Glossary · Invoicing & Pricing
Gross receipts
In short
The total taken in before any deduction. Arizona defines three overlapping terms for it, and the prime contracting classification does not run on the one most people say.
In full
Gross receipts is the total amount taken in, before subtracting anything. A.R.S. § 42-5001(7) defines it as the total sale, lease or rental price of the retail sales of retailers, including services that are part of the sale, with no deduction for the cost of property sold, materials used, labor or service performed, interest paid, losses, or any other expense.
Arizona actually uses three terms in this area. Gross income means the gross receipts of a taxpayer derived from trade, business, commerce or sales, and the value proceeding or accruing from the sale of tangible personal property or service, without deduction for losses. Gross proceeds of sales means the value proceeding or accruing from the sale of tangible personal property, again without deduction for cost, expense or losses.
The prime contracting classification does not run on gross receipts. A.R.S. § 42-5075(B) sets the tax base at sixty-five percent of the gross proceeds of sales or gross income derived from the business. ADOR's Contracting FAQ nonetheless describes the gross receipts of a prime contracting project as subject to the tax, using the everyday term rather than the statutory one.
For a contractor the practical point is that none of the three permits netting. Subcontractor payments, material costs and labor are not deducted before the tax base is computed; deductions come only from the list the statute provides.
A.R.S. § 42-5001(4), (5), (7); A.R.S. § 42-5075(B); ADOR Contracting FAQs