- Online Gambling Texas
- Online Gambling Taxes
- Online Gambling Winnings Taxes
- Gambling Taxes By State
- Online Gambling Tax Laws
All countries and governments have their own online gambling tax policies and legislation so we need to look at this question from a global perspective. Firstly we'll cover the situation in the UK and following that look at how things may differ in the rest of the world.
Do you have to pay tax on your gambling winnings?
UK Gambling Taxes
This article covers taxes on gambling in the US for U.S. Citizens plus the legality of betting sports online (spoiler alert: in most states, it's perfectly legal). Paying taxes on any sports betting winnings is completely normal, and the IRS will view it as such. Online casino players have a cashier page. Also, sites with player rewards have a running tally of winnings and losses, so printouts of VIP program's reports also help establish your numbers. Ask for your online casino to make a report of pertinent tax information. Tips for Withholding Taxes. For many of us, gambling means buying the occasional lottery ticket on the way home from work, but the Internal Revenue Service says that casual gambling also includes raffles, casino games, poker, sports betting—and, yes, even fantasy football. When you win, your winnings are taxable income, subject to its own tax rules. Find out how taxes are applied to winnings on gambling and sports betting activity, including how to calculate the taxes owed and deducting expenses. By Lance Cothern Updated: Nov 22, 2019. H&R Block Online and H&R Block Software get unlimited sessions of live, personal tax advice with a tax professional with Online Assist and Software Assist for a fee. Standard live chat hours apply (7:00 a.m.
Key Points
- All winnings either online or offline are tax free!
- Any betting tax abolished in 2001 by Gordon Brown.
- Tax used to be on bookies but they passed to punters.
- Bookmakers must now pay 15% POI tax but not punters.
- POI tax on any games of chance increased from 15% to 21% but again not for punters.
In the UK any and all winnings from gambling – either online or at betting shops – are entirely tax free and do not need to be declared as part of any tax return.
This has been the case since the then Chancellor of the Exchequer Gordon Brown's budget of 2001, when he abolished Betting Duty which had stood at 6.75%. That duty was removed in an attempt to persuade bookmakers not to move their operations overseas and therefore take jobs and revenue away from the UK economy.
All of that is not to say that there is no tax involved when it comes to gambling in the UK, however, and there is a ‘point of consumption' tax related to the activity. This does not affect punters themselves, though, and will be dealt with separately further down this page.
Will the situation ever change? Generally speaking there is little chance that this situation will be reversed, either, as the UK tax system is simply not built in such a way that taxing gambling winnings would be viable. This is the case as it is fairly standard within the system that if tax is levied on the income or profit made through an activity, then there must also be an allowance made against losses through the same activity.
With gambling being an activity where overall more losses are made by punters than winnings, therefore, such a change in the tax legislation would cost the UK government revenue. As a result, it is quite simply not something which would be considered. Your betting, casino, slot machine, poker and bingo winnings are yours to keep tax free.
What About Professional Gamblers?
It may seem logical that the tax situation would be different for professional gamblers than it is for occasional punters. When it comes to pure winnings from betting, however, that quite simply is not the case. As we have discussed above these winnings are not taxable and this remains true even for a ‘professional gambler'. That is because HMRC do not recognise professional gambling as a taxable trade.
In fact, within their most up to date ‘Business Income Manual', HMRC clearly define their position on professional gambling:
‘The fact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade.' BIM22017
Gambling winnings, therefore, remain free of tax regardless of whether they make up an individual's main source of income. Where the situation can get a little more complicated, however, is in the case of income related to gambling but not actually direct winnings from gambling. Appearance fees paid to poker players for playing at certain tournaments, for instance, represent payment for a service provided to the tournament organisers and as such may be taxable.
Away from the UK, too, tax laws and legislation do differ and it would benefit a professional gambler outside of the UK to research the specific rules and regulations within their own country.
UK Point of Consumption Tax
As we mentioned earlier, Betting Duty for gamblers was abolished in 2001 and was at that time replaced by a 15% tax on gross profits for bookmakers and gambling providers. That tax was initially charged on a ‘point of supply' basis, meaning that if the bookmaker or company were not based in the UK, then they were not liable. This situation has more recently changed, however.
