Which state has the highest taxes for sports betting and which state has the lowest taxes? And how much revenue are we generating as a result?
When it comes to sports betting, taxes were one of the most important issues surrounding the legalization debate.
Taxing sports betting, the argument went, would generate tens of millions of dollars per year in revenue.
And if anything, these estimates were low! Sports betting only became legal in January 2022 in the state of New York, yet earlier this year the Empire State crossed the billion-dollar threshold in tax revenue generated from the activity.
But it’s not quite that simple. Each state taxes revenue from sports betting at a different rate and under different rules. We look at the highest and lowest tax rates for sports betting in the United States.
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States with the Highest Sports Betting Taxes
Of course, the not-so-secret recipe to New York’s eye-popping tax revenue generation is the nation’s highest taxation rate for sports betting revenue at a whopping 51%.
Operators continually mention their struggles to make a profit with such a hefty rate of taxation, but NY legislators have no plans to make any changes in the near future.
New York’s sports-mad and robust population contributes to the state’s ability to lap the field in tax revenue generation. Now approaching $1.22 billion in total tax revenue, New York has generated more than twice the tax money of the second-highest state, Pennsylvania (only now approaching $500 million) since the May 2018 repeal of the Professional and Amateur Sports Protection Act of 1992, which paved the way for legalized sports betting in the U.S.
What’s interesting, however, is that New York isn’t alone in charging that astronomical 51% figure. In fact, they weren’t even the first state to do so.
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Delaware Sports Betting Tax Revenue
Delaware, which allows wagering only on an in-person basis at each of the state’s three casinos, levied the first 51% tax rate just days after PAPSA fell. But to date, Delaware has generated about $66 million in tax revenue, due in no small part to the fact the state ranks 45th in population (whereas New York is either third of fourth, depending which source you believe).
It’s a similar story in Rhode Island and New Hampshire, each with just a few thousand more people than Delaware, but with legal online sports wagering since 2019. Despite getting a later start than Delaware, Rhode Island is approaching the $80 million figure in tax revenue generation, while New Hampshire should reach $85 million by the end of 2023.
It’s nowhere close to the New York figure, but the difference shows the impact of online wagering vs. mere in-person retail wagering.
More States with High Sports Betting Taxes
Pennsylvania comes in next on the list at a tax rate of 36%, but the effective tax rate is closer to 24%.
This explanation would require a full-on, college-level class in economics and taxation, but the gist of it is that certain promotions and losses in revenue are deductible from taxes in Pennsylvania (and select other states) lowering the actual revenue realized.
Nonetheless, as we mentioned Pennsylvania has generated $470 million in taxes since legalizing sports wagering in 2018. This places them second behind New York.
Pennsylvania is also interesting in their approach because they charged an astronomical, nation-high $10 million licensure fee, opting for a quick influx of revenue. If they hadn’t made this move, chances are the tax rate could be similar to New York’s.
States with the Lowest Tax Rates for Sports Betting
Most states are in a range of 8% to 15% tax rate on sports betting. A few notable exceptions:
- Arizona taxes retail betting at 8% and online betting at 10%. However, the effective tax rate is only 3.6% when factoring in exemptions and promotions
- Iowa and Nevada charge tax rates of only 6.75%. Of course, most people know the long history of the gambling industry in the state of Nevada, so it’s the Hawkeye State that stands as the true outlier here.
- Montana keeps ALL revenue from sports betting, with a 6% “finder’s fee” for sales agents
- Tennessee assesses a 1.85% tax on all sports betting operators’ handle. In other words, EVERY dollar is taxed at 1.85%, not just revenue.
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Each State’s Sports Betting Tax Rate & Total Revenue
The chart below, in alphabetical order, displays retail and online tax rates, with a third column for revenue generated to date.
When you see an N/A, it means either:
- The state doesn’t offer such an option (many states only allow retail sports wagering and don’t allow for online play).
- The figures either aren’t publicly reported or sports gambling hasn’t been legal in that state long enough to generate reliable figures.
Sports Betting Taxes By State
| STATE | RETAIL TAX RATE | ONLINE TAX RATE | REVENUE AS OF SEPT. 2023 |
| Arizona | 8% | 10% | $54,188,188 |
| Arkansas (1) | 13%/20% | N/A | $7,134,908 |
| Colorado | 10% | 10% | $48,269,766 |
| Connecticut | 13.75% | 13.75% | $28.938,505 |
| Delaware | 50% | 50% | $66,237,883 |
| Illinois (2) | 15% | 15% | $321,906,698 |
| Indiana | 9.5% | 9.5% | $105,472,316 |
| Iowa | 6.75% | 6.75% | $31,206,102 |
| Kansas | 10% | 10% | $6,987,745 |
| Kentucky | 9.75% | 14.25% | N/A |
| Louisiana | 10% | 15% | $57,204,466 |
| Maine | 10% | 10% | N/A |
| Maryland | 15% | 15% | $34,010,103 |
| Massachusetts | 15% | 20% | $50,259,246 |
| Michigan | 8.4% | 8.4% | $51,086,027 |
| Mississippi | 12% | N/A | $30,926,646 |
| Montana (3) | ALL | ALL | $3,354,921 |
| Nebraska | 20% | N/A | N/A |
| Nevada | 6.75% | 6.75% | $128.984,198 |
| New Hampshire | 51% | 51% | $83,996,467 |
| New Jersey | 8.5% | 13% | $411,099,015 |
| New Mexico (4) | N/A | N/A | N/A |
| New York | 10% | 51% | $1,218,070,342 |
| North Carolina | N/A | N/A | N/A |
| Ohio | 20% | 20% | $61,738,509 |
| Oregon (5) | N/A | N/A | $73,159,895 |
| Pennsylvania | 36% | 36% | $470,192,881 |
| Rhode Island | 51% | 51% | $78,687,244 |
| South Dakota | 9% | N/A | $158,624 |
| Tennessee (6) | 1.85% | 1.85% | $161,830,371 |
| Virginia | 15% | 15% | $110,710,133 |
| Washington | N/A | N/A | N/A |
| Washington, D.C. | 10% | 10% | $18,925,684 |
| West Virginia | 10% | 10% | $17,485,550 |
| Wisconsin | N/A | N/A | N/A |
| Wyoming | N/A | 10% | $1,588,605 |
- Arkansas charges 13% of net gaming receipts up to $150 million, and 20% on net receipts after the first $150 million.
- Add an extra 2% for all sportsbooks in Cook County (where Chicago is located).
- Montana keeps all revenues, minus a 6% fee for sales agents.
- New Mexico does not specify sports betting tax revenue.
- Oregon’s state lottery runs the state’s sports betting operation; no figures available.
- Tennessee levies a 1.85% tax on all sports betting handle.
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