Gross revenue
Total income from sales before returns, discounts and allowances are subtracted, and before any costs.
In short
- Gross revenue is total sales before returns, discounts, allowances and costs.
- Net revenue subtracts returns, allowances and discounts; gross profit then subtracts the cost of goods sold.
- Sales tax collected from customers is a liability, not part of gross revenue.
Net revenue = Gross revenue − Returns − Allowances − Discounts
Gross revenue excludes sales tax collected from customers, which is a liability, not income.
Gross revenue is everything a business brings in from selling its products and services over a period, before subtracting returns, discounts, allowances or any cost. It is the first line of the income statement, often labelled gross sales or, on a tax return, gross receipts.
Gross revenue vs net revenue
Net revenue is gross revenue minus returns, allowances and discounts. A store that sells $500,000 of goods and refunds $20,000 of returns has gross revenue of $500,000 and net revenue of $480,000. Net revenue is the figure the rest of the income statement is built on, and the one most analysts mean when they say revenue.
Gross revenue vs gross profit
The two are easy to confuse. Gross revenue is before any cost. Gross profit is net revenue minus the cost of goods sold. It shows what the sales earned after paying for what was sold.
What is not gross revenue
- Sales tax collected. GST, HST, QST, PST or US sales tax collected from customers is owed to the government. It belongs in a liability account, not in revenue.
- Loans and owner contributions. Money that comes in but wasn't earned from customers.
- Pass-through amounts where the business acts strictly as an agent, which some businesses report net. Whether a sale is reported gross or net depends on whether the business controls the goods or service before the customer gets it.
On a tax return
In the US, Schedule C starts with gross receipts or sales, and the IRS lists the documents that support them: cash register tapes, deposit slips, receipt books, invoices, credit card charge slips and Forms 1099. In Canada, form T2125 starts from gross sales, commissions or fees. Both expect the business to keep the records that prove the figure.
Why it matters
Gross revenue is used to size a business and often to test thresholds, which makes it worth getting right. Keeping sales tax out of it is the most common fix: issuing invoices and receipts that show the tax on its own line lets the books record revenue and tax separately from the start.
Worked example
A bike shop's month
A bike shop rings up $64,000 in sales in a month, plus $8,320 of 13% HST that it collects for the government. It refunds $1,800 for two returned bikes and gives $700 in loyalty discounts. Its gross revenue is $64,000, its net revenue is $61,500, and the $8,320 of HST goes to the HST payable account, not to revenue.