Understanding gross receipts taxes can make it easier for you to file your taxes properly. When it comes to both business and personal taxes, a solid understanding of your taxes is critical to filing correctly and not missing crucial elements — something that could lead to fees and penalties down the road.
Gross receipt taxes may prove particularly difficult to manage, since they may vary from state to state. This simple guide can give you a better understanding of your tax needs, how to properly file gross receipts taxes, and what to watch out for in the process.
Understanding Gross Receipts and Related Taxes
Gross receipts capture all the money that your business receives that is not accounted for under normal business operations. A few facts to keep in mind:
- Your gross receipts will include all sources of income.
- This means not just gross sales, but also tax refunds, donations, and other sources of income.
- The gross receipts tax is the tax levied on your company’s total revenue.
- It may vary from state to state.
- Failure to pay these taxes can leave you facing significant penalties and fines or, in serious situations, even shutting down your business.
- Like the sales tax paid by consumers, it reflects a percentage of your business’s actual sales and income.
A gross receipts tax, unlike SG&A taxes, is not paid by consumers. In some cases, however, businesses may choose to raise their prices as little to pass that expense on to consumers. For example, you might charge an extra $0.25 for a loaf of bread if you operate a market in a state that imposes a gross receipts tax, or you might add funds to the overhead and profits margin for a project to ensure you have the funds on hand to cover those expenses in addition to your usual business costs.
New business owners should carefully consider how the gross receipts tax can influence their ability to do business, especially if they need to set prices. Talk to a professional tax attorney about the taxes you may need to arrange for, including the gross receipts, payroll, and other taxes, as well as how to calculate taxable income.
How to File Gross Receipt Taxes
As a business, you will need to fill out Form 1120 to report your annual income to the IRS. If your state has a gross receipts tax, you will need to fill out a specific form for your state. In Tennessee, for example, businesses that must pay gross receipt taxes should fill out GRO212.
Provide all the necessary information on the form based on your state’s needs. You may need to provide information about your:
- Gross sales
- Operating expenses
- Any other income your business has
Your state may have several exemptions that help lower your gross receipts tax. Working with an experienced tax attorney can help ensure you fill out the form correctly and include all relevant information.
Once you have filled out the form, issue a payment to your state government in the amount of the gross receipts tax. If you do not have that amount available, you may want to make payment arrangements. In some cases, you may need to adapt your future pricing or other financial commitments to make it easier to keep up with those requirements.
Your State-by-State Guide to Gross Receipt Taxes
Most states do not use a gross receipts tax, but some use it in lieu of business taxes or in addition to them. As your business grows, you may need to pay increased attention to tax requirements, including the gross receipts tax for your state. Talk to a tax professional or tax attorney if you have any questions about your legal requirements.
The following requirements apply:
Delaware Gross Receipts
In Delaware, business and occupational gross receipts tax rates range from 0.0945% to 1.9914%, depending on the type of business conducted and profits collected.
Nevada Gross Receipts
Nevada imposes a gross receipts tax on sales over $4 million. If a business makes less than this amount in annual revenue, it will not have to worry about filing or paying a gross receipts tax. This tax primarily serves to target the owners of casinos and bars throughout the state.
Oregon Gross Receipts
Oregon has a gross receipts tax that kicks in on sales over $1 million for each year. The gross receipts tax is .57% of the revenue earned over $1 million. Businesses that sell less than that amount will not have to pay these taxes.
Ohio Gross Receipts
Ohio businesses must pay taxes on any income over $150,000 each year. Tax rates may depend on the type of business. If businesses have an income greater than $1 million, they should pay those taxes quarterly, rather than paying them at the end of the year.
Texas Gross Receipts
Texas businesses calculate sales tax as a percentage of their total gross receipts, with most companies required to pay 1% to the state. Retailers receive a lower rate of 0.5% due to their typically higher volume of transactions and smaller profit margins on goods sold. For example, a manufacturing company with $1 million in gross receipts would owe $10,000 in sales tax, while a retail store with the same revenue would pay $5,000. The tax applies to most goods and services, though certain items like groceries, medicines, and raw materials used in manufacturing remain exempt.
Our San Antonio tax attorneys help businesses review their sales tax obligations, identify potential deductions and exemptions, prepare accurate filings, and represent companies during state tax audits. When a business faces sales tax problems, our legal team steps in to communicate with state authorities, set up payment arrangements if needed, and defend against any penalties.
Tennessee Gross Receipts
Tennessee imposes gross receipts taxes only on certain business activities, including bottling, utilities, vending, and mixing bars. Tax rates depend on the specific type of activity done and the classification of the business.
Washington Gross Receipts
In Washington, businesses will pay taxes on the total amount earned. The gross receipts tax rate in Washington is .484% of the business’s gross receipts
Because each state’s gross receipts tax is different, and the rules can vary depending on the type of business you have, make sure you carefully research your local regulations. While other states do not impose a gross receipts tax, you may still have to pay taxes based on regulations imposed by your local government.
You should consult a tax professional to ensure that you pay your taxes promptly, on time, and correctly each year. Many states do exclude sole proprietors from their business taxes or may have different policies for freelancers or small businesses than they do for large businesses.
Get Expert Help with Gross Receipt Taxes
Keeping up to date on state and local tax code is critical for ensuring the overall success of your business and helping you maintain your financial status. Do you have questions about gross receipts taxes or other business taxes and how they apply to your business?
Contact Silver Tax Group today to speak with a tax expert about any gross receipts taxes questions you might have.
