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Slots money takes long and winding road to operators

Slip a $5 bill into a Maryland slot machine, push a button and watch the machine blink its multicolored lights and hum an electronic tune.

Once all the machinations are finished and the last penny is gone — assuming Lady Luck doesn’t intervene — where does the money go?

Two-thirds of gross slots revenue is ultimately kept by the state. But, at least at first, the state takes the whole pie.

Gross slots revenue is wired from casinos to the Maryland State Lottery Agency each day, not including weekends and holidays, when lottery offices are closed. The lottery then sends back the operators’ share — 33 percent of the gross — daily.

It’s a setup that is rare among states that allow casino gambling, said Jan Jones, a senior vice president for Caesars Entertainment Corp.

“In most states, gambling is approved by the legislature as a business activity where you pay a tax,” Jones said. “In Maryland, you’re an extension of the lottery.”

That means — technically — there is no tax on Maryland’s slot machines, according to the state Office of the Comptroller. Money is collected as lottery revenue, with 33 percent of that revenue allocated to casino operators.

David S. Cordish, chairman of The Cordish Cos. and developer of the Maryland Live casino at Arundel Mills mall, said operators could sometimes wait “up to 10 days” to receive their third of the revenue pie.

“There are no deductions, we are hardwired into the state,” Cordish said. “They take all the money and then they rebate back to us.”

The other disbursements — 48.5 percent for the Education Trust Fund, 7 percent for the horse racing purse account, 5.5 percent for local impact grants, 2.5 percent to the race tracks facility renewal account and 1.5 percent to small, minority and women-owned business — are delivered on a monthly basis. The lottery keeps 2 percent of gross revenues.

But, while rare, it’s not Maryland’s process that’s the problem, Jones said.

“The process isn’t problematic,” she said. “But that high a tax rate is problematic.”