Tax Question Created with New Pennsylvania iGaming Bill

by Jim Hall

New online gambling legislation in Pennsylvania creates question on taxes in the state.

In Pennsylvania, online gambling has been a hot topic of debate for many years. Since last year, the state has shown serious progress on the matter, with the possibility of passing legislation this year. However, a new bill was introduced earlier this week that has raised questions about taxes and if the state would benefit from such online gambling legislation.

Senate Bill 524

Jay CostaOn Monday, Senate Bill 524 was introduced by Senator Jay Costa. The bill is co-sponsored by Senators Wayne Fontana, Juditch Schwank and Vincent Hughes and would legalize online gaming in the state. The bill was actually previewed back in January by Costa when a Senate Co-Sponsorship Memorandum was filed by the Senator.

This time around, the actual details of the measure have been released. On top of legalizing online gambling and providing regulations, daily fantasy sports will also be included. This bill also expands into land-based gaming with multi-state progressive games as well as skill-based games added in the state.

With the measure, airports in Pennsylvania would be allowed to offer online gambling. Players would have the ability to use tablets, called ‘multi-use computing devices’ in the legislation, to play their favorite casino games. This was a big issue last year as there were opponents of online gaming when considering gambling expansion outside of casinos.

Most Controversial Component

With every bill associated with online gambling, there is going to be a point of contention or controversial component. For SB 524, the most controversial portion of the measure is the operating cost for online gaming providers. When looking at other bills introduced in the state, the bill by Costa has the highest fees set as well as tax rate.

The bill will impose a $10 million licensing fee which is a little bit higher than the $8 million presented in other bills. Vendors will have to pay a smaller fee of $5 million, but this amount is still higher than the $2 million suggested in other legislation. Vendors are the groups that would provide software, gaming servers, etc.

Operators are not going to like the tax rate suggested by Costa as it sits at 25%. Other bills have suggested a smaller tax rate of 14%. 14% is reasonable and more appealing to operators as they will lose less revenues in the process. This amount is also similar to other states who offer or who are looking to offer such activities. 25% would account for daily fantasy sports and casino/poker gaming which may keep some operators from showing interest.

To be successful, online gaming operators need to be able to make a profit. Having such a high fees in place along with a high tax rate, the state may have trouble seeing anyone show interest in offering online gaming services. While a fair share of taxes and fees should be paid in order to benefit the state, too much will result in no earnings for companies which leads to shut down sites or no interest in the industry.

So now, we have to wait and see how this legislation is received. It seems the problem with passing online gaming legislation in Pennsylvania is that there is always something included that keeps a bill from moving forward. With this legislation, it may be the tax rates or fees. It may also be the fact that gaming would expand beyond casino gaming venues which is opposed in the state. Only time will tell if this will be the legislation to see Pennsylvania legalize online gaming or if another measure will have to be created.