Legislation Will Set Tax Rate For PA Online Gambling And DFS At 25 Percent

Pennsylvania Online Gambling Watch Officially Back On, With Legislation Coming In Senate

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A Pennsylvania state senator intends to introduce legislation that would legalize both online gambling and daily fantasy sports in the “near future.”

The rumblings in the statehouse are the latest indication that online gambling provisions that failed to be enacted in 2016 are high on the priority list of some lawmakers in the state.

The latest on PA online gambling

Sen. Jay Costa posted a co-sponsorship memorandum, a common first step before introducing legislation in Pennsylvania.

The legislation Costa is likely to introduce is an omnibus gaming bill that would tackle a number of issues. From the memo:

“In the near future, I plan to introduce legislation amending the Pennsylvania Race Horse Development and Gaming Act to allow the Commonwealth’s gaming industry to continue to evolve and remain competitive in a responsible manner, respond to the Pennsylvania Supreme Court’s September 2016 ruling that declared the slot machine local share provisions of the Act unconstitutional, and generate an estimated $137 million in revenue for the FY 16-17 budget.”

The provisions include:

  • Legalization and regulation of online gambling.
  • Legalization and regulation of daily fantasy sports.
  • Authorization for the state lottery to offer online lottery games.
  • A fix to the taxes on gaming facilities that benefit jurisdictions that host casinos. A tax law in the state was struck down as unconstitutional by the state Supreme Court.

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More on online gambling from Sen. Costa

The online gambling component is pegged to generate $125 million in the state for the current fiscal year. That seems to be pointed at the $100 million the legislature and governor promised the budget from a gambling expansion in 2016.

From the memo:

Revenue for FY 16-17*
Internet Gaming License Fee –
$10 million 10 (of 12) $100 million

Internet Gaming Vendor Fee –
$5 million 5 (of 10) $25 million

Some of the nitty-gritty of the legislation (as planned):

  • Any casino may offer online gambling, and a license fee of $10 million will be imposed. Vendors must pay a licensing fee of $5 million.
  • Online gambling revenues will be taxed at a rate of 25 percent.
  • Daily fantasy operators may obtain a license for $2.5 million. DFS revenue is also taxed at 25 percent.

The tax rate likely would not allow for online poker in the state, but would be conducive to other forms of online gambling, particularly online casinos.

The fee and tax rate may be too high for any DFS operator to stomach, DraftKings and FanDuel included. (Those two companies plan to merge in 2017.)

The backstory on gaming and the PA legislation in 2017

While the PA House has twice passed legislation including online gambling, the Senate has not yet taken that step. The Senate took care of the so-called “host tax,” but refused to vote on the bill when the House added a number of gambling expansions.

But chatter on online gambling in the statehouse preceded the start of this year’s session, with a number of lawmakers openly talking about the issue:

The planned bill from Costa shows there may have been a measure of compromise with the House on considering gaming provisions all at once. If nothing else, PA online gambling certainly is alive and kicking in 2017.

- Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner. He has played poker recreationally for his entire adult life and has written about poker since 2008.
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