Sports Betting Tax Rates by State: How Operators Are Taxed

States tax sports betting by taxing the licensed operators that accept wagers, and as of October 2026 the rate depends on the state: New York taxes sports wagering revenue at 51 percent, Pennsylvania at 34 percent plus a separate 2 percent assessment, New Jersey at 19.75 percent online and 8.5 percent retail, Ohio at 20 percent, and Nevada at no more than 6.75 percent of gross revenue. Some states use a different base altogether. Tennessee taxes total wagers rather than revenue, and Illinois combines tiered rates with a per-wager tax.

This article explains where the power to tax sports betting comes from, how the main tax designs work, what several states charge as of October 2026, and what has recently changed. It covers taxes on operators as a matter of policy. It does not address any individual bettor’s own tax situation, which is a question for a licensed tax professional or attorney.

Where State Sports Betting Taxes Come From

Before 2018, a federal law known as PASPA barred most states from authorizing sports betting. The Supreme Court struck that law down in Murphy v. National Collegiate Athletic Association on May 14, 2018, a ruling explained in Murphy v. NCAA and PASPA. After that decision each state could decide for itself whether to authorize sports betting and how to tax it.

Taxes are set in each state’s own statute, which is why no single national rate exists. The rate sits in the state’s sports wagering law or tax code, so changing it requires an amendment, as North Carolina’s 2026 budget did. The legislative route is outlined in how a gambling bill becomes law.

The paths states took to legalize betting are covered in how states legalized sports betting after Murphy v. NCAA. The tax is a privilege tax on the license holder: the Illinois and Tennessee statutes, for example, describe it as a tax for the privilege of holding a license, and the operator, not the bettor, remits it.

How the Main Tax Designs Work

Most states use a percentage of revenue. Revenue here is not the money wagered. It is generally what operators keep after paying winning bets, often with specified deductions, and statutes name it differently: gross gaming revenue, adjusted gross receipts, gross sports wagering revenue. Two states with the same headline rate can collect different amounts if their definitions of the base differ.

A second design is a tiered or progressive rate, in which the percentage rises as an operator’s annual revenue crosses thresholds. Illinois is the clearest example, and Nevada’s general gaming fee also steps up across monthly revenue brackets.

A third design taxes handle, meaning the total amount wagered, regardless of what operators pay out. Tennessee does this. Its statute states: “There is imposed upon the gross handle of a licensee a privilege tax of one and eighty-five one hundredths percent (1.85%).” The state does not let operators deduct winning payouts or promotional wagers from that base, which makes it very different from a revenue tax.

A fourth design adds a flat per-wager charge on top of a percentage. Illinois has used one since July 1, 2025. Because the per-wager tax applies to each online bet whether or not the operator makes money on it, its effect depends on the volume of wagers rather than on operator profit.

What Several States Charge as of October 2026

The table below summarizes the operator tax rules in eight jurisdictions, each checked against an official state source or statute. All entries are current as of October 2026 and describe only the main state-level tax; many states also impose license fees, local assessments and other charges that the table leaves out.

Several details sit behind the table. Pennsylvania’s statute requires each certificate holder to pay “a tax of 34% of its daily gross sports wagering revenue,” and the Gaming Control Board describes a further 2 percent used for public-interest grants. New Jersey’s rate rose on July 1, 2025, from 13 percent to 19.75 percent for online sports wagering under P.L. 2025, c.66, and casino licensees also pay a 1.25 percent additional tax. In Illinois, the tiers run from 20 percent up to $30 million of annual receipts to 40 percent above $200 million, and the statute adds 2 percent for wagers placed in a home rule county with more than 3,000,000 residents.

Ohio’s Department of Taxation describes the base as gross receipts less winnings and voided wagers, and from 2027 a share of promotional credits becomes deductible: 10 percent through 2031 and 20 percent from 2032. Nevada’s brackets are part of its general gaming fee, which, according to a state fiscal analysis, applies to nonrestricted licensees whose operations can include a sports pool.

The table is a snapshot. Rates differ for retail and online wagering in some states, and readers who need an exact rule for a particular state should consult that state’s statute or regulator.

How the Tax Applies in Practice

In practice the operator reports and remits the tax, usually monthly or weekly, to the state revenue department or gaming regulator. Pennsylvania’s statute calls for weekly payment based on the previous week’s revenue, while the Illinois Gaming Board said operators first remitted the new per-wager tax with their July 2025 reporting, due August 31, 2025.

A short hypothetical shows why the base matters. Suppose a state taxes 10 percent of revenue and another taxes 1.85 percent of handle. If an operator accepts $100 million in wagers and keeps $8 million after payouts, the first state’s tax is $800,000 and the second’s is $1.85 million. This is purely an illustration of the arithmetic, not a description of any real operator or state.

