The Tax Man Digs For Gold In The Silver State

Tax season is definitely on the minds of many involved in or interested in the online poker gaming industry these days. Last week, Full Tilt Poker announced the launch of their European twin site, which would resolve the tax on winnings issue for many European Union players. This week, law makers in Nevada are looking at implementing regulations and legislation to tax the profits obtained from hosting an online poker tournament.

Traditionally, poker tournaments have not been taxed as the host must pay for such expenses as rental fees, utilities, salaries, food and beverage. An online poker tournament, however, does not need to pay for the overhead that a bricks and mortar casino tournament would need to expense. Nevada Senate Bill 9, which looks to remove the tax exemption status for online poker tournaments, was introduced to the Senate Committee on Judiciary earlier this week by Nevada State Gaming Control Board chairman, A.G. Burnett.

If the bill is passed, any fees paid to poker tournament host, such as entry fees, would be subject to a 6.75% tax rate. This tax scheme would not apply to any prizes won by players playing online. It is uncertain what effect this would have in terms of attracting players to online tournaments, nor is there any word on whether or not casinos hosting online poker tournaments would increase entrant fees to offset this cost.

On the heels of the Nevada Senate bill was Nevada Assembly Bill 112 which was referred to the Assembly Committee on Judiciary this past Wednesday. Amongst other components of this proposed legislation has to do with license fees for any online gambling operators. The legislation proposes to double the licensing fees from $500K to $1M, and to double the renewal fees from $250K to $500K. Nevada legalized online poker in 2011 and licenses have been issued to gambling operators, but no sites have gone live as of yet.

Last week, New Jersey made a motion forward to legalizing online gambling within the state. Although the Governor, Chris Christie, vetoed the proposed internet gambling bill, he sent the bill back to the New Jersey Legislature with his recommendation for an increased tax rate on online casino winnings. The bill as it currently stands, proposes a 10% tax on winnings, which is 2% higher than the current rate that bricks and mortar casinos pay on winnings, and Christie has proposed a 15% tax. Christie is mindful that should the bill pass, which it will by all indications, there may be a decline in tourism to the popular gambling destination of Atlantic City, as gamers may favor the convenience of playing in the comfort of their own home.

Even with the changes to the tax rates proposed both in Nevada and New Jersey, they are a far cry from the tax rates imposed on online gaming operators in countries such as France, Italy and Spain, where the rates range from 20% to over 40%. It will be interesting to watch how the online poker community reacts and changes with the possible introduction of these new regulations.