Tax Rates Could Be Center Of Upcoming MD Online Casino Bill Hearings

Written By Phil West on February 23, 2024
A visual representation of changing tax rates for a story about the Maryland online casino hearings.

Before the end of this short month, the legislature will set the wheels of two competing online casino bills in motion. The measures face committee hearings that could lead to restructuring.

House Bill 1319 is first up. Its hearing in the House Ways and Means Committee is on Feb. 26. Rep. Vanessa Atterbeary, chairwoman of that committee, filed the bill earlier this year. Two days later, Sen. Ron Watson’s legislation, Senate Bill 603 and its companion bill, SB 565, will get a hearing before the Senate Budget and Taxation Committee.

As debate begins on the bills, which have some similarities and also differences, especially on proposed tax rates, Maryland lawmakers can look to the states that have legalized online casinos to enact tax rates that works for everyone.

Proposed tax rates different in House and Senate bills

The six retail casinos in Maryland generate roughly $2 billion in revenue annually. Maryland online casinos could generate even more. A recent study concludes that legal iGaming could actually increase revenue at brick-and-mortar casinos in the state.

The House and Senate bills have some similarities:

  • Create a renewal fee equal to 1% of the average annual proceeds over the previous three years
  • Allow operators to deduct promotion costs from their tax bill in the first year followed by a 20% write-off rate
  • Mandate that live dealer studios must be in Maryland but not on casino property, with assurances that jobs lost from legalizing online casino gambling are offset with jobs created

But they also have some marked differences.

The Senate measures tie online casino licenses to existing casinos. The House bill does not. SB 603’s flat tax rate is 47% for electronic games and live dealer games. HB 1319 separates its tax rates, with electronic game revenue taxed at 55% and live dealer games taxed at 20%.

Should Maryland join the states with existing online casino laws, it could enter the Multi-State Internet Gaming Agreement, initially signed by Nevada and Delaware in 2014. It allows online poker players from different states to come together to play. The agreement now includes Michigan, New Jersey and West Virginia.

Maryland lawmakers debating the bills can look to the tax rates imposed on iGaming in the current states that offer it. The following statistics and quotes come from the American Gaming Association.

Connecticut

“A master wagering licensee, if licensed to operate online casino gaming, must pay to the state for deposit in the general fund 18% of the gross gaming revenue (GGR) from online casino gaming for the first five years after commencement of operations. During the sixth year of operations and any succeeding year after, the tax rate increases to 20% GGR.”

Delaware

Delaware lawmakers tax internet video lottery games to the tune of 57%; revenues are distributed as follows:

  • Approximately 42% to three tracks as commissions for operating the games
  • Around 40% to the State General Fund to help pay for state services
  • Approximately 10% to increasing the size of horse race purses
  • Around 7% to leasing, servicing and upgrading games, as well as monitoring games with the lottery’s central computer system

Note: This revenue structure is applied to gross revenues only after the first $3.75 million in proceeds has been transferred to the State Lottery Fund.

Michigan

Operators are subject to a graduated tax on the adjusted gross receipts as follows:

  • Less than $4 million: 20%
  • $4 million to $8 million: 22%
  • $8 million to $10 million: 24%
  • $10 million to $12 million: 26%
  • $12 million or more: 28%

In addition, Detroit commercial casinos are also subject to an additional 1.25% municipal tax. Operators can deduct free play of up to 10% of gross receipts in the first three years of operation, dropping to 6% in the fourth year, 4% in the fifth and no free play deductions in Year 6 and beyond.

Nevada

The Silver State has online casino gaming only in the form of online poker. Operators pay a graduated GGR tax as follows:

  • 3.5% of GGR up to $50,000 per month
  • 4.5% of GGR between $50,000 and $134,000 per month
  • 6.75 % of GGR exceeding $134,000 per month

New Jersey

Garden State regulators mandate online casinos to be tied to a licensed land-based property in Atlantic City.

The tax rate is set at 15% of internet gross gaming revenues. In addition, licensees are required to pay an investment alternative tax on Internet gaming gross revenues. This tax is set at 5% of gross revenues, or licensees may pay a community investment alternative tax rate of 2.5%.

Pennsylvania

Interactive gaming operators are subject to the following tax rates:

  • 16% on online peer-to-peer games (i.e., poker)
  • 16% on online non-peer-to-peer table games
  • 54% on online slot machine games
  • 36% on online sports betting

Rhode Island

The new online casino law sets a 61% tax rate on slots and 15.5% on table games.

West Virginia

The Mountain State taxes online casino revenue at 15% of GGR.

Photo by PlayMaryland
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Phil West

Phil West is a longtime journalist based in Austin, Texas, whose bylines have appeared in The Daily Dot, Nautilus, Pro Soccer USA, Howler, Los Angeles Times, Seattle Times, Philadelphia Inquirer, San Antonio Express-News, Austin American-Statesman, and Austin Chronicle. He has also written two books about soccer.

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