What Taxes You Must Pay on Sports Betting in Pennsylvania

For decades, states have tried to ban sports betting. The issue became a hot button for politicians, who viewed the ability to place wagers on sporting events as a threat to their constituents’ personal integrity. However, in 2018, the tide apparently turned. Multiple states, including Pennsylvania, passed legislation to legalize and regulate sports betting.

The laws in place to regulate sports betting in Pennsylvania are still being crafted. But, as of right now, the state accepts bets from residents, and the tax obligations for those who choose to engage in legal sports betting are not severe. In this article, we will examine the various taxes that you must pay on sports betting in Pennsylvania.

Sales Tax

Every online sportsbook operator in Pennsylvania collects a 4% sales tax on all bets placed. If you make a $100 bet, you’ll need to pay an additional $4 in sales tax. In the grand scheme of things, this is not a large amount of money. But if you consider that you’re paying the tax on virtually every purchase made on the internet, it can add up quickly.

Transaction Tax

Every online sportsbook operator in Pennsylvania collects a 3% transaction tax on all bets placed. If you make a $100 bet, you’ll need to pay an additional $3 in transaction tax. While this is a smaller percentage than the sales tax, it’s still sizable given that the bet is settled online. For a brick and mortar sportsbook, this would be collected when the bet is settled in person. But given the risks associated with physically going to a bookmaker, the transaction tax is seen as a cost of doing business.

Vigorous Campaign Finance Rules

Since its inception in 2018, the Pennsylvania State Legislature has been actively considering how to craft a legislative framework to regulate and tax sports betting. One of the primary sticking points in negotiations has been how to treat sports wagering. Currently, all bets are treated the same in terms of how they’re taxed and how they have to be reported. But, as previously noted, states have been trying to ban sports betting for years.

Because of this, political players in Pennsylvania have expressed some concerns that allowing bets on sporting events might be interpreted as a vote in favor of legalizing the activity in general. To allay these fears, the state house of representatives specifically included a provision in the bill that would make it clear that the activity of placing wagers on sporting events is specifically prohibited by state law. This has apparently convinced enough legislators to pass the bill, which now only awaits the signature of Governor Tom Wolf.

What Taxes You Might Not Pay On Sports Betting In Pennsylvania

Aside from the mandatory taxes listed previously, you might not have to pay any additional taxes on your wagers in Pennsylvania. The state has a legal sports betting scheme that taxes the activity fairly lightly. In most cases, you’ll only need to pay the sales tax on winning bets and report these wagers as taxable income. However, you do owe taxes on your losses. These are generally treated as gambling losses and can be deducted from your regular income when you file your taxes in 2019.

But you might not want to sit back and wait to see how all this plays out. Once the law is set in place, its legality is assured. So if you’re looking to get in on the action, you might want to do so before the laws are changed again.

Also, keep in mind that each sportsbook operator is required to register with the state. This means you’ll have to provide personal details to the authorities, who will keep a record of your activity. While none of this is considered particularly onerous, it doesn’t mean it’s not important information. The more you provide, the less likely you are to be tracked by law enforcement.

Overall Impression

In most cases, you won’t have to worry about paying additional taxes on your wagers in Pennsylvania. But you might want to avoid becoming too familiar with the concept, because, as of right now, states still consider the activity to be illegal. Ultimately, it’s your own responsibility to know the rules and regulations as they stand in your state. If you want to play it safe, then avoid sports betting altogether. But if you’re looking for the excitement of a craps or football game, then you might want to consider placing a wager or two before the season starts.