Senators Sam Singh and Jeremy Moss have proposed bills that slightly modifies how sports betting and iGaming operators are taxed in Michigan. A separate bill for for each vertical introduced last week slightly increases taxes.
Michigan sportsbooks are allowed to deduct promo spend from gross revenue before taxes are applied. Michigan online casinos can do the same up to a certain point. Both verticals, but especially sports betting, makes the Great Lakes State a tax-friendly market.
The bills propose a hike of one percentage point to online casino revenue, while the increase for sports betting would be one-tenth as large. They also slightly adjust the allocation of the taxes, which goes to the Internet Gaming Fund, Detroit services and the agricultural fund.
Sports betting operators to pay slightly more in taxes
Under the current Michigan gambling laws, operators are taxed 8.4%. However, because of promo deductions, the state’s effective tax rate is actually at 5.0% lifetime, and 4.7% year-to-date through October.
Those types of figures make Michigan a great state to operate in. Singh and Moss are proposing the base rate to increase to 8.5% with Senate Bill 1193. That 0.1 percentage point hike is unlikely to impact operators’ bottom lines very much.
As the tax rate slightly increase, the allocation of those tax dollars could potentially be modified, too. The current setup is as follows:
- 65% to the Internet Gaming Fund
- 30% to Detroit services
- 5% to the Michigan agriculture equine industry development fund, up to $3 million
The bill proposes the following allocation structure:
- 63.5% to the Internet Gaming Fund
- 31% to Detroit services
- 5.5% to the Michigan agriculture equine industry development fund, up to $3 million
Proposed tax bump impacts iGaming operators, too
Michigan online casino platforms are tiered into tax brackets based on revenue. This is also the last year most operators can deduct promos up to 10% from gross revenue, too. Next year, the deduction dips to 6%.
The current structure for online gambling taxes are as follows:
- 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%
Singh and Moss are proposing a more substantial increase for online casinos with Senate Bill 1194. Each bracket would see a one percentage point increase, to produce the following:
- 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%
The allocation of the funds could also change. The current setup is the same for sports betting, too. However, the only change would be the Internet Gaming Fund receiving 64.5% and the agricultural fund getting 5.5% The city of Detroit would remain the same at 30%.
There is no timetable for the bills to be passed. They have been referred to the Committee on Government Operations.
