A Lawsuit Filed by the Owners of Pennsylvania Casinos Challenges the State’s Taxation of Slot Machine Revenue

Pennsylvania (July 31, 2024) — According to local media reports the lawsuit filed by the owners of 12 Pennsylvania casinos challenges the state’s taxation of slot machine revenue, asserting it is unconstitutional due to the state’s failure to impose the same tax on cash-paying electronic game terminals, commonly known as skill games. The casino owners argue that the state’s imposition of a 54% tax on casino slot machine revenue, while exempting revenue from skill game terminals found in bars and stores, violates constitutional guarantees of fair taxation.

Key Points:

1. Lawsuit Details:
   • Filed by owners of 12 of the state’s 17 licensed and operating casinos, including major companies like Caesars Entertainment Inc. and Penn Entertainment Inc.
   • The lawsuit argues that requiring licensed casinos to pay a high tax on slot machine revenue while not taxing unlicensed skill game terminals is unfair and unconstitutional.
2. Financial Impact:
   • Pennsylvania collects over $1 billion annually from this tax, funding property tax rebates and economic development projects.
   • The lawsuit could potentially disrupt this significant revenue stream.
3. Skill Games Controversy:
   • Skill games are found in various establishments like bars and stores and are argued to be based on player skill rather than chance.
   • A separate case before the state Supreme Court will decide whether these skill games are considered unlicensed gambling machines, which would subject them to state regulation and taxation.
   • A lower court ruled that these games are based on skill, not chance.
4. State’s Stance and Responses:
   • The Pennsylvania Department of Revenue declined to comment on the lawsuit.
   • The Pennsylvania Gaming Control Board is currently evaluating the situation.
5. Current Numbers:
   • The state has approximately 25,000 regulated slot machines in casinos.
   • Gamblers wagered nearly $32 billion on these machines last year, losing over $2.4 billion.
   • The American Gaming Association estimates there are at least 67,000 skill game terminals in Pennsylvania, more

SOURCE: LI Staff Report.