How gross receipts works
Gross receipts include cash and credit sales, interest, rents and most other income, and unlike revenue on an income statement, the figure is not reduced by cost of goods sold or operating expenses. Some states, including Texas, Washington and Ohio, apply a gross receipts tax that is owed even in a year the business posts a net loss.
Because gross receipts tax calculations often differ from standard bookkeeping revenue figures, such as how they treat returns or intercompany sales, businesses operating in these states usually run a separate gross receipts report rather than relying on the income statement total. Filing thresholds and rates vary significantly by state and by industry. Some states also exempt certain industries or apply tiered rates once gross receipts pass a threshold, so a business operating in several states may owe gross receipts tax in one state and none in another for the same year of sales.
Example
A Texas business has $600,000 in sales, $580,000 in cost of goods sold and other expenses, and a $20,000 net loss for the year. Because Texas franchise tax is based on gross receipts, not net income, the business still owes tax calculated on a portion of that $600,000 figure, despite showing a loss on its income statement. A business operating in both Texas and a state without a gross receipts tax would only calculate and remit this tax on the portion of activity connected to Texas.
Gross receipts in QuickBooks Online vs Xero
Not software-specific: QuickBooks Online and Xero report total income and revenue by account, but neither calculates a state's specific gross receipts tax base, which often has its own inclusions and exclusions. Businesses typically export a total sales report from their accounting system and apply the state's rules separately, or use state-specific tax software.
Related terms
How LedgerBPO handles gross receipts
We keep your revenue accounts organized and reconciled so pulling a total gross receipts figure for a state filing is a clean export, not a research project. Where a state's gross receipts tax has unusual inclusions, we flag it so your CPA or tax preparer has accurate numbers to work from.