When you file your gross receipts tax report you need to know how much tax you have to pay.

 

The first step is to determine the amount of taxable gross receipts as illustrated in the example below.)

 

The second step is to determine your total gross receipts. These 2 amounts may not be the same if you have non-taxable gross receipts. There are 3 common types of gross receipts not subject to gross receipts tax: sales to out-of-state buyers, sales from resale and exemptions. They are all grouped in the total labeled deductions. Note: Even though exemptions are technically not reportable, it is a best practice to include them with deductions to reduce the possibility of an audit for apparent underreporting.

 

The third step is to add taxable sales to total deductions. These steps are illustrated in the chart below.

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Backing out the tax

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It's important to know that the gross receipts tax law makes the seller responsible for gross receipts tax regardless of whether the tax is added to invoices or bills. That means the money you receive from sales actually consists of 2 amounts: the sale and the gross receipts tax. To avoid paying tax on the gross receipts tax, you should report only the sales amounts. You do this by using this arithmetic formula to back out the tax.

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The example below assumes there are taxable gross receipts as well as different types of non-taxable ones. It shows you how to determine taxable gross receipts by backing out the tax. If you don't do this calculation, the tax will be included in gross receipts you report which means you will pay tax on the tax.

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