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US States with the Lowest Sports Betting Taxes

US States with the Lowest Taxes on Sports Betting

State and local governments across the United States have relied on the commercial gaming industry to buffer its coffers for decades. In 2018, the national gaming landscape would change after the Supreme Court permitted states to offer sanctioned sports betting. Within a year, 11 states and the District of Columbia authorized wagering. Now, 38 states have legalized wagering for betting sites.

Similar to collecting taxes on slot machine winnings, the emergence of sports betting has also sparked differences in how state and local governments tax the revenue it generates. Since May 2018, bettors across America have wagered more than $220 billion with U.S. sports betting casinos, according to the American Gaming Association. The results have generated $3 billion in tax revenue for states, but those returns have varied based on each jurisdiction's tax rates.

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Nevada Ties for Lowest Sports Betting Tax Rate in the US

Nevada ties for lowest sports betting tax rate in the US

States that offer some of the lowest tax rates on online sports betting include Nevada, Iowa, and Indiana - three jurisdictions that authorized wagering before 2020. Nevada has a 6.75% tax rate and taxes sports betting revenue at the same rate as Iowa. States like Tennessee offer low tax rates of 1.85% but are taxed based on betting handle.

In some states, tax rates can change depending on whether the bets were placed at brick-and-mortar facilities or at casinos online. In these cases, tax rates indicated in the map were those for online sports bets.

The Northeast has imposed heavier tax rates on sports betting revenue. New York - America's largest online gaming market in 2022 - tied for the highest tax rate on online sports betting revenue at 51% with New Hampshire.

New Hampshire, which went live with online wagering in 2019, has only one legal sportsbook - DraftKings. From July 1, 2022, to June 30, 2023, the Granite State generated $69 million in online gross gaming revenue, earning the state $31.7 million.

Read on to see the ranking of the five states with the lowest taxes on sports betting. Tax rates will be at the forefront of pending regulation as more states authorize sports bettings.

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#5. Michigan

  • Online sports betting tax rate: 9.65%
  • Legalization date: Dec. 20, 2019
  • Tax allocation: School Aid Fund and $2 million annually goes to helping firefighters undergoing cancer treatments

#4. Indiana

  • Online sports betting tax rate: 9.5%
  • Legalization date: May 13, 2019
  • Tax allocation: State general fund, with a set share going to fund solutions for problem gambling

#3. South Dakota

  • Online sports betting tax rate: 9%
  • Legalization date: March 18, 2021
  • Tax allocation: Distributed across a variety of state initiatives, with a special emphasis on Lawrence County

#2. Iowa (tie)

  • Online sports betting tax rate: 6.75%
  • Legalization date: May 13, 2019
  • Tax allocation: State general fund

#1. Nevada (tie)

  • Online sports betting tax rate: 6.75%
  • Legalization date: 20101949
  • Tax allocation: State general fund, with education and health services key recipients

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In this research, we used data from the American Gaming Association to map the tax rates of all states where sports betting is legal. Each state with authorized sports betting in the USA determines its own tax rate and the allocation of revenue. Tax rates differ based on several factors, including state regulations and market size.