From the latter part of 2014, the tax on bookmakers' profits was changed to a ‘point of consumption' tax by a combination of the Gambling (Licensing and Advertising) Act 2014 and by the introduction of ‘Remote Gaming Duty'. This means that regardless of where they themselves are based, providers must pay a 15% duty on any bets placed by UK customers.
In the 2018 budget chancellor George Osborne announced that the point of consumption tax would rise from 15% up to 21% for all games of chance but sports betting would remain at 15%, for now.
Gambling Taxes In The Rest Of The World
| Country | Taxes |
|---|---|
| Austria | No |
| Australia | No |
| Australia | No |
| Belgium | No |
| Bulgaria | No |
| Canada | No |
| Czech Republic | No |
| Denmark | No |
| Finland | No |
| France | 2% on poker cash pots, 7.5% on sports (+1.8% levy) and 7.5% on horse racing (+8% levy) |
| Germany | No |
| Greece | No except lottery at 10% |
| Hungary | No |
| Ireland | Bookies pay 1% on all bets – not winnings. |
| Italy | No |
| Kenya | No – bookies must pay 7.5% on their winnings. |
| Latvia | 25% |
| Luxembourg | No |
| Macau | 40% |
| Malta | No |
| Nigeria | 20% |
| Netherlands | No expect lottery at 29% above €454 |
| Portugal | No expect lottery at up to 35% |
| Romania | 1% up to 66,750 RON, additional 16% of surpassing margin up to 445,000, additional 25% of surpassing margin over 445,000 RON |
| Slovenia | No expect lottery at 50% if more than €4,000 |
| Spain | No but must declare winnings as income for taxation |
| Sweden | No |
| South Africa | No except 6% on horse racing. |
| UK | No |
| USA | 25% |
As the above table shows, where various types of gambling are legal there are a variety of different attitudes towards taxation on winnings from those forms of betting. If your country is not listed then it's likely gambling is not strictly legal and there is therefore no taxation laws.
Online Gambling Texas
The tax rates for online gambling are literally and figuratively all over the map as jurisdictions across the United States move to approve, regulate – and profit from – mobile/online wagering.
As 2020 begins, there are only three states – Delaware, Pennsylvania, and New Jersey – with regulated online betting on slots, poker, and table games. Nine states across the country, including PA and NJ, have online sports betting.
Here, we break down the various state tax rates for online gambling and discuss the implications of the vast range that exists across markets.
Online casino rates all over the map
Tax rates for online casino operations run from as low as 15% in New Jersey, the top revenue generator, to the 62.5% found in Delaware. That number comes from totaling the state's cut, referred to as 'revenue sharing' in DE, plus a 12.5% state vendor fee.
Pennsylvania took a different approach, varying tax rates depending on the vertical. PA's rates are 54% for online slots, but 16% for online poker and online table games.
| State | Online Tax Rates |
|---|---|
| Delaware | 62.5%* (50%+12.5%**) |
| New Jersey | 15% |
| Pennsylvania | 54% (slots); 16% (poker & table games) |
*These rates apply after the initial $3.75 million in revenue all goes to the state.
**50% goes to revenue sharing with the state and an additional 12.5% to the state vendor.
Online sportsbook rates run the gamut
Online sportsbook rates vary even more widely across the nine states with mobile sports wagering operational. Those states are:
- Nevada
- New Jersey
- Pennsylvania
- Rhode Island
- West Virginia
- Oregon
- Iowa
- Indiana
- New Hampshire
The lowest tax rate among the online sportsbook jurisdictions is 6.75%, the rate employed in Nevada and Iowa.
The highest, Rhode Island, comes in at a staggering 83% when adding the 51% revenue sharing amount and the 32% cut for the state's vendor.
