Virginia has brought in over $26 million in tax revenue since the inception of legalized sports betting last year, but is it enough?
According to a review by the Richmond Times-Dispatch, sports betting operators in VA have paid $26.7 million to the state, while offering $168.8 million in promotions and bonuses to their customers since the launch in January 2021.
While trying to lure potential bettors with bonuses is typical in the sports betting industry, Virginia law allows operators to catch a tax break from their promotional offerings.
Operators of Virginia sports betting apps must pay a 15% tax from their adjusted gross revenue. However, the structure of Virginia law allows them to deduct the promotional dollars from the AGR, meaning the state has a much smaller sum to tax.
Sportsbooks Catch Big Breaks
The write-offs have nullified 43.7% of the revenue that the state would have been able to tax. As a result of the loophole, only five of the 12 live sportsbooks in the state have paid any taxes at all so far.
The newspaper reported that gaming-giant Caesars, which owns 9.7% of the Virginia betting market, is the largest operator yet to make a tax payment.
The five companies that have paid taxes are Barstool Sports, BetMGM, DraftKings, FanDuel, and Hard Rock digital.
Virginia Tax Breaks Are In Minority
Virginia is one of eight out of 30 states with legalized sports betting that allows the tax write-off to sports betting operators.
In theory, allowing the sports betting bonuses will enable the companies to attract more bettors via promotions. Still, there are questions as to whether it’s in the state’s best interest.
Colorado is one of the states that offer the same tax break to operators, and according to Bloomberg, the Centennial State fell woefully short of its gambling revenue projections after the first full year of operation.
Sports betting companies in CO were able to deduct 62% of their revenue in the first year, mainly by way of bonuses and promotions.
Meanwhile, New York, which has a 51% tax rate and does not allow the break to its betting operators, has exploded out of the gates since mobile sports betting launched on January 8, bringing in over $216 million in taxes for the state’s education fund.
Virginia Delegate Mark Sickles, a Fairfax Democrat, brought forth legislation to eliminate the Virginia tax break, but it did not make it to the General Assembly.
The issue is expected to be revisited next year.