Pa Slot Tax Rate
With a 55 percent tax rate on slot-machine earnings, Pennsylvania leads the nation in tax revenue collected from casinos. Pennsylvania: $1.08 billion. Indiana: $878 million.
- If you didn’t give the payer your tax ID number, the withholding rate is also 24%. Withholding is required when the winnings, minus the bet, are: More than $5,000 from sweepstakes, wagering pools, lotteries, At least 300 times the amount of the bet.
- In addition, Slot Machine Licensees must pay Slot Machine Taxes into the State Gaming Fund. § 1403(A)& (C)(1). The Slot Machine Tax rate for non -category 4 casinos is 34% under the Amended Gaming Act. § § of the § Board § of the.
- Online Casino Tax Rates in Pennsylvania. A big reason behind the delay in launch of online gambling in PA was due to the high tax rates. Online slots, for example, are taxed at a rate of 54%, which leaves little margin for operators. Online casinos are taxed at the following rates in PA: Table games: 16%; Online poker: 16%; Online slots: 54%.
- PA Sales, Use and Hotel Occupancy Tax: 6 percent: Local Sales Tax: 1 percent for Allegheny County 2 percent for Philadelphia: Cigarette Tax: $2.60 per pack of 20 cigarettes/little cigars ($0.13 per stick) Malt Beverage Tax: See Malt Beverage Tax Rate Table: Liquor Tax: 18 percent: Vehicle Rental Tax: 2 percent: New Tire Fee.
What has Pennsylvania gotten itself into with an extremely high tax rate for online casino games? We’re close to finding out.
In October 2017, PA Gov. Tom Wolf signed massive gaming bill into law, effectively authorizing real money online poker and casino games which will form part of a large-scale statewide gambling expansion.
As regulated US iGaming interests prepare to launch their offerings to the Keystone State market — perhaps as early as this year— here is a look at the 54 percent effective slot revenue tax rate that internet casino operators will be responsible for paying to various statewide interests.
A closer look at the PA tax rate
What do you get when you burden online slot machine revenues with a tax rate in excess of 54 percent? That remains to be seen.
Moments after Pennsylvania House Bill No. 271 was signed by the governor, Online Poker Report regulated iGaming analyst Steve Ruddock posted a detailed explanation of how the state’s effective 54 percent online slot revenue tax rate might affect the industry.
Pennsylvania iGaming operators’ reliance upon slot revenue is expected to be less than that of neighboring New Jersey’s historical figures (thanks to a newly-formed multistate poker coalition between the Garden State, Nevada and Delaware along with an increased focus on more moderately-taxed table games in PA). But that still “doesn’t change the fact that the hefty upfront fee and the tax rate of 54 percent on slots makes it virtually impossible for any operator offering all three verticals (slots, table games, and poker) to realize a profit in its first five years,” according to Ruddock.
That analysis paints a bleak picture of the incoming Keystone State iGaming market — while supporting the notion that existing land-based operators may acquire iGaming licenses more as a “defensive” maneuver to limit competitors’ market access rather than as an opportunity to engage in profitable business activity.
Taxes are great for beneficiaries, bad for businesses
There’s no denying that taxed funds represent a clear benefit to those who receive them, while at the same time representing an equal burden to the companies that pay them. There’s no denying that convincing lawmakers to amend the current 54 percent tax rate for slot machine revenue — both land-based and online — would be a hard sell, either.
What this means is that the time window for opposing such an exorbitant tax rate is quickly closing now that the Pennsylvania iGaming license application process has begun, and that online gambling operators in the state will have to deal with an unfortunate business reality that is unlikely to rectify itself in the short-term… unless tax recipients suddenly decide its in their best interests to agree to smaller payouts.
Is the 54 percent slot tax unsustainable in statewide iGaming market?
Going by New Jersey online operator statistics that were published in April 2017, regulated US iGaming companies only retain about 5 cents of every dollar in actual profit… and that’s in a statewide market that has a general tax rate of 17.5 percent for all online gambling verticals.
Therefore, the Pennsylvania model for taxing online slot machine revenues at 54 percent would appear to be unsustainable in a future nationwide online gambling market that might include more than just a few states.
It also calls into question whether PA lawmakers’ decision to extract maximum value from online gambling operators from the onset will eventually backfire, which would result in a Pennsylvania iGaming market that is less competitive, untenable and less profitable to Keystone State residents in the long run.
Players dream of hitting a big jackpot when they play the slots. When that day comes for you, you'll have questions about the taxes you must pay on the winnings.
Hand Pay Jackpots
When you hit the winning combination of symbols for a large jackpot, your slot machine locks up. Depending on the machine, the lights on top of the machine may come on and start flashing, music may play or bells ring. A slot attendant arrives promptly to see what you have won.
On jackpots smaller than $5,000, an attendant verifies that you hit the jackpot and then assists you in claiming your money at the cashier's cage. In the case of a large or progressive jackpot, the casino may have technicians come and check the machine to certify that it was functioning properly when the jackpot hit. If you hit one of the wide-area progressive machines such as MegaBucks, the slot company that operates the game comes out and verifies that machine before giving you a check.
When you hit a jackpot, you have the option of taking your winnings in cash or check. Usually, large amounts are paid by check. In the case of the MegaBucks or similar multi-million dollar jackpots, you receive a check for the partial amount, and then you have 90 days to decide if you want to be paid a lump sum or an annual annuity on the balance. If you select the lump sum option, you receive only a percentage of your actual winnings. For example, the full winnings of one multi-million slot jackpot is paid in 25 annual installments, or you can take a lump sum of 60 percent of the winnings.
IRS Withholding
All casino winnings are subject to federal taxes. However, the IRS only requires the casinos to report wins over $1,200 on slots and video poker machines or other games such as keno, lottery or horse racing. When you have a win equal to or greater than $1200, you are issued a W-2G form. This form lists your name, address and Social Security number. The casinos are not required to take out withholding tax on jackpots under $5,000 as long you supply your Social Security number. If you don’t provide your Social Security number, the casinos withhold 28 percent on small jackpots.
You can request a specific amount of withholding tax to be taken out of any jackpot you win. Some players like to do this to avoid a big tax payment in April when they file their income tax returns. The additional withholding may not be necessary if you keep a log book. The law allows you to deduct gambling losses up to the amount of your winnings. You can only do this if you have documentation of your losses. Keeping a diary or log book is the way to do this.
Proper Identification
Casinos can refuse to pay you until you produce proper identification—a photo ID such as a driver’s license, military ID or passport.
If you don’t produce an ID, you are photographed and the casino holds your winnings until you come back with proper ID. For this reason, you should always carry a valid form of identification with you when you visit the casino.
When the casino checks your identification, it also checks your age to make sure you are legally old enough to play. The minimum age for gambling varies from state to state, but under-age gamblers are not be paid if they hit a jackpot. This is the law in all jurisdictions, and it has been upheld in court.
Plan Ahead
Pa Slot Tax Rate
Before you start playing your favorite slot machine you should have a plan for the day you hit a jackpot. Players become excited when they hit the big one, and this may affect the decisions you make about your winnings. It is helpful if you know ahead of time how much withholding you want taken out or whether you want a check for all or some of the amount.