Tax & Accounting Blog

New Jersey Sports Fans’ Fantasy Leagues Are Sales Tax-Free

Blog, Indirect Tax, ONESOURCE, Reuters Tax & Accounting News, Sales and Use Tax November 3, 2016

The following was written by Ruth Jeremiah and posted on her behalf.

New Jersey Division of Taxation has determined that fantasy sports entry fees are not subject to tax. This ruling stems from an Austin, TX taxpayer that runs a fantasy sports website and charges taxes for entry fees for various professional sports leagues, including football and basketball. Users create accounts for daily contests and once the account is established the user supplies personal information such as name and date of birth. The taxpayer uses this information in conjunction with third party technology to verify the personal information and determine eligibility. Taxpayer does not charge users a fee to register as a user but does charge an entry fee for each contest the user participates in.

New Jersey imposes sales and use taxes on tangible personal property and does not tax services unless specifically enumerated by statute.  Not surprisingly, online fantasy sports contest services are not specifically identified as a taxable service. However, information services and charges for access to certain information are identified as taxable services. One could argue that the online fantasy sports contestants are paying for access to information that the Taxpayer provides.  But New Jersey shot that argument down. “The charge by Taxpayer is not for the information it provides to its contestants but for the entry fee to online daily fantasy sports contests.” So, contestants can continue to live out their sports management fantasies tax-free!