Gross receipts tax is a tax imposed on a business's total revenue, with no deductions for expenses, cost of goods sold, or losses. It applies to the top line, not the bottom line.
That is what separates it from income tax. A business can operate at a loss and still owe gross receipts tax.
How is gross receipts tax calculated?
The calculation is straightforward. Multiply total gross receipts by the applicable tax rate. No deductions, no adjustments for profit or loss.
For example, a business with $500,000 in revenue and a 0.5% gross receipts tax rate owes $2,500, regardless of whether it was profitable.
Revenue | Tax rate | Tax owed |
$100,000 | 0.26% (Ohio example) | $260 |
$500,000 | 0.50% | $2,500 |
$1,000,000 | 1.00% | $10,000 |
Rates vary significantly by state and sometimes by industry.
Which states have a gross receipts tax?
As of 2025, eight states impose a statewide gross receipts tax: Delaware, Nevada, Ohio, Oregon, Tennessee, Texas, Virginia, and Washington.
Some cities and localities also impose their own gross receipts taxes separately from state requirements. Businesses operating in multiple jurisdictions need to track each one individually.
What is the difference between gross receipts tax and sales tax?
Sales tax is collected from the customer at the point of sale and remitted to the government. Gross receipts tax is paid by the business based on its total revenue and is not directly visible to customers.
Another key difference: sales tax only applies to certain transactions. Gross receipts tax applies to all revenue the business brings in, regardless of what was sold.
Who is subject to gross receipts tax?
In most states that impose it, gross receipts tax applies to businesses of all sizes operating within the state. Some states exempt very small businesses below a revenue threshold.
Certain industries may have different rates or exemptions. Nonprofits, resellers, and businesses in specific sectors sometimes receive partial or full exclusions depending on state law.
Are there any exemptions to gross receipts tax?
Yes, but they vary widely by state. Common exemptions include sales for resale, certain agricultural transactions, and intercompany transactions within affiliated groups.
Some states also exclude specific types of revenue such as dividends, interest, or proceeds from asset sales. Businesses should review their state's specific rules rather than assuming federal income tax exemptions carry over.
Key Takeaways
Description | |
Definition | A tax on total business revenue with no deductions for expenses or losses |
Key difference from income tax | Applies even when a business is not profitable |
States that impose it | Delaware, Nevada, Ohio, Oregon, Tennessee, Texas, Virginia, and Washington |
Vs. sales tax | Paid by the business on all revenue, not collected from customers at point of sale |
Exemptions | Vary by state; common ones include resale transactions and certain industries |
Frequently Asked Questions
Can a business deduct gross receipts tax as a business expense?
Yes. Gross receipts taxes paid to state or local governments are generally deductible as a business expense on the federal income tax return.
Is gross receipts tax the same as a franchise tax?
Not always. Some states use gross receipts as the basis for calculating a franchise tax, but the two are distinct. Franchise taxes are levied for the privilege of doing business in a state, while gross receipts taxes are revenue-based.
Do service businesses pay gross receipts tax?
Yes. Unlike sales tax, which often exempts services, gross receipts tax typically applies to all revenue, including revenue from services.
How often is gross receipts tax filed?
Filing frequency varies by state and revenue level. Some states require monthly filing, others quarterly or annually.
