Kentucky To Tax Online Gambling, by Mike Godfrey, Tax-News.com, Washington
Wednesday, March 03, 2010

At the same time as Kentucky takes action in the courts to abolish 141 online gambling sites, the state House has passed a bill to introduce taxes for “advanced deposit wagers” on horse racing placed by Kentuckians by phone or online.

The new law was passed by the House on a huge majority and makes use of an exception to federal law that allows Kentucky to proceed with online betting on horse racing, fantasy sports and state lotteries.

The bill proposes a tax of half a percentage point on advanced deposit wagers which bill sponsor Larry Clark, (D-Louisville), says could raise USD400,000 a year in revenue.

The income from the tax is to be shared equally between the Kentucky Horse Racing Commission, the respective Kentucky track which is holding the race and that track’s purses. Last year, Kentucky threw out a similar measure with a 3.5% tax rate.

In the concurrent legal proceedings, the Kentucky Justice and Public Safety Cabinet, as prosecutors, contend that the 141 domains were “gambling devices” on a par with slot machines and roulette wheels in an illegal gambling den. Kentucky has not yet enacted any legislation against internet gambling outside of horse racing.

The proceedings have gone as far as the Kentucky Supreme Court, and a judgement could be handed down as early as this month.