Pennsylvania casinos sue state demanding skill-game tax

Operators of the twelve casinos in Pennsylvania have initiated a lawsuit seeking a ruling from the state Supreme Court to deem the 54% tax on slot machine revenues unconstitutional. Their argument stems from the existence of tens of thousands of unregulated “skill games” that operate without tax liabilities.

Estimates suggest that approximately 100,000 of these unlicensed, slot-like games are present throughout Pennsylvania, frequently found in establishments such as bars, gas stations, convenience stores, and pizza parlors—locations that do not enforce age restrictions. Some state legislators advocate for these skill games, asserting that they contribute crucial revenue to fraternal organizations and small businesses.

Leading the charge for these unlicensed games is Pace-O-Matic, a supplier based in Georgia. The company has achieved several court victories, successfully reversing the confiscation of their machines. However, the Pennsylvania Attorney General has since appealed a recent decision, invoking a 2017 law that reclassifies skill-based games as slot machines under state law.

Pennsylvania Casinos Claim Tax Violates Constitutional Principles

The lawsuit posits that the 54% tax imposed by the 2004 state gaming law contravenes constitutional guarantees aimed at ensuring equitable taxation. This tax generates approximately $1 billion annually for the state, funds which are earmarked for property tax relief and economic development initiatives.

“It is unreasonable to impose such a steep tax requirement on licensed operators, necessitating that they surrender nearly half of their slot revenue to the Commonwealth, while unlicensed operators evade taxes altogether,” the casino owners contend in their legal filing.

Casino Operators Demand Equal Taxation Policies

Pennsylvania casino operators are urging the state Supreme Court to mandate that a similar tax rate be applied to skill games or to prohibit tax collection on slot machines altogether. A central point of contention among the operators is the call to regulate and potentially ban the unlicensed games. At minimum, they advocate for the establishment of a level playing field that equitably addresses both skill games and traditional casino slots.

As of now, the Pennsylvania Department of Revenue and the state’s Gaming Control Board have opted not to comment on the ongoing lawsuit when approached by the Associated Press.

This legal battle not only highlights the complexities of gambling regulation in Pennsylvania but also underscores the shifting dynamics of the gambling landscape, where unlicensed operations are increasingly challenging the established market. As court decisions unfold, the implications for tax policy, revenue distribution, and regulatory practices will be closely watched by stakeholders across the industry.