What No Sportsbook Promo Tax Write-Offs Means For Massachusetts Bettors

Written By Dan Holmes on May 24, 2023 - Last Updated on August 7, 2023
How no promo tax deductions affects Massachusetts bettors, from playma.com

Earlier this week, the Massachusetts Gaming Commission voted unanimously to include promotional play bonuses in the calculations for taxable revenue on sports betting operators.

That means MA online sports betting apps cannot deduct sports betting promos from taxable revenue.

Instead, they will have to include promo play expenses as part of their revenue for determining taxes to the state.

But what does it mean for Massachusetts sports bettors? Let’s take a closer look.

Impact on Massachusetts bettors

Since the launch of online sports betting in Massachusetts, MA sportsbook bonuses have been prominent on every platform. Sportsbooks typically use promo offers to entice new users, which can include second chance bets, odds boosts and deposit matches, among others.

By offering enticing welcome bonuses, sportsbooks can attract a larger customer base that, after eating promotional losses at first, eventually will generate more revenue for the operator. Eating those losses is more tolerable when the sportsbook can deduct promo credits from their taxes.

However, some bettors may fear MA sportsbooks will limit their promos now that the MGC’s policy of not allowing promo tax write-offs is set in stone.

But that likely won’t be the case.

In the long run, sportsbooks will still turn profits and award bonuses to both new and existing customers. For example, Ohio banned promotional write-offs, but sports betting platforms still offered large welcome bonuses when the industry went live earlier this year. In addition, Ohio sportsbooks still offer continual bonus promotions that aren’t any different from what those sportsbooks offer in other states.

Since launch, MA sportsbooks have been paying taxes on promotional play expenses. In April, the state collected $11.7 million in taxes from MA online sportsbooks, based on $58.5 million in taxable gaming revenue.

So, the sportsbooks will be fine in the long run. While there may be a slight decrease in Massachusetts promos compared to other states, it really won’t be anything noticeable to the average sports bettor.

Think about it: Massachusetts sportsbooks have never been able to deduct promo credits from their taxes. Nothing changed with the MGC’s decision this week. Have you seen any significant chatter with complains about smaller bonuses in the Bay State?

Neither have we.

National trends of sportsbook taxation

In a presentation to the MGC by Connor Loughlin and Theresa Merlino of financial consulting firm RSM, data was shared that illustrated the national trends regarding sports betting taxation.

States vary in how they handle sportsbook promo deductions. According to RSM, 22 states that have legalized sports betting require promo play to be included in taxable income. Four more require part of promo play expenditures to be included.

Commissioner Brad Hill noted that sports betting operators are not clamoring for promotional play to be excluded.

“I have not heard from any of the operators, and (the MGC has) not received any letters from them asking for this to be changed. So, it must not be a problem. If they aren’t asking for relief, this (doesn’t seem) to be an issue,” Hill said.

Concern about possible increase in problem gambling

Commissioner Eileen O’Brien expressed concerns that allowing deductions for promotional play might lead to an increase in problem gambling. Responsible gambling in Massachusetts has been a constant focus for the MGC since the industry went live.

“I have a belief that any sort of deduction for promo play would likely lead to an increase in the offerings of the promo plays, which would have (a responsible gambling) impact,” O’Brien said.

O’Brien has been a staunch opponent of allowing deductions for promotional play expenses. She’s also shared her concerns over the number of commercial advertisements that feature promo enticements.

Of the tax revenue collected from sportsbooks, Massachusetts earmarks 9% for its Public Health Trust Fund and responsible gaming programs. While there have been no studies to show that an increase in promo play expenditures leads to higher incidents of problem gambling, O’Brien has suggested that could be an outcome.

RELATED: MA Sportsbooks Granted More Time To Add Certain Responsible Gambling Options

If you or a loved one is experiencing problems with gambling, call 1-800-327-5050 or visit www.mahelpline.org/problemgambling to speak with a trained specialist for free, 24/7

Photo by AP Photo/Elise Amendola
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Dan Holmes

Dan Holmes is a Staff Writer for PlayMA with plenty of experience under his belt. Dan has written three books about sports and previously worked for the National Baseball Hall of Fame and Major League Baseball. He also has extensive experience covering the launch of sports betting in other states, including Ohio and Maryland. Currently, Dan is residing in Michigan with his family.

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