In today's article we are going to delve into the exciting world of Gross receipts tax. Throughout the next few lines we will explore the different facets, experiences and knowledge related to Gross receipts tax, with the aim of offering a complete and enriching vision of this topic. From its origin to its most current applications, we will delve into each relevant aspect to fully understand Gross receipts tax and its impact on today's society. Regardless of your level of prior knowledge about Gross receipts tax, this article is intended for anyone interested in learning more about this particular topic. So get ready to discover everything you ever wanted to know about 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 often compared to a sales tax; the difference is that a gross receipts tax is levied upon the seller of goods or services, while a sales tax is nominally levied upon the buyer (although both are usually collected and paid to the government by the seller). 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 lifecycle.
Another pyramid effect of the tax comes from the fact that such a tax by definition is levied against itself (in the sense that a business subject to a gross receipts tax will raise its prices to compensate, which in turn increases its gross revenue, which increases the tax owed, and so on in circles) and therefore amounts to a tax on tax. Thus, the actual tax rate of a gross receipts tax is always slightly higher than the nominal tax rate. This is easiest to discern in jurisdictions like Hawaii where businesses are allowed to visibly pass on gross excise tax to their customers.
Economists have criticized gross receipts taxes for encouraging vertical integration among companies and imposing different effective tax rates across different industries.
Several states in the United States have imposed gross receipts taxes.
In addition to these states, Texas has a "margin tax" on certain corporate net revenues.