Will Tennessee's lottery tickets get a 5% tax? Lawmaker thinks so

A lawmaker in Tennessee is considering a new way to fund schools: taxing lottery ticket sales. The proposed 5% tax would send more money into local communities.

However, with more than $30 billion already generated for educational programs in the state, is this extra cost worth it for players? As the bill makes its way through the legislative process, residents in Tennessee are left wondering if this new tax would really pay off in the long run.

What is House Bill 51?

The bill was introduced by Rep. Kelly Keisling, a Republican from Byrdtown. House Bill 51 would propose a 5% tax on sales of lottery tickets. The bill would require counties to collect the tax and remit it to the state.

According to the bill, the tax would only apply to ticket sales and “shares.” What are shares? The bill defines them as “intangible evidence of participation in a lottery game,” Grainger Today reported.

Where would this tax money go?

With this tax on lottery sales, many people are wondering where this money would go. Officials said that half of the proceeds would be distributed in the same way as property taxes for local school systems. The distribution of the other half of the proceeds would be determined by where the sale took place.

According to the Tennessee Education Lottery Corporation, the state's more than 5,000 lottery retailers have collected more than $30.7 billion in gross ticket revenues since the lottery began. In addition to those ticket sales, Tennessee Lottery players have won more than $20.8 billion, and these retailers have received over $2 billion in commissions.

In fiscal year 2024, more than $100 million was transferred into the Lottery for Education Account in Tennessee. Proceeds from this account help fund educational programs, including the Tennessee Promise scholarship, which covers the expenses not paid for with other financial aid for up to five semesters at a community college or four-year institution.

Do other states have taxes on lottery sales?

With the news of this bill coming out in Tennessee, it has players upset about the thought of them having to pay a little more for their lottery tickets. In Tennessee, the bill only applies to lottery ticket sales. The state doesn't impose an income tax and doesn't tax lottery winnings, which many other states do.

It appears it would be the first time in the United States that lottery ticket sales are taxed. While other states impose local and state taxes on lottery winnings, no other state appears to impose a sales tax on lottery ticket sales.

On that note, if you are lucky enough to hit it big playing the lotto and live in one of the following states, then you won't have any state taxes taken out of your winnings: Alaska, California, Delaware, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

In addition, you can also include Alabama, Alaska, Hawaii, Nevada, and Utah on that list, as these states don't even offer the lottery right now, so there are no winnings or ticket sales to even tax.

Enjoy playing the Tennessee Lottery, and please remember to play responsibly.