Understanding Gross Receipts With Examples

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Janet Berry-Johnson is a CPA with 10 years of experience in public accounting and writes about income taxes and small business accounting.

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.

1. Tax Foundation. Resisting the Allure of Gross Receipts Taxes: An Assessment of Their Costs and Consequences. Accessed August 16, 2021.
2. Texas Public Law. "Texas Tax Code Sec. 171.103 Determination of Gross Receipts From Business Done in This State for Margin." Accessed Nov. 12, 2020.
3. Ohio Laws and Rules. "Chapter 5751: Commercial Activity Tax." Accessed Nov. 12, 2020.

Gross working capital is the sum of a company's current assets, which are convertible to cash and used to fund daily business activity.

Activity cost drivers give a more accurate determination of the true cost of business activity by considering the indirect expenses.

A perpetual inventory system is a computerized system that keeps track of the quantity of inventory on hand and updates the records as goods are purchased or sold. Learn how it works and its pros and cons.

Suspense accounts are used by businesses, mortgage servicers, and brokerage firms to temporarily account for customers' money, pending further action.

Earnings management is the use of accounting techniques to make a company’s financial reports look better.

Above-the-line costs refer to either costs above the gross profit line or the costs above the operating income line, depending on the type of company.

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