Legislature Improves Ohio Sports Betting Tax Structure

Written By Rashid Mohamed on June 14, 2022 - Last Updated on July 10, 2022
How sportsbooks in Ohio will be taxed has become a major concern

When states legalize sports betting, a vital component of the decision-making process is the tax rate and how it’s applied.

Ohio sports betting operators recently received good news out of Columbus when the Ohio legislature changed the tax calculation structure for sports betting operators. 

HB 29 had required sportsbooks to pay taxes daily. With the passage of HB 515 on June 1, operators will now reconcile taxes on sports betting revenues monthly. 

The change will benefit sportsbooks and, likely, bettors in Ohio, who won’t have any associated costs passed down to them. 

Ohio sportsbooks to pay taxes monthly, not daily

Even before HB-29 was ratified, stakeholders talked about a so-called chaser bill to clarify some contentious issues. One of those issues was requiring sportsbooks to pay taxes daily.

It’s common practice for casino operators to pay taxes off of revenue generated over the previous 24 hours. Sportsbooks, however, usually pay taxes monthly. This is because sports betting is inherently a volatile and low-margin business.

For example, if a sportsbook takes in a massive win on a single day, it would be obliged to pay taxes on every penny won, even if there are no significant losses to balance it out. In contrast, should a sportsbook take a big loss one day, it can’t use that loss to balance out winning days.

Ohio sports betting effective tax rate withstands adjustment

Some stakeholders argued that having to pay taxes daily could increase the effective tax rate for operators. Most of the time, if a state’s legislative provisions alter the effective tax rate in any way, it is decreased by writing off promotional credits. Such is the case in Colorado, Michigan, Pennsylvania, and Virginia. Laws in these states allow operators to write off promos.

HB-29 was written in such a way that sportsbooks must pay taxes every day that banks are open. Since banks are generally open from Monday to Friday, that’s when sportsbooks would have to pay their taxes. Weekend receipts would be paid on the following Monday when the banks open again.

In essence, bookies would be paying taxes for a 24-hour gaming window from Tuesday to Friday, but a 72-hour gaming window from Saturday to Monday. Ultimately, this could have had a huge impact on big-event weekends. Also, the bill did not permit negative carry-over.

HB 515 removed unnecessary additional costs

Prior to HB 515 passing, promotional credits would have been much less beneficial to sportsbooks and bettors. The sportsbook wouldn’t have to pay any taxes on game day, but it would be compelled to pay taxes on the futures bets made ahead of the game.

In most other states, sportsbooks that have experienced a negative day can usually use the negative carryover to offset wins on other days.

One situation where this will be more fair: Super Bowl Sunday. Sportsbooks will take in a huge volume of bets leading up to the game while also shelling out for advertising and promotions. The result will be several days in a row showing losses before the books can realize revenue games once the Super Bowl actually happens. 

Follow PlayOhio as the team tracks the sports betting operator applications and the latest launch and news information.

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Rashid Mohamed

Rashid Mohamed is a sportswriter based in Denver, Colo. He holds a bachelor's degree in political science and an associate degree in journalism. Rashid enjoys covering sporting events and the sports betting industry.

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