Effective Date of Rate Increase on Sports Gaming Tax
One of the tax changes in Amended Substitute House Bill 33 (“House Bill 33”), the Budget Bill, was an amendment to R.C. 5753.021 increasing the tax rate on sports gaming receipts from ten percent to twenty percent. Uncodified Section 803.40 of House Bill 33 provides that the amendment applies to sports gaming receipts received on and after July 1, 2023. This effective date provision is understandable because budget bills are typically signed by the Governor and filed with the Secretary of State on or before July 1, the beginning of the biennial budget period.
However, House Bill 33 was not signed by the Governor until July 4, 2023. As a result, the application of Section 803.40 will impose the twenty percent rate on sports gaming receipts received prior to the enactment of the amendment, receipts from July 1, 2023 through July 3, 2023. This raises a substantial constitutional issue under Article II, Section 29 of the Ohio Constitution, which prohibits retroactive laws. The sports gaming tax is arguably a transactional tax. Pursuant to R.C. 5753.021, the tax is levied on sports gaming receipts. It is not designated an annual privilege tax that is based on gross receipts for the annual period. Thus, it appears to be imposed on gross receipts as they are received. If the sports gaming tax is determined to be a transactional tax on gross receipts, the imposition of the twenty percent rate on sports gaming receipts from July 1, 2023 through July 3, 2023 is likely unconstitutional under Article II, Section 29, as applied by the Ohio Supreme Court. If instead the tax is deemed to be a tax on sports gaming receipts for the entire monthly tax period and therefore cannot be calculated until the end of the tax period, the tax would likely survive a retroactive law challenge.
If you have questions or concerns, please contact any ZHF professional. We are, as always, closely monitoring the state’s budget process.