betting law doesn’t provide operators with generous deductions to their GGR.
Pennsylvania Sports Betting Tax Revenue
Pennsylvania’s much-maligned sports betting tax rate is a hefty 36%, but the state allows operators to deduct promotional credits and bonuses. Those deductions have resulted in an effective tax rate of just 24.6%, as Pennsylvania sports betting has generated $188.8 million in taxes from $766.8 million in total sports betting revenue.
That’s still a burdensome amount, but one that pales compared to some of the monopoly jurisdictions, one of which is our next state, Rhode Island.
Rhode Island Sports Betting Tax Revenue
Rhode Island sports betting revenue sits at $73.8 million, with the state receiving $37.6 million of that amount, which works out to the 51% tax rate imposed on sports betting.
If Rhode Island weren’t the smallest state in the country (and 45th in terms of population), its largesse tax rate would get a lot more attention.
Michigan Sports Betting Tax Revenue
Michigan sportsbooks have tallied over $243 million in sports betting revenue, but the state has only seen $8.2 million in taxes due to operator-friendly promotional deductions. As such, the Wolverine State has an effective tax rate of 3.4%, well below the already low 8.4% tax rate the Michigan legislature levied on operators.
Colorado Sports Betting Tax Revenue
Colorado sportsbooks have generated $264.4 million in revenue, resulting in just $11.9 million in taxes. Colorado, like Michigan, also offers plenty of opportunities to lower its taxable revenue, including promotional deductions and loss-carryover. That works out to an effective tax rate of just 4.5%. That’s a significant difference from the state’s 10% tax rate.
Illinois Sports Betting Tax Revenue
With $538.2 million in lifetime revenue and $85.9 million in taxes, Illinois’ effective tax rate is 16%. That aligns with the state’s 15% tax rate and a local 2% tax imposed in counties with more than three million residents. Chicago sportsbooks will have an added 2% tax after the city council voted to remove a sports betting prohibition.
Indiana Sports Betting Tax Revenue
Since its launch, Indiana online sportsbooks have tallied $460.3 million in revenue. Of that amount, $43.8 million of that has been sent to the state in the form of taxes. That works out to an effective tax rate of 9.5%, an exact match of the imposed tax rate.
Tennessee Sports Betting Tax Revenue
The Tennessee sports betting tax rate began at 20% on revenue, but the legislature approved a bill in 2023 to change it to a 1.85% tax on handle. That made Tennessee the fist state to tax online sportsbooks on handle rather than revenue.
When comparing taxes paid under the old rate to taxes operators would have paid under the new tax rule, the difference is negligible, with operators paying slightly less under the tax on handle.
West Virginia Sports Betting Tax Revenue
West Virginia imposed a 10% tax rate on sports betting without promotional deductions. That’s a good thing for West Virginia, considering the pedestrian tax rate. The state has seen sports betting revenue of $87.7 million since the industry’s launch, with $8.8 million in taxes sent to the state, resulting in an effective tax rate that matches the state’s tax rate.
New Hampshire Sports Betting Tax Revenue
New Hampshire sportsbooks are paying 46% in taxes, having generated $58.7 million in sports betting revenue and paying $29 million in taxes to the state. That lines up pretty closely with the state’s tax rates of 51% on online wagers and 50% on retail bets.
Steve Ruddock is the content director for BettingUSA and the Editor-in-Chief of Gaming Law Review.
Steve has covered the legal and legislative developments in the US gambling sector for more than a decade for online and print publications.