Delaware comes in second-highest with its 62.5% tax rate set for online casino.
| States with Online Sportsbooks | Tax Rate |
|---|---|
| Nevada | 6.75% |
| Iowa | 6.75% |
| Indiana | 9.5% |
| West Virginia | 10% |
| New Jersey | 13% (casino-based); 14.25% (racetrack-based) |
| Pennsylvania | 36% |
| New Hampshire | 51% (revenue share) |
| Delaware | 62.5%* |
| Rhode Island | 83%** |
| Oregon | Not disclosed |
*Includes 50% revenue share with the state plus 12.5% to the state vendor
**Includes 51% revenue share with the state plus 32% to the state vendor
Pitfalls of high taxes on online gambling
Nevada was the lone state with full-fledged sports betting prior to the 2018 overturning of PASPA that opened the way for other states to join in. Their reasonable 6.75% tax rate across the board has stood the test of time.
While states like New Jersey, Iowa, and Indiana have followed suit with operator-friendly tax rates, others have clearly opted for a different strategy – to their detriment.
The American Gaming Association (AGA) believes setting tax rates too high to foster competition in the market makes it difficult to compete against illegal gambling operations. The AGA tracks tax rates across the country in the organization's annual State of the State's report.
'To compete with the illegal market, states must implement sensible policies – including tax rates and licensing fees – that enable a seamless shift to safer alternatives for consumers,' said Casey Clark, the AGA's senior vice president, strategic communications.
Market saturation is changing the gambling business
There is a longstanding tendency by governments to treat gambling taxation as an elastic cash cow, shifting program funding from a state's voting constituents to outsider companies.
That may have worked when gambling was relatively new, but with the increasing competition in the Northeast and Mid-Atlantic Add gopher gold. gambling markets, high taxation in certain states has caused issues.
The high online tax rates in Pennsylvania come up when discussing the slowed rate of gambling market growth in the state. The huge 54% slot rate likely in large part explains why there are still just five online slot operators in a state as large and populous as Pennsylvania, with its nearly 13 million residents.
The other factor holding back expansion is likely PA's decision to require computer servers to be housed within the borders of the Keystone State. This regulation stems from an early 2019 DOJ Wire Act opinion that has been taken at face value by the Pennsylvania Gaming Control Board, even as other states attribute little weight to the interpretation.
With online casino growth left wanting, PA's online sportsbook market has proven more appealing for operators, despite the hefty 36% tax rate on revenue.
Online sportsbook expansion is ‘hot'
There are currently eight online sportsbooks in PA with more expected to launch in the near future.
Pennsylvania's online sports betting market has several factors working to their benefit.
Joe Bertolone, the executive director of the International Center for Gaming at the University of Nevada Las Vegas, said online sportsbook growth, even in high tax jurisdictions such as PA, will continue to drive expansion and innovation simply because that niche is considered 'hot.'
Despite the high tax rate, the PA market is a 'must' for operators due to the size of the state's population of close to 13 million, added Bertolone.
'You've got to be there,' he said of PA.
Online Gambling Taxes
Small market states feel negative effects of high tax rates
Smaller markets like Delaware and Rhode Island don't carry the same draw for potential operators. The impact of high tax rates is magnified in these states, which can be further constrained by local law.
Online Gambling Winnings Taxes
While 'The First State' was indeed the first in the country to offer a form of legal online casino, revenues from online gambling have underwhelmed to date. In addition to a small population of around 1 million, Delaware is constrained by a law that allows for just three online casino operators, one for each land-based casino.
All three brands operate on one single platform run by 888 Holdings. Competition in the DE market, therefore, is lacking.
The first state (besides Nevada) to launch legal retail sports betting, Delaware is still limited to land-based wagering at their three casinos plus state lottery retailers which can accept parlays of three teams or more.
The state lottery runs Rhode Island‘s only legal online sportsbook, and it has limited features and offers no bonus incentives.
Both states have traditionally treated gambling operations like a goose with limitless gold eggs. But they may soon be forced to change with the times.
Competition necessitates adjustments
Gambling Taxes By State
After being out ahead of the curve when it comes to offering legal gambling, Delaware seems to be falling behind in adjusting to the post-PASPA era of online wagering.
