Tennessee handle tax moves a step closer with legislature nod
Representatives and Senators greenlight unprecedented Senate Bill 475 with 1.85% tax in the offing
A first-of-its-kind tax on operator handle has passed a significant hurdle with concurrent approvals in votes in both the Tennessee House of Representatives and Senate.
Senate Bill 475 passed through the house by a vote of 75-7 on Friday, while senators voted in the affirmative on two separate amendments brought through by house representatives.
SB 475 had been under consideration by the Senate Finance, Ways, and Means Committee since the end of March and would have taxed operator handle at a rate of 2%, however amendments at committee stage saw the rate reduce to 1.85%.
At present, local sportsbook operators are taxed at a rate of 20% of their gross gambling revenue (GGR).
In addition to the handle tax changes, the amended SB 475 also removes an existing requirement for Tennessee operators to maintain a 10% hold on all wagers or face punitive measures, something which serves as a significant impediment for the state as it is often manipulated by operators to pay fines of low value fines that have little impact on their business.
The passed bill “prohibits licensees from deducting payouts to bettors or promotional wagers or payouts from total gross wagers.”
SB 475 includes language to expunge a mandate that all operators in the state use official league data only when compiling sportsbook markets, opening the door for operators to use unofficial and potentially cheaper data sources.
This followed challenges to the requirement made by SuperBook Sports and Betly on commercial grounds in the courts in February, where the duo suggested terms used by data supplier Genius Sports were not “commercially reasonable” in the state and should be challenged.
Changes to licensing rules are also enshrined within legislation which would see sportsbook vendors register for licenses every three years rather than annually, as is current, with a total fee payable of $150,000.
In respect of operators, license renewal fees are tiered based on the gross handle taken by the operator in the previous year. Operators taking in more than $100m in handle would be required to pay renewal fees of $750,000, reducing to $375,000 for those operators taking less than $100m.
Lastly, the passed legislation also would see the dropping of the Advisory nomenclature from the official designation of the Tennessee regulator, changing it to the Tennessee Sports Wagering Council.
SB 475 will now pass to Tennessee Governor Bill Lee for signing into law.