12/27/2023 0 Comments Income tax gross receipts![]() Businesses and industries with lower profit margins or more stages in the production process-each one taxed separately-are hit harder by gross receipts taxes than are high-margin businesses that are vertically integrated, meaning that more of the work is done in-house (resulting in less exposure to the tax because there are fewer transactions). ![]() Although they have been dismissed for decades as inefficient and unsound policy, they have returned in recent years as states seek to replace revenue lost by eroding corporate income tax bases and to limit revenue volatility.Īs the map indicates, states often designate multiple gross receipts rates, typically by industry, to mitigate some of the economic costs associated with these taxes. These taxes gained popularity among states in the 1930s but began to be repealed or struck down as unconstitutional by state courts in the 1970s. Seven states currently levy gross receipts taxes, while several others, including Pennsylvania, South Carolina, Virginia, and West Virginia, permit local taxes imposed on a gross receipts base. These taxes are imposed at each stage of the production process, leading to tax pyramiding. Gross receipts taxes are applied to a company’s gross sales, without deductions for a firm’s business expenses, like compensation and cost of goods sold. ![]() ![]() Moving away from state gross receipts taxes would represent a pro-growth change to make the tax code friendlier to businesses and consumers alike, which is especially necessary in the wake of the coronavirus pandemic. Today’s map looks at which states levy a gross receipts tax, which is often considered one of the most economically damaging taxes. ![]()
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