Because You Asked: How video game taxes work in Illinois

DIXON — As more electronic video gaming terminals pop up in restaurants, truck stops and other businesses across the state, Sauk Valley residents are asking the same questions: How much money is the city getting for this, and where does all that money go?

The state collects license fees and video gaming taxes from establishments with video gaming terminals across Illinois. A portion of the tax is returned to the local governments where it was collected, while the remainder is deposited into the state’s Capital Projects Fund to cover costs related to the state’s capital plan.

According to reports from the Illinois Comptroller, the Video Terminal Tax has generated $994,530,875 in total state revenues since July 1, 2023. This year, Governor JB Pritzker enacted a 1 percentage point tax hike on the video gambling industry that his office estimates will bring in an additional $35 million over the next year.

However, states are not the only ones benefiting from the tax. Municipalities receive 5% of the net income for video gaming terminals in their area. The Illinois Video Gaming Act limits licensed establishments to no more than six gaming terminals.

According to data from the Illinois Gaming Board, there are 160 video game terminals across 29 establishments in Dixon. Last fiscal year – fiscal 2024 – those terminals raked in $10,521,533 and paid $3,576,326 in taxes.

After the state took its due of $3,051,249, Assistant City Manager Matt Heckman said, Dixon’s slice of the action was just over $526,000, which goes into the city’s general fund.

“It can be used for any general fund expense like public safety, police and fire, public works, the street department, public properties, but it’s generally used for operating expenses,” said Heckman. “Our No. 1 source of revenue for the general fund is the sales tax revenue. So, we’ve made a concerted effort to expand our sales tax base.”

After taxes are taken, 50% of the profits go to the terminal operator and 50% to the licensed establishment, according to the Video Gaming Act. Terminal operators are the businesses that supply and service the video gaming terminals.

The Twin Cities seem to be having similar success.

Sterling is home to 180 video gaming terminals housed across 31 locations. In fiscal 2023, those terminals made $9,028,669 and paid out $3,069,753 in taxes. The state took $2,618,318, leaving the city with $451,434. City Manager Scott Shumard said that money only makes up about 2.4% of the city’s overall General Fund revenues.

Rock Falls has 168 video gaming terminals amid 30 business. Fiscal 2023 brought $8,181,285 to those terminals and cost them $2,781,641 in taxes. The city received $409,064 after the state took $2,372,576. City Manager Robbin Blackert said Rock Falls dedicates that tax money to keeping their police department equipped with necessary equipment, such as squad cars and body cameras.

For more information on the Video Gaming Act or to look up video gaming revenue reports for businesses and communities throughout Illinois, visit www.igb.illinois.gov.

• The Telegraph and Sterling Gazette are dedicated to answering the questions Sauk Valley residents have about their communities. If there is an issue you’d like to learn more about, send your questions to Shaw Local reporter Brandon Clark, who makes it his mission to get the answers. Email questions to him at news@saukvalley.com.