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Michigan Senators Propose Changes to Sports Betting and iGaming Tax Allocations

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Michigan Senators Propose Changes to Sports Betting and iGaming Tax Allocations

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December 16, 2024February 12, 2023
Michigan Senators Propose Changes to Sports Betting and iGaming Tax Allocations

Two Michigan Senators, Jeremy Moss and Sam Singh, have proposed bills to increase iGaming and sports betting taxes. The senators proposed distinct tax rates for the two verticals, hoping to direct realized money to the Internet Gaming Fund, Detroit Services, and the Agricultural Fund.

Michigan remains one of the US’s most tax-friendly states for gambling. Both sportsbooks and online casinos enjoy significantly lower taxes compared to other states. They are also allowed to deduct promo expenses before applying taxes.

Singh and Moss propose a one percentage point tax hike (1%) for online casinos and a one-tenth increase (0.1%) for sports betting operators.

What Tax Increase Means for Sports Betting Operators

Sportsbooks are taxed at 8.4% under the current state gambling laws. With promo deductions, the value decreases significantly to 5.0% lifetime.

The proposed 0.1% Senator Bill 1193 increases tax allocations from 8.4% to 8.5%. This shift is unlikely to affect operators’ bottom lines significantly.

If the bill passes, the allocated fund is expected to be modified slightly.

Internet Gaming Fund: 65% to 63.5%

Detroit Services: 30% to 31%

Agriculture Equine Industry Development Fund: 5% to 5.5%

What Tax Increase Means for iGaming/Online Casino Operators

Online casinos in Michigan are taxed according to generated revenues and allowed promo deductions of up to 10%. From next year, deductibles drop to 6%.

Here is how online casinos are taxed based on generated revenues currently.

  • Less than $4 million: 20%

  • $4 million to less than $8 million: 22%

  • $8 million to less than $10 million: 24%

  • $10 million to less than $12 million: 26%

  • $12 million or more: 28%

The proposed 1% Senate Bill 1994 increases the tax allocations by 1%.

  • Less than $4 million: 21%

  • $4 million to less than $8 million: 23%

  • $8 million to less than $10 million: 25%

  • $10 million to less than $12 million: 27%

  • $12 million or more: 29%

Fund allocations may also change if the proposed bill passes. The Internet Gaming Fund will receive 64.5%, while the Agricultural Fund will get 5.5%. The City of Detroit allocations stay at 30%.

The bills have been referred to the Committee on Government Operations. However, there is no timetable for when they may be passed.