![]() ![]() Gross income starts with ‘gross receipts’ for businesses. Gross income includes just about every type of income. A gross receipts tax is often compared to a sales tax the difference is that a gross receipts tax is levied upon the seller of goods or services, while a sales tax is nominally levied upon the buyer (although both are usually collected and paid to the government by the seller). The general rule is that taxpayers have to pay tax on gross income. This amount is not reduced by any costs or expenses. Indirect taxes like excise taxes are not neutral because they target specific industries and activities, like cigarettes and alcohol.Īll tax revenue is subject to economic cycles and changing taxpayer behavior, but indirect taxes, like broad-based consumption taxes, are more stable than taxes that target a narrow tax base, such as cigarette smokers. Gross receipts means the total amount of all receipts in cash or property without adjustment for expenses or other deductible items. A gross receipts tax or gross excise tax is a tax on the total gross revenues of a company, regardless of their source. An S corporations gross receipts are its total revenue received from all income sources during an annual accounting period. Indirect taxes, like value-added taxes (VAT) and retail sales taxes, can be neutral because they have little effect on consumer behavior and apply to all business models the same. Gross receipts taxes lead to tax pyramiding, while sales taxes are clearly marked on invoices and receipts. This does not mean that these taxes are transparent. Unlike a corporate income tax, these taxes apply to the firm’s sales without deductions for a firm’s costs. Indirect taxes are generally simple, both for the government to levy and collect since they are applied broadly and automatically included in purchases. Gross receipts tax es are applied to receipts from a firm’s total sales. Income that is not derived from the exercise of the privilege for which the taxpayer is. These principles should serve as touchstones for policymakers and taxpayers everywhere. The definition of gross receipts is discussed in 23VAC10-500-10. Tax Foundation’s Principles of Sound Tax Policy are simplicity, transparency, neutrality, and stability. ![]()
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