Tennessee lawmakers have changed the way legal sports betting in the state will be taxed.
Gov. Bill Lee has signed Senate Bill 475 — a piece of legislation that will tax sports betting in Tennessee at a 2% rate on an operator’s total sports betting handle, shifting from a previous tax rate of 20% on adjusted gross income. Tennessee, which launched online sports betting sites in 2020, is now the first state in America to tax an operator’s total handle instead of its gross revenues.
SB 475 — introduced in January— was unanimously passed in the state’s Senate by a 30-0 vote in April. The bill was later approved by its House of Representatives with a 75-7 vote.
In addition to the tax rate change, SB 475 removes Tennessee’s hold requirement, which forces online betting operators in the Volunteer State to hold 10% of the money they handle each year. The adjustment comes after only nine of Tennessee’s 11 online sportsbooks held 10% in 2022.
SB 475 also nixes a requirement for operators to use official league data for in-play wagering.
April stands strong
The tax rate change for sports betting in Tennessee comes after strong returns in April. According to the Tennessee Sports Wagering Advisory Council, the state had a total sports betting handle of $318.4 million for the month with an adjusted gross income of $32 million.
Sportsbooks paid out $284.1 million to bettors while being assessed a $6.4 million privilege tax.
Tennessee offers only online sports betting with no casino or retail sports betting options. Major sportsbooks, including DraftKings, FanDuel, and BetMGM have secured market access in the state. In March, Fanatics Sportsbook became the latest operator to be awarded a license.
Fanatics, which reportedly agreed to purchase PointsBet’s U.S. business in a deal valued at roughly $150 million last week, has yet to announce a launch date for operations in Tennessee.
SB 475 wasn’t the only bill introduced in Tennessee that aimed to change the state’s tax requirements for wagering. House Bill 1362 — also introduced in January — looked to tax the handle of online wagering operators in the state at a 1.85% rate. The bill, which is sponsored by Rep. Andrew Farmer, had yet to reach either of Tennessee’s legislative chambers for approval.