Gross receipts are the sales of a business that form the basis for corporate taxation in various states and local tax authorities. The components of gross receipts can differ widely depending on the specific regulations of each jurisdiction, impacting your financial decisions and tax liabilities.
Understanding Gross Receipts
Gross receipts encompass the total amount of all receipts in cash or property, without any adjustments for expenses or other deductible items. Unlike gross sales, gross receipts capture everything that is not directly related to the usual business activities of an entity—such as tax refunds, donations, interest and dividend income, and more. Additionally, gross receipts do not account for any discounts or price adjustments. Some states and local tax jurisdictions implement taxes on gross receipts instead of corporate income tax or sales tax.
Examples of Gross Receipts by State
Texas
According to the Texas Tax Code Section 171.103, gross receipts for a business include:
- Each sale of tangible personal property delivered or shipped to a buyer in this state, regardless of the FOB point or other conditions of the sale.
- Each service performed within Texas, with the exception that receipts from servicing loans secured by real property are considered in-state if the underlying property is located in Texas.
- Each rental of property situated within Texas.
- The use of a patent, copyright, trademark, franchise, or license in the state.
- Sales of property located within Texas, including royalties from oil, gas, or other mineral interests.
- Any other business conducted in the state.
Ohio
the Ohio Revised Code Section 5751.01 defines gross receipts for the purposes of the Commercial Activity Tax (CAT) as “the total amount realized by a person, without deduction for the cost of goods sold or other expenses incurred, that contributes to the production of gross income of the person, including the fair market value of any property and any services received, and any debt transferred or forgiven as consideration.”
These state-specific definitions illustrate that gross receipts can vary significantly, and businesses must understand local regulations to comply with their tax responsibilities efficiently.
Related Terms: gross sales, tax refunds, tangible personal property, fair market value, forgiven debt.
References
- Tax Foundation. “Resisting the Allure of Gross Receipts Taxes: An Assessment of Their Costs and Consequences”.
- Texas Public Law. “Texas Tax Code Sec. 171.103 Determination of Gross Receipts From Business Done in This State for Margin”.
- Ohio Laws and Rules. “Chapter 5751: Commercial Activity Tax”.