Between its three casino sportsbooks and lottery retailers, DE brought in $132.5 million in handle for the year 2019, $19.5 million being revenue.
A look at year-on-year figures from 2018 to 2019 in the popular betting month of November, Delaware saw a significant 46% drop in handle while revenue was stagnant at $1.3 million.
With competition in surrounding states increasing, gambling revenues in Rhode Island have also disappointed of late. The Providence Journal reported in November that the state would claim less than $10 million in revenue for sports betting for 2019. That's less than half of the $22.7 million projected in profit.
The state also now expects only $105 million in handle via the state's new mobile app, just a fraction of the $595 million assumed in prior projections.
Will high online tax rates survive?
Bertolone has cautioned that expansion is dynamic, and markets will continue to feel the 'ripple' as saturation is reached.
The other factor holding back expansion is likely PA's decision to require computer servers to be housed within the borders of the Keystone State. This regulation stems from an early 2019 DOJ Wire Act opinion that has been taken at face value by the Pennsylvania Gaming Control Board, even as other states attribute little weight to the interpretation.
With online casino growth left wanting, PA's online sportsbook market has proven more appealing for operators, despite the hefty 36% tax rate on revenue.
Online sportsbook expansion is ‘hot'
There are currently eight online sportsbooks in PA with more expected to launch in the near future.
Pennsylvania's online sports betting market has several factors working to their benefit.
Joe Bertolone, the executive director of the International Center for Gaming at the University of Nevada Las Vegas, said online sportsbook growth, even in high tax jurisdictions such as PA, will continue to drive expansion and innovation simply because that niche is considered 'hot.'
Despite the high tax rate, the PA market is a 'must' for operators due to the size of the state's population of close to 13 million, added Bertolone.
'You've got to be there,' he said of PA.
Online Gambling Taxes
Small market states feel negative effects of high tax rates
Smaller markets like Delaware and Rhode Island don't carry the same draw for potential operators. The impact of high tax rates is magnified in these states, which can be further constrained by local law.
Online Gambling Winnings Taxes
While 'The First State' was indeed the first in the country to offer a form of legal online casino, revenues from online gambling have underwhelmed to date. In addition to a small population of around 1 million, Delaware is constrained by a law that allows for just three online casino operators, one for each land-based casino.
All three brands operate on one single platform run by 888 Holdings. Competition in the DE market, therefore, is lacking.
The first state (besides Nevada) to launch legal retail sports betting, Delaware is still limited to land-based wagering at their three casinos plus state lottery retailers which can accept parlays of three teams or more.
The state lottery runs Rhode Island‘s only legal online sportsbook, and it has limited features and offers no bonus incentives.
Both states have traditionally treated gambling operations like a goose with limitless gold eggs. But they may soon be forced to change with the times.
Competition necessitates adjustments
Gambling Taxes By State
After being out ahead of the curve when it comes to offering legal gambling, Delaware seems to be falling behind in adjusting to the post-PASPA era of online wagering.
Between its three casino sportsbooks and lottery retailers, DE brought in $132.5 million in handle for the year 2019, $19.5 million being revenue.
A look at year-on-year figures from 2018 to 2019 in the popular betting month of November, Delaware saw a significant 46% drop in handle while revenue was stagnant at $1.3 million.
With competition in surrounding states increasing, gambling revenues in Rhode Island have also disappointed of late. The Providence Journal reported in November that the state would claim less than $10 million in revenue for sports betting for 2019. That's less than half of the $22.7 million projected in profit.
The state also now expects only $105 million in handle via the state's new mobile app, just a fraction of the $595 million assumed in prior projections.
Will high online tax rates survive?
Bertolone has cautioned that expansion is dynamic, and markets will continue to feel the 'ripple' as saturation is reached.
And yet, just like Delaware, Rhode Island's tax rate remains in the stratosphere. PA's rates likewise leave something to be desired, especially for potential online casino operators.
Online Gambling Tax Laws
Whether states will make changes to online gambling tax rates perceived by many to be unsustainable or stunting growth of the market remains to be seen.
