The debate over taxes on slot machine revenue in Pennsylvania has reached a new level as commercial casinos in the state are challenging the constitutionality of such taxes. The casinos argue that skill games, which are unregulated and found in many bars and restaurants, do not face the same tax burden, creating an unfair advantage.
The operators of twelve land-based casinos have taken their case to the Pennsylvania Supreme Court in an attempt to level the playing field. They argue that the state government’s failure to tax skill games is discriminatory and could potentially jeopardize the $1 billion in tax revenue generated annually through the 54% tax on slot machine revenue.
If the court does not rule in favor of eliminating taxes on slot machines, the complaint suggests that the same tax rate should be imposed on skill games to create parity. The Pennsylvania Gaming Control Board has not yet responded to the lawsuit, stating that they are currently evaluating the complaint.
A previous court decision determined that skill games differ from traditional slot machines as they require players to identify the winning pay line rather than relying solely on chance. The American Gaming Association estimates that there are over 67,000 skill game machines in Pennsylvania, compared to approximately 25,000 licensed slot machines.
The issue of skill games has been a contentious one for some time, with a recent legal case involving Pace-O-Matic, a skill game developer, and the Pennsylvania Attorney General’s Office adding to the complexity. The Attorney General argues that skill games are unlicensed gambling machines and should not be permitted to operate.
Companies behind the latest lawsuit include major players in the casino industry such as Caesars Entertainment, Penn Entertainment, and The Cordish Companies. Pace-O-Matic defends its games, claiming they do not detract revenue from traditional casinos and instead support small businesses and non-profit organizations. The company is open to regulation but insists that tax rates must be reasonable to ensure profitability for small business owners.
Pennsylvania Governor Josh Shapiro has proposed a 42% tax rate on skill games in his budget address, while others have suggested a lower rate of 16%. The outcome of these legal battles and regulatory decisions will have significant implications for the gaming industry in Pennsylvania and could shape the future of taxation on both slot machines and skill games.