Gross receipts
The total amount a business or organization takes in from all sources during a period, before any costs or expenses are subtracted.
In short
- Gross receipts count every amount received, from all sources, with nothing subtracted.
- They are not profit: costs, returns and expenses come off later.
- In the US the figure decides several thresholds, such as who can use the cash method.
Gross receipts are everything a business or organization receives during its accounting period, from all sources, without subtracting any costs or expenses. That is how the IRS defines the term for tax-exempt organizations, and the same idea applies to businesses: sales of goods and services, fees, commissions, rents and interest all count at their full amount.
Gross receipts versus revenue and income
- Gross receipts: the full amounts taken in, from every source.
- Gross revenue or sales: usually income from the main business activity, sometimes after returns and allowances.
- Gross profit: sales minus the cost of goods sold.
- Net income: what remains after all expenses.
On a US Schedule C, line 1 is gross receipts or sales. Returns and allowances come off on line 2 to give net receipts, and the cost of goods sold comes off after that.
Why the number matters
Gross receipts are often the test that decides which rules apply. In the US, they decide which annual information return a tax-exempt organization files, and a business whose average annual gross receipts for the three prior years are under an inflation-indexed limit can use the cash method of accounting. Several states and cities also levy gross receipts taxes, charged on receipts rather than profit. Lenders and grant programs ask for the figure too.
In Canada
Canadian forms use different words. A sole proprietor reports gross sales, commissions or fees on Form T2125, and the GST/HST small supplier test counts taxable supplies rather than gross receipts. When a Canadian lender or program asks for gross receipts, it is asking for total revenue before expenses; check its own definition for what to include.
Worked example
A café's year
Over a year, a café sells $310,000 of food and drinks, earns $6,000 renting its room for evening events and receives $400 of interest from its bank. Its gross receipts are $316,400. Food costs, wages and rent don't reduce that figure; they come off later, when profit is worked out.