The North Carolina General Assembly has approved a wide-ranging revenue bill that includes several changes to tax rules tied to the state's legal online sports betting market. Senate Bill 595, titled "Various Revenue Laws Changes," has cleared the General Assembly and now awaits action from Gov. Josh Stein.
The proposed changes touch three main areas. They update how taxable sports wagering revenue is calculated, expand the information the Department of Revenue can request from operators about successful bettors, and establish a new state income tax withholding requirement for certain gambling winnings beginning next year.
One revision updates the definition of gross wagering revenue for licensed interactive sports wagering operators. Under the bill, that figure continues to represent the total money received from sports wagers after subtracting winnings paid to players, but before deducting expenses, fees, or taxes.
The legislation also clarifies how promotional offers are treated for tax purposes. If a bonus or promotional credit is returned to an operator as a deposit or used to place a sports wager, its cash value would be included when calculating gross wagering revenue.
Another section gives the North Carolina Secretary of Revenue broader authority to request information from operators. The secretary could make such a request no more than once during each calendar year, and operators would have to provide records for every registered player who received at least $2,000 in winnings during the previous calendar year.
The bill also creates a new withholding requirement for licensed interactive sports wagering operators and advance deposit wagering licensees. Whenever federal law requires gambling winnings to be subject to withholding under an Internal Revenue Code, operators would also have to withhold North Carolina income tax. The amount withheld would match the state's individual income tax rate.
The withholding requirement would take effect January 1, 2027, and would apply to gambling winnings paid on or after that date. The sports wagering provisions remain part of the broader revenue package now awaiting the governor's decision.
Additionally, the bill introduces a 6% tax on prediction market operators. This tax could be the latest step in a growing trend among states to regulate and tax prediction markets. With the bill now in the governor's hands, a legal battle with the CFTC and PM operators could potentially be on the horizon.
