Gross receipts are sales of a business that form the basis for corporate taxation in a handful of individual states and certain local tax authorities. It is the total amount of all receipts in cash or property without adjustment for expenses or other deductible items.
Gross receipts capture anything that is not related to the normal business activity of an entity — tax refunds, donations, interest and dividend income, and others. Also, gross receipts do not account for discounts or price adjustments. Some states and local tax jurisdictions impose taxes on gross receipts instead of corporate income tax or sales tax.
What do Gross Receipts include?
Gross receipts vary from state to state but usually include the following-
1. Each sale of tangible personal property if the property is delivered or shipped to a buyer in the state. 2. Each service performed in the state 3. Each rental of property situated in the state 4. The use of a patent, copyright, trademark, franchise or license in the state 5. Each sale of property located in the state, including royalties from oil, gas or other mineral interests 6. Other business transacted in the state
What is Gross Receipt Tax?
A**gross receipt tax (GRT), also called gross excise tax, is a state tax on the gross sales of a business. States often impose a gross receipts tax in lieu of a corporate income tax or sales tax. Thus GRT is imposed on the above mentioned inclusions of Gross Receipts.
Gross receipts taxes might look like sales taxes at first glance, but they tax the sellers, not the retail buyers, at least directly. They’re imposed at several levels and even between businesses in the purchase of raw materials, supplies, and transportation.
How to calculate Gross Receipt Tax?
The following factors are taken into consideration when calculating Gross Receipt Tax-
1.Establish the time period you wish to measure. Common time periods to consider when measuring a business’s activity are monthly, quarterly and annually.
2.Determine if your business operates under the cash or accrual accounting system. The cash accounting system recognizes sales upon receiving the cash from the customer, while the accrual system recognizes income when the product is delivered or the service to the customer is completed
3.Gather all receipts and invoices of product sold or services rendered for the period. These provide you with the amounts you need to add together to determine gross sales.
4.Add all relevant sums from produce sold or services rendered during the financial period in question to determine business gross receipts. If you operate under the accrual system, add only those sales where you delivered the goods or completed the service within the specified time period you are considering. If you operate on the cash basis, recognize only the sales where you received payment within the time period.
The various taxes imposed on tax payers and businesses can make tax returns filing a difficult process. For technical issues like these and more, our tax experts at the National Tax Preparers of America (NTPA) will help you through the technical expertise and accuracy required in your tax returns.
