Understanding Gross Receipts With Examples

What Are Gross Receipts?

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. The components of gross receipts vary by state and municipality.

Understanding Gross Receipts

Gross receipts means the total amount of all receipts in cash or property without adjustment for expenses or other deductible items. Unlike gross sales, 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.

State Examples of Gross Receipts

Texas Tax Code Section 171.103 defines gross receipts for a business as the sum of:

1. Each sale of tangible personal property if the property is delivered or shipped to a buyer in this state regardless of the FOB point or another condition of the sale
2. Each service performed in this state, except that receipts derived from servicing loans secured by real property are in this state if the real property is located in this state
3. Each rental of property situated in this state
4. The use of a patent, copyright, trademark, franchise or license in this state
5. Each sale of property located in this state, including royalties from oil, gas or other mineral interests
6. Other business transacted in this state

Ohio Revised Code Section 5751.01 defines gross receipts for the purposes of 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."

Like the above, definitions of "gross receipts" are given by other tax authorities that use them as a taxation basis for businesses. Detailed lists of exclusions to gross receipts are also provided.