What Are Gross Receipts?
Let me explain gross receipts to you directly: they cover the total amount of all receipts your business earns in cash or property, including sales, tax refunds, and other income, but excluding expenses and adjustments. These figures are crucial for corporate taxation in some states, and they directly impact your financial decisions and tax obligations. You'll see examples from Texas and Ohio that show how different places define and use gross receipts for taxes.
Key Takeaways
Here's what you need to know: gross receipts are the total sales and other non-business income of your company, without any deductions for expenses. They differ from gross sales because they include things like tax refunds, donations, and dividend income. Some states and local tax authorities impose taxes on gross receipts rather than corporate income or sales tax. And remember, definitions of gross receipts can vary by state, with specific examples from Texas and Ohio's tax codes.
Detailed Analysis of Gross Receipts
Gross receipts are the total of all cash or property you receive, without deducting expenses or other items. Unlike gross sales, gross receipts capture anything not related to your normal business activity—tax refunds, donations, interest and dividend income, and more. They also don't account for discounts or price adjustments. Some states and local tax authorities tax gross receipts instead of corporate income tax or sales tax.
Examples of Gross Receipts in Different States
Take Texas, for instance: according to Texas Tax Code Section 171.103, gross receipts for a business include each sale of tangible personal property if it's delivered or shipped to a buyer in the state, regardless of the FOB point or other sale conditions; each service performed in the state, except that receipts from servicing loans secured by real property are in the state if the property is located there; each rental of property situated in the state; the use of a patent, copyright, trademark, franchise, or license in the state; each sale of property located in the state, including royalties from oil, gas, or other mineral interests; and other business transacted in the state.
Now look at Ohio: Ohio Revised Code Section 5751.01 defines gross receipts for 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.
Other tax authorities define gross receipts similarly for taxing businesses, and they often provide detailed lists of exclusions.
The Bottom Line
Gross receipts are a key financial metric for your business, forming the basis for corporate taxation in certain states and localities. Unlike gross sales, they include all earnings, even non-operating income like tax refunds or interest. States like Texas and Ohio define them differently, which reflects their local tax obligations. You need to understand these distinctions to navigate state tax codes, ensure compliance, and manage your tax liabilities and financial reporting effectively.
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