Pennsylvania may tax Free-Play Slots at 8%

pennsylvania-slots-taxOne of the most-common casino promotions involves offering free-play slots coupons to draw customers in. But these promos may no longer be free for casinos to do in the state of Pennsylvania.

Governor Tom Wolf has proposed that casinos pay an 8 percent tax on free-play coupons; customers would not have to cover any of the amount.

If approved, the 8 percent tax would retroactively begin on Jan. 1, 2016, forcing casinos to pay on coupons they’ve already offered. Wolf’s office believes that such a measure would bring in $21 million by June 30. In the new fiscal year, running from July 1, 2016 to June 30, 2017, the state would raise an estimated $50.9 million from the new tax.

While this sounds good for the Pennsylvanian government, casino operators are not keen on paying any more taxes. Currently, casinos already pay 55 percent on slots revenue, and another 12-14 percent on table game revenue.

mohegan-sun-slotsAccording to the Republican Herald, Mohegan Sun Pocono alone has already paid $1 billion in taxes since 2005. And Mohegan Sun’s President, Mike Beansaid, says that additional tax burden would force them to rethink offering free play.

“Free play, is one of the primary marketing tools that allows Pennsylvania casinos to compete,” he said, adding that with the 8 percent tax, “we’d have to rethink using that tool.”

Currently, casinos can deduct promotional play from money left over after collecting wagers and paying out players. But Wolf’s office thinks that this money should be taxed based on how much free play is being given out now.

Since 2007-08 fiscal year, free play has increased from 7 percent of gross slots revenue to 26.5 percent in 2014-15. So the idea is to get a cut of this expanding promotional tool because, as of now, Pennsylvania isn’t making anything off free play.