- The bill would lift the exemption for paying tax on tournament fees that B&M casinos currently enjoy.
- The change would bring Nevada’s taxing model for online poker closer in line with those of European tax structures.
Nevada Senate Bill 9, introduced to the Senate Committee on Judiciary on Tuesday by Gaming Control Board Chairman A.G. Burnett, seeks to add online poker tournament entry fees to the list of activities for which online poker operators are required to pay tax.
“Cash received as entry fees for contests or tournaments” are currently excluded from Nevada’s definition of gross revenue.
According to Burnett, the costs traditionally associated with running online tournaments are much less than their brick-and-mortar counterparts.
The current exemption for poker tournaments—designed to offset operator expenses such as utilities and floor space—do not apply online, Burnett argues.
If the bill passes, fees collected in conjunction with internet poker tournaments would be subject to the same 6.75% tax rate on gross gaming revenues that will be applied to online ring games. The change would bring Nevada’s taxing model for online poker closer in line with those of European tax structures.
Nevada’s tax rate is among the lowest of recently regulated markets that have embraced online gambling. As a point of comparison, Spain, Italy and Denmark have equivalent tax rates in the 20%-30% range and the rate in France can exceed 40%. Even the recently proposed changes by Governor Christie to the New Jersey online gambling bill call for a 15% tax.
As more states expand their gambling laws to include internet gambling, interstate compacts which allow individual states to combine their player pools for greater liquidity and bigger prizes are expected to become popular as they have in the state lottery sector.
Smaller states will look to form partnerships to pool their liquidity and maximize the attraction for their player. Delaware, which legalized internet gambling last year, is already looking to form partnerships with other states and possibly other countries.
Competition to become the lead regulator in such compacts is already starting to heat up. Nevada has its regulatory framework in place but New Jersey’s top politician has publicly stated that he wants to see his state become the “epicenter” for the industry. The lower operating taxes could weigh heavily on the decisions of states such as California, Iowa and Hawaii, all of which have online gambling bills pending in their respective state legislatures.
Given the lack of any existing US sanctioned internet poker operations; Burnett was reluctant to project the amount of expected revenue from the proposed fee increase.