Sports Betting Taxes Lower than the Statutory Rate in Colorado, Michigan, Pennsylvania, and Virginia


A study conducted by Tax Foundation revealed that sports betting taxes in the US vary significantly. The study was conducted in 18 states where sports betting is offered. The study found that taxes are relatively lower than the statutory rate in Michigan, Pennsylvania, Colorado, and Michigan.

The four states permitted sports betting operators to deduct promotional costs that include free bets and bonuses to lower their liability. Virginia, Colorado, and Pennsylvania also allow operators to deduct Federal Excise Tax. Virginia even allows a deduction for losses.

According to Senior Policy Analyst Ulrik Boesen, deductions present a challenge when forecasting revenues. For instance, in Colorado, voters approved sports betting in 2019 for funding the state’s Water Plan. The state estimated that it could collect $16 million annually for the first five years.

However, Colorado only collected $6.6 million in 2020 to 2021 financial year. Colorado charge sports betting at a rate of 10 percent, but only 4.47 percent is effective. Michigan 8.4 percent is only effective at a rate of 3.28 percent.

In the US, 21 states have legalized sports betting. However, only 10 states have a legalized operational sportsbooks. Boesen believes that states that have passed legislation legalizing sports betting should pay attention to how tax policy is working in other states.

Boesen also calls for states to levy high taxes on sportsbook revenue, noting that states with a low tax burden may create more economic activity.

“States with a low tax burden may generate more economic activity. The states with the highest handle per capita all have relatively low Tax rates.”


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