Potential Ohio Sportsbooks Could Be Scared By Unique Tax Payment Structure

While sports betting has been legalized in Ohio, it will be months before the state begins the licensing process. That gives the Ohio Casino Control Commission time to craft the rules that will govern the process in the state.

It also gives those contemplating filing for licenses time to digest the legal framework that was signed into law by Gov. Mike DeWine on Dec. 22, 2021.

Comparing Ohio Sports Betting To Other States

On the plus side, House Bill 29 calls for up to 25 licenses for mobile sports betting in Ohio to be granted. New Jersey has 23 mobile sports-betting platforms, while New York has approved nine mobile sportsbooks.

So if a sportsbook wants to expand in Ohio, it should have the opportunity. That’s good for smaller operators or even some larger ones that weren’t able to land a license in New York.

And, on the surface, the state’s 10% tax rate on gross gaming revenues should be appealing to operators. Ohio’s approach seems to be mirroring that of New Jersey, which taxes mobile sports betting at 13.5%.

New York, meanwhile, has a 51% tax on gross revenues — taking the approach that having fewer operators means each one garners a bigger share of the market and thus can pay a higher tax rate.

Also Read: Will Ohio Sports Betting Allow Wagers On College Sports?

Ohio Sportsbooks’ Daily Tax Payment Structure Is Unique

But this doesn’t mean there aren’t areas of concern for those contemplating applying for licenses in Ohio when that time arrives.

House Bill 29 requires sportsbooks to pay taxes daily, which likely means Monday-Friday as most banks are closed on weekends. This is a different approach from states that require sportsbooks to pay taxes on a monthly basis. The bill also does not permit negative carryover.

A monthly requirement to pay taxes has a leveling effect as the wins and losses balance each other out to some extent. Paying daily means sportsbook operators may have big tax bills on a Monday – especially after a weekend’s worth of college and pro football games – while owing nothing on days when bettors had the edge.

You might think that it’s all the same at the end of the month, but that’s not necessarily the case. Paying taxes daily on any winnings without the benefit of negative carryover is equivalent to paying a higher overall tax rate.

As an example, if Futures Bets are placed on the NCAA’s basketball champions, that money would be counted as part of the sportsbook’s “winnings” on the day the bets were placed, but there’s no resolution of the bet that day. But the sportsbooks would have to pay 10% of that handle in taxes, despite the possibility the sportsbook could eventually lose the wager.

It’s possible that language is changed prior to the licensing period, but – for now – it’s something that possible licensees will be keeping an eye on.

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