Where Do My Gambling Tax Dollars Go When I Bet On Sports In Iowa?

Written By Derek Helling on May 21, 2020
gambling tax

The Hawkeye State matches Nevada for the lowest tax rate on sports betting handle in the country. That’s just part of the information that bettors may want on gambling tax dollars in Iowa, however.

Perhaps more important is how local and state authorities spend the dollars they receive from Iowa’s online and retail sportsbooks. The Iowa Racing and Gaming Commission has a lot of information about that.

Where gambling tax dollars went in Iowa for 2019

The most up-to-date information on this topic is in the IRGC’s annual report for 2019. The report states that IA casinos paid over $293.32 million in state gaming taxes from Jan. 1 to Dec. 31 of last year.

Although the IRGC report doesn’t show a breakdown of where sports-betting-specific tax revenue went, it does provide a detailed breakdown for taxes paid on casino gambling revenue in the state. For 2019, that was:

  • $147.26 million (51.1%) to the Rebuild Iowa Infrastructure Fund
  • $64.64 million (22.4%) to the Iowa Skilled Workers & Job Creation Fund
  • $55 million (19.2%) to the Revenue Bonds Debt Service Fund
  • $15 million (5.2%) to Vision Iowa
  • $3.75 million (1.3%) to the Revenue Bonds Federal Subsidy Holdback Fund
  • $2.25 million (eight-tenths of a percent) to the general fund

Note: The distribution of gaming tax revenue is reported by the IA Department of Management. The DOM reports on a weekly basis, starting at the beginning of the fiscal year, not the calendar year.

Gaming operators also pay city and county taxes and licensing fees. The IRGC report shows that the state collected over $1.3 million in sports betting taxes for 2019.

Iowa legal sports betting didn’t begin until Aug. 15 of last year, and even then, it was hampered by the state’s in-person registration requirement for online wagering. Iowa law earmarks that revenue along with fines and licensing fees relating to legal sports wagering for different purposes.

What IA law says about sports betting tax funds

The relevant statutes in the state’s code make a distinction between licensing fees and tax dollars paid on sports betting handle in terms of where the state directs those dollars. This also includes fines and dollars wagered by people on the state’s self-exclusion list.

Essentially, everything but regulatory fees and the tax on handle goes to the state’s general fund. From there, the IA Legislature dictates how to spend those dollars each year.

As far as sports betting handle tax goes, however, state law required the establishment of a separate and specific fund. Regulatory fees, like those that casinos pay to have IRGC employees inspect their operations, go into a separate and specific fund as well.

State law limits the use of funds in that Gaming Enforcement Revolving Fund for those purposes. For example, those dollars could go toward covering the travel expenses of state regulators when they have to go investigate a potential violation.

Tax dollars paid at that 6.75% of handle rate go into the Sports Wagering Receipts Fund. Although the law says the state may use money in the fund for its general cash flow, the state must restore that amount to the fund before the close of each fiscal year.

The law goes on to say that the Legislature can direct the funds as it wishes, so in terms of how the money is used, it’s essentially as though tax on handle goes straight to the general fund. The law simply says these dollars have to be accounted for separately.

In this way, sports betting taxes in IA support all the state’s agencies and services. When you put down a wager in Iowa, you’re paying state employees’ salaries, improving roads and providing meals for senior citizens.

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Derek Helling

Derek Helling is a lead writer for PlayUSA and the manager of BetHer. He is a 2013 graduate of the University of Iowa and covers the intersections of sports with business and the law.

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