Gross receipts tax

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A gross receipts tax or gross excise tax is a tax on the total gross revenues of a company, regardless of their source. A gross receipts tax is similar to a sales tax, but it is levied on the seller of goods or service consumers. This is compared to other taxes listed as separate line items on billings, are not directly included in the listed price of the item, and are not a factor in markup or profit on company sales. A gross receipts tax has a pyramid effect that increases the actual taxable percentage as it passes through the product or service life-cycle.[1]

Criticism[edit]

Economists have criticized gross receipts taxes for encouraging vertical integration among companies and imposing different effective tax rates across different industries.[2]

United States[edit]

Several states in the United States have imposed gross receipts taxes.

  • Arizona - Transaction Privilege Tax (TPT)
  • Delaware - Business and occupational gross receipts tax rates range from 0.096% to 1.92%, depending on the business activity.[3]
  • Florida - A tax of 2.5% is imposed on "gross receipts from the sale, delivery, or transportation of natural gas, manufactured gas, or electricity to a retail consumer in Florida," referring to utility companies (suppliers of electrical power).[4]
  • Hawaii - The Hawaii General Excise Tax (commonly abbreviated as GET) is charged on the gross income of any business entity generating income within the State of Hawaii. The GET rate is 4% charged on all business income except for two exceptions: insurance agents commissions are charged at a rate of .15% (.0015) and income from wholesalers, manufacturers, and businesses owned by people with disabilities are charged at a rate of 1/2 of 1% (.005). The State allows businesses to pass on their 4% tax-inclusive tax burden to their consumers by charging their customers a quasi sales tax rate of 4.166%.[5] The GET generates nearly half of the State's tax revenue and is the primary method by which the State generates tax revenue from the strong tourist economy.[6] Despite its "success", there are several criticisms of the General Excise Tax. The GET is charged on business income from all sources including the sale of basic necessities such as food and doctor's fees and therefore serves as a sales tax on items most states exempt from sales tax. The total tax burden on each item sold is more than the 4.166% charged at the register since GET was charged earlier up the production chain (such as manufacturers and wholesalers), making the GET less transparent than a retail sales tax.
  • Illinois - Illinois policy makers are considering a 1% gross receipts tax to increase the foundation level for Illinois public schools, as well as to fund a host of educational accountability initiatives. The tax is expected to generate enough revenue to replace the state share of the retail sales tax, corporate franchise taxes, and corporate income taxes. Proponents claim that it is simple for both the government and business to administer, easy for the public to understand, broad-based, stable, and progressive. An editorial article in the Chicago Tribune called it "the best idea" for education funding reform,[7] but some statewide business leaders have rushed to condemn it.
  • Mississippi - A 3.5% contractor's tax is levied on all commercial and non-residential construction and is calculated upon the total contract amount.
  • Montana - Contractors must pay a fee of 1% on all public contracts above $5,000.[8]
  • New Mexico - The gross receipts tax rate varies throughout the state from 5.125% to 8.6875%.[9]
  • Ohio - Commercial Activity Tax (CAT)[1]
  • Pennsylvania - Either 5% or 5.9% for most applicable industries. Tax stands at 1% for private bankers, and the tax on natural gas was repealed during the industry's deregulation.[10]
  • Washington - Business and Occupation Tax (B&O)
  • West Virginia – Business and Occupation Tax; only applies at the state level to utilities, but is used by the great majority of cities in the state.
  • United States Virgin Islands

See also[edit]

Notes[edit]

  1. ^ "Gross Receipts Tax". AIA Kansas. 1995-11-17. Archived from the original on 2006-09-29. Retrieved 2007-02-04. 
  2. ^ Chamberlain, Andrew; Fleenor, Patrick (2006-12-01). "Tax Pyramiding: The Economic Consequences of Gross Receipts Taxes". Tax Foundation. Retrieved 2007-02-21. 
  3. ^ "Gross Receipts Taxes". State of Delaware. 2006-06-14. Retrieved 2007-02-04. 
  4. ^ . Florida Dept of Revenue http://dor.myflorida.com/dor/taxes/grt_utility.html. Retrieved 2013-12-14.  Missing or empty |title= (help)
  5. ^ http://hawaii.gov/tax/brochures/ge_bro.pdf
  6. ^ http://hawaii.gov/tax/trc/docs2007/Final%20Report.pdf
  7. ^ "The war of the 'woulds'". Chicago Tribune. 2007-02-09. Retrieved 2007-02-12. 
  8. ^ http://revenue.mt.gov/content/publications/biennial_reports/2010-2012/Biennial-Report-2010-2012.pdf
  9. ^ "Gross Receipts Taxes". State of New Mexico. Retrieved 2007-02-04. 
  10. ^ "Revenue: Gross Receipts Tax". Pennsylvania Department of Revenue. 2005-02-15. Retrieved 2009-05-18. [dead link]