Pennsylvania casinos push back against slot tax

When the 54% tax on slot games was first imposed in Pennsylvania, casino operators accepted it in stride, although land-based properties must not have been pleased with the tally. This was back in 2004 when the Pennsylvania Race Horse Development and Gaming Act (Act 71) was introduced.

Slots in Pennsylvania must not be taxed, argues a new lawsuit

Fast forward two decades later, and casinos may have had enough. That is not to say that casinos want to dodge their due payments.

Rather, argues a new lawsuit filed on Monday with the Supreme Court of Pennsylvania, the tax is unconstitutional as it levies traditional casino operators, but fails to tax the so-called skill-based game machines that emulate traditional slot gambling, but are just outside of clear definition by law.

"There is no basis for requiring licensed entities to pay about half of their slot machine revenue to the Commonwealth while allowing unlicensed entities to pay no tax on such revenue," the plaintiffs argue.

The debate around skill-based machines has raged on with some intensity. These devices are usually placed in bars, gas stations and stores, and have been part of what owners of such small establishments have described as their only lifeline.

The plaintiffs, 12 Pennsylvania casinos among which are Penn Entertainment and Caesars Entertainment, argue that it’s not lawful for the state to be levying their slot games with the eye-watering 54% tax while turning a blind eye to the skill-based game segment, which is essentially a form of gambling, but does not have to stump up for taxes.

This is not the first foray against skill-based machines, and the lawsuit itself may be a clever way for casinos to settle scores. A separate lawsuit that is awaiting Supreme Court deliberation is filed against Pace-O-Matic, a maker of such skill-based games, with the court urged to officially pronounce these games as an illegal form of gambling.

Skill-based games must stay, or go

Naturally, much is on the line. Although Pennsylvania’s casinos are some of the most profitable for the state in terms of tax windfall, there are many people whose livelihoods depend on skill-based game machines still being operational.

Small business owners have praised the machines for allowing them to stay in business when the pandemic struck. The companies that make these machines are naturally on the side of the status quo.

Of course, there are other factors at play. For one, the exact number of skill-based machines is not known, although they are said to outnumber traditional slots nearly 3:1. According to the American Gaming Association, a trade body that represents the industry, there are around 67,000 skill-based slot machines in the Keystone State.

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