Gross receipts tax
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A gross receipts tax, sometimes referred to as a 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 services rather than the consumer. This is compared to other taxes which are 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 which increases the actual taxable percentage as it passes through the product or service life-cycle.[1]
Criticism
John Mikesell, Professor of Public Finance and Policy Analysis at Indiana University, states that "gross receipts taxes are just simply terrible in terms of competitiveness, in terms of economic development, in terms of encouraging investment, and all those sorts of things." He suggests that they don’t make sense from a policy standpoint, and perhaps politics drive such taxes due to their lack of transparency.[2] Other economists have criticized gross receipts taxes for encouraging vertical integration among companies, and for imposing different effective tax rates across different industries.[3]
United States
Several states in the United States have imposed gross receipts taxes.
- Arizona - Transaction Privilege Tax (TPT)
- Washington - Business and Occupations Tax (B&O)
- Ohio - Commercial Activity Tax (CAT)[1]
- Delaware - Business and occupational gross receipts tax rates range from 0.096% to 1.92%, depending on the business activity.[4]
- New Mexico - The gross receipts tax rate varies throughout the state from 5.125% to 7.875%.[5]
- 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. Some statewide business leaders have rushed to condemn this proposed tax.
- Mississippi - A 3.5% contractor's tax is levied on all commercial and non-residentioal construction and is calculated upon the total contract amount.
See also
Notes
- ^ "Gross Receipts Tax". AIA Kansas. 1995-11-17. Retrieved 2007-02-04.
- ^ Hodge, Scott (2007-01-17). "Tax Foundation Podcast Episode 19" (PDF). Tax Foundation. Retrieved 2007-02-04.
{{cite web}}: Unknown parameter|coauthors=ignored (|author=suggested) (help) - ^ Chamberlain, Andrew (2006-12-01). "Tax Pyramiding: The Economic Consequences of Gross Receipts Taxes". Tax Foundation. Retrieved 2007-02-21.
{{cite web}}: Unknown parameter|coauthors=ignored (|author=suggested) (help) - ^ "Gross Receipts Taxes". State of Delaware. 2006-06-14. Retrieved 2007-02-04.
- ^ "Gross Receipts Taxes" (PDF). State of New Mexico. Retrieved 2007-02-04.