Virginia legislature eliminates promotional sportsbook deductions in new budget
New legislation cuts vital tax exemption for operators launching in the state before June 2021
Legislators in Virginia have ended a statewide sports betting policy allowing operators to deduct promotional spend from taxable revenue as part of the state’s 2023 budget.
Under the new budget, operators will now only be allowed to exempt promotional spend from their adjusted gross revenue for taxable purposes for the first 12 months of operation, with any such exemption after this point being prohibited.
Previously, licensed firms have been able to exempt promotional expenditure including free bets and bonuses from their taxed revenue, with operators deducting almost $10m in promotional expenditure in May alone.
A rule that allows operators to roll a monthly loss over to the next month was not changed and was included in the new budget document.
However, those who have operated in the state for more than 12 months will now no longer be able to continue to make these deductions, including the likes of DraftKings, FanDuel, BetMGM, and Caesars.
Between January and May 2022, Virginia’s licensed operators have deducted a total of $67,955,590 in promotional spend from their respective adjusted gross revenue.
Big promotional spenders include BetMGM, which has deducted $25.2m (37% of the overall total), FanDuel with a deduction of $18.7m (27.6% of total), and DraftKings with a promotional deduction of $11.2m (16.5% of total) between January and May 2022.
Virginia’s 14 mobile sportsbook operators have paid $33.7m in taxes during the January to May period, with adjusted gross revenue taxed at a rate of 15%.
Were this unlimited exemption not to have existed, Virginian sports betting tax receipts would have more than doubled to almost $70m in the same period.
The Old Dominion State is the second US state to end promotional deductions from taxable sportsbook revenue following the Colorado legislatures tabling of similar legislation in May 2022.
However, instead of a single cut-off point, the Colorado bill, which passed through a Senate reading during the last legislative session, introduces a phased timetable beginning from January 2023 and reducing gradually all the way until 2026.