Gross Sales vs Gross Receipts

In America, the first gross receipts tax was established in 1921 by West Virginia as a “business and occupations privilege” tax. Gross receipts taxes spread during the 1930s, as the Great Depression reduced state property and income tax revenue. By the late 1970s, however, gross receipts taxes began to be repealed or struck down as unconstitutional by state courts. The key difference between revenues and receipts is that revenues are reported as sales on the income statement, while receipts increase the cash total on the balance sheet.

Gross Sales Vs Gross Receipts

These figures must be watched over a moderate period of time to make an accurate determination of their significance. When you use another business to process or collect payments for you, the fee or commission they retain is taxable. You must include it with the amount you received in gross receipts. In gross receipts, you should include taxable and exempt payments. Any exempt payments will be subtracted from gross receipts on the exemption lines of your return.

Revenue vs. Income

However, gross sales do not include the operating expenses, tax expenses, or other charges—all of these are deducted to calculate net sales. Until the passage of Proposition E, San Francisco levied a 1.5% tax on the payroll expense of larger businesses in the city. San Francisco was the only city in California to base its business tax on payroll expense.

  • Other states quickly began enacting similar laws and all states with a general sales tax and the District of Columbia now have laws requiring the collection of online sales tax.
  • Gross sales are equal to the sum of all sales, while net sales subtract all discounts, allowances, and returns to calculate your company’s profit.
  • Transportation charges.—Separately stated charges for transportation are included in gross receipts and subject to tax where the merchandise is consigned to the buyer and shipped f.o.b. cars at the destination point, transportation charges collect and allowed.
  • The gross receipts tax, on the other hand, is based on your total revenue and directly impacts the profits you earn.
  • It has no general sales/use tax and the Delaware gross receipts tax is a tax on the total gross revenues of a business, regardless of their source, at rates that vary by business activity.

Just add up all the numbers in the “profits” section of your records, and that number is what goes on your final recorded receipt. If in this example, they came to $600, you would be left with $900 of actual revenue. Because income is classified as money that you earn, whether through a job or investments, loans are not included as part of your gross income. You don’t make money from your loan; you borrow money with the intent of paying it back. If you operate your business as a Sole Proprietorship or a single-member Limited Liability Company (LLC), gross receipts go on Schedule C of your IRS Form 1040.

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(8) Charges for transporting landfill from an excavation site to a site specified by the purchaser, either if the charge is separately stated and does not exceed a reasonable charge or if the entire consideration consists of payment for transportation. At some point or another, you may need to know your gross receipts for certain Gross Sales Vs Gross Receipts situations, like taking out a loan. A business run as a Sole Proprietorship or a single-member Limited Liability Company (LLC), gross receipts go on Schedule C of your IRS Form 1040. Gross receipts tax is a tax that some businesses must pay to the local state government based on the receipts a business must pay every year.

  • New Mexico GRT also applies to the right to use a franchise in the state.
  • These monthly/quarterly and yearly gross earnings reports are for tax purposes and to help you keep track of what you’re profiting compared to what your business is earning.
  • State and local governments collected a combined $443 billion in revenue from general sales taxes and gross receipts taxes, or 12 percent of general revenue, in 2020.
  • For purposes of the Gross Receipts Tax and Business Registration Fee, a lessor of residential real estate is treated as a separate person with respect to each individual building in which it leases residential real estate units.
  • Revenue is money that you earn, while income refers to pretax profits, or revenue from which you’ve subtracted your expenses to make and sell your product or service.

Gross means total while net represents leftovers after deducting business expenses. Whatever metric you choose to present your company’s annual revenue, specify by adding gross or net before “revenue.” The idea is to make it easy for the target audience to understand your calculations. Despite the differences, gross and net revenue are essential in establishing a company’s financial health. But recognizing and reporting them can be time-intensive, hence the need to leverage revenue automation tools. You can also estimate your business value as a multiple of the last recorded gross revenue.


Zendesk automates the measurement of sales metrics so you can focus on keeping your top and bottom lines strong. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such, SmartyCents and Youthletic.

HB 323 wasn’t enacted, so New Mexico won’t be renaming its gross receipts tax for now. Learn how to use the sales revenue formula so you can gauge your company’s continued viability and forecast more accurately. Changes to the tax rates may occur twice a year in January or July. The Department posts new tax rate schedules online and in the GRT Filer’s Kit, which can be found at the bottom of this page.

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