Regulators also police the rules around the base. Tennessee’s Sports Wagering Council issued an August 21, 2026 memorandum clarifying that operators may deduct resettled wagers only when the resettlement adjusts the wagered amount, not when it adjusts the payout. Details like this decide how much tax is owed and are the subject of regulator guidance, audits and, at times, disputes.

What Is Changing and What Remains Open

The most recent enacted change is in North Carolina. Gov. Josh Stein signed Senate Bill 257 on July 7, 2026, and the operator rate rose from 18 percent to 23 percent of gross wagering revenue, according to the Carolina Journal and WRAL, which reported that operators paid the higher rate for the first time in July 2026. The same budget creates a 6 percent tax on prediction markets’ net trading fee revenue beginning January 1, 2027, according to Bloomberg Tax and other reports.

That prediction market provision is part of an unsettled legal area. Bloomberg Tax reported in July 2026 that North Carolina would join Kentucky and Illinois in taxing prediction markets and that Kalshi had sued Illinois after the state brought them into its sports wagering tax scheme. Whether such platforms are federally regulated commodity markets or gambling operations is disputed, and this article takes no position on the dispute or on how the Illinois case will end.

Federal law adds a layer that does not change with state rates. The IRS states that sports wagering is subject to federal excise tax of 0.25 percent of the amount wagered for state-authorized wagers, along with a $50 annual occupational tax per principal or agent, and 2 percent for wagers the state does not authorize. Statuses here are as of October 2026, and other states may have pending proposals that this overview does not track.

Common Misconceptions About Sports Betting Taxes

One misconception is that the state tax is charged to bettors. The statutes quoted here impose the tax on the licensed operator, and nothing in them describes a surcharge on a bettor’s wager. Separate rules apply to the taxation of individual winnings, which this article does not cover.

A second is that a higher rate always means a larger tax bill. The base can matter as much as the percentage, because states define revenue, receipts and deductions differently, and some tax handle rather than revenue.

A third is that every state taxes the same way. As the table shows, states use flat rates, brackets, handle taxes and per-wager charges, sometimes together.

A fourth is that the federal government is not involved. In fact, federal excise tax applies to wagers whether or not a state has authorized sports betting, at different rates for authorized and unauthorized wagers.

What This Means for Readers

For readers following sports betting policy, the rate is only one measure of how a state regulates betting. License fees, deductions, local assessments and how revenue is spent all shape the picture, and they change when legislatures meet. The most dependable sources are the state statute, the department of revenue and the gaming regulator, whose sites publish the current rules and reports.

Readers who want to confirm a sportsbook is licensed in a state can follow the general method in how to check if an online sportsbook is licensed. Anyone with a question about their own tax situation should consult a licensed tax professional or attorney in their state, since this article describes operator taxation in general terms only.

Related Laws and Next Reading

Readers comparing how one large state fits these tax rules into its wider framework can read is gambling legal in New York, which covers the state with the highest rate in the table. The online casino side raises similar questions about rates and licensing, covered in which states have legal online casinos. Together with the articles linked above, these show how federal law left the tax question to each state and how states answered it differently.

Sources & References

• Illinois General Assembly — 230 ILCS 45/25-90, Tax; Sports Wagering Fund
• Illinois Gaming Board — FAQs on New Statutory Sports Wager Tax (June 17, 2025)
• Pennsylvania General Assembly — 4 Pa.C.S. § 13C62, Sports wagering tax
• Pennsylvania Gaming Control Board — Who will receive tax revenue from sports wagering?
• New York State Gaming Commission — Sports Wagering
• Cornell Legal Information Institute — 9 NYCRR § 5330.28, Tax
• New Jersey Division of Gaming Enforcement — Summary of Gaming and Atlantic City Taxes and Fees
• New Jersey Legislature — P.L. 2025, c.66 (A5803)
• Nevada Gaming Control Board — License Fees and Tax Rate Schedule
• Nevada Legislative Counsel Bureau — Financial impact analysis, initiative S-01-2020 (NRS 463.370)
• Ohio Department of Taxation — Sports Gaming Receipts Tax
• Ohio Casino Control Commission — Revenue Reports
• FindLaw — Tennessee Code § 4-49-104
• Tennessee Department of Revenue — Fantasy Sports Tax (notes the 1.85 percent handle tax)
• Tennessee Sports Wagering Council — Guidance on Resettled Wagers (August 21, 2026)
• Carolina Journal — NC budget raises sports-betting tax, adds prediction markets (July 10, 2026)
• WRAL — NC sports betting in July up nearly $200M over previous year (August 28, 2026)
• Bloomberg Tax — North Carolina’s Stein OKs taxes on prediction markets, gambling (July 7, 2026)
• Internal Revenue Service — Sports wagering