The Tax Foundation, an independent research think tank, recently conducted a state-by-state comparison of tax rates on online sports betting. The findings reveal that New Jersey is not imposing the highest tax rate in this revenue category.
Currently, 38 states have legalized sports wagering in some form, but only 27 states provide statewide access to online sports betting platforms. New Hampshire, New York, and Rhode Island apply the highest tax rate to sportsbook revenue at 51%. Nevada and Iowa have the lowest tax rates at 6.75%.
In New Jersey, online sportsbook operators must partner with a licensed brick-and-mortar racetrack or casino within the state. The tax rate for these operators is 14.25%, with 13% allocated to the state’s Casino Revenue Fund and an additional 1.25% directed to the Casino Reinvestment Development Authority for marketing Atlantic City.
New Jersey's tax rate on sports betting revenue is one of the lowest in the Northeast and Mid-Atlantic regions, behind states like New York, Rhode Island, and New Hampshire (all at 51%), Pennsylvania (36%), Vermont (31.7%), Massachusetts (20%), North Carolina (18%), Maryland, and Virginia (both at 15%).
Connecticut is the only other state in these regions with a lower tax rate than New Jersey at 13.75%.
Adam Hoffer, director of Excise Tax Policy at the Tax Foundation, noted that the market for sports betting has expanded rapidly since a 2018 U.S. Supreme Court decision allowed states to establish online sports betting markets. He suggested that if more states such as California and Texas legalize sports wagering, it could significantly increase market volume.
“As the tax base grows, tax policy design becomes increasingly important,” Hoffer said. “Rates should be low enough to pull participants out of black markets and into the legal, regulated markets.”
