Because of the amount of money that the casinos in New Jersey and Nevada bring in, they represent significant sources of taxation for every level of government. Many people believe that one of the major forces behind the legalization of gambling is the need of local governments to generate tax revenues from non-traditional sources. Gaming fees or taxes are basically license fees and excise taxes. They are generally based on gross revenue or on the number and types of games in the casino.

The federal government views casino taxation as a punitive measure designed to assist law enforcement agencies and attorneys in locating illegal gaming operations and to provide avenues for punishment for not paying taxes when other criminal charges cannot be sustained.

The Federal Wagering Excise Tax is levied on all wagers placed on a sports event or contest with a bookmaker and on the wagers made on a lottery. Currently, the excise tax is fairly low although many feel that it should be completely eliminated.

The Federal Wagering Occupational Stamp Tax is required of any person who receives wagers for or on behalf of any person. As a result, not only does the casino have to pay this tax, but employees who take wagers have to have the occupational stamps as well. The stamp is necessary only for lotteries, sports, race books and pari-mutuel pools. State-operated lotteries and their employees are exempt.

Nevada State Taxation

State-level taxes in Nevada fall under four categories: percentage fees, various license fees, casino entertainment tax, and miscellaneous fees. Percentage fees are charged monthly and are based on the total amount of gross revenue the casino brings in. Gross gaming is taken to mean all winnings with the total of all sums paid out as losses subtracted (general operating expenses cannot be deducted).

New Jersey Taxation

New Jersey also has several categories of state taxation, but they are simpler. The first is a percentage fee based on the gross gaming revenue. The second is a percentage fee for reinvestment of casino profits in redevelopment projects in the state. The third is license fees for games and slots.