Tennessee Sports Betting Handle Drops Ahead of Tax Changes

The Sports Wagering Advisory Council (SWAC) announced that Tennessee saw a sports betting handle of $230.3 million in June. That number is up 7% from last June but down 17% from May. The NBA and NHL playoffs coming to an end certainly contributed to the drop, but it still led to another month where the state failed to meet its tax goal. 

The more troubling number for the Volunteer state was the $23.1 million in gross income reported by operators. That number is down 35% from May, leading to a smaller operator hold percentage in June. Operators in the state had a solid 11% hold, but that is down from 13.3% in June.

June was the final month before new sports betting regulations went live in Tennessee, and the state hopes it will help them meet their tax goals moving forward.

New Tennessee Sports Betting Tax System

Starting on July 1, the state of Tennessee officially brought an end to the 20% tax rate being assessed to sportsbooks in the state. Instead, they will charge each operator a flat 1.85% tax on the monthly handle. Tennessee is the first state to place a tax on the handle instead of gross revenue, but others could soon follow.

The biggest reason for this change was their failure to meet their monthly tax goals. The state believed that part of the reason for that was the low hold percentage for operators. The “hold” refers to money the sportsbooks have to set aside to be taxed. Many operators failed to meet the hold percentages, resulting in less money for that state. Tennessee is addressing the issue by taxing the overall handle instead of relying on the operators to meet their hold requirements. 

On top of the change to the tax system, Tennessee will also begin charging operators in the state to use services like geolocation, payment processing, etc. These services are typically free but will now be an extra source of income for the Volunteer State.