Friday, February 2, 2018

Gross Receipts Tax at Five Percent?


I need your help. I have in my possession a formula that, according to a credible source, defines how a future Gross Receipts Tax would be calculated. 

Let me stress right from the get-go that I have not been able to independently verify this formula, so I am not - I repeat, I am not - saying that this is the real deal. However, the source is credible and the very formula itself suggests that this might actually be what a future GRT would look like. 

I need your help in verifying whether or not this is actually what the GRT proponents have in mind. I have tried to have it verified through communications with legislators, most of whom have stonewalled me. The exception to that rule was one legislator who told me, flat out, that nobody has any plans for a Gross Receipts Tax. When I asked this legislator what the purpose would be behind HB0051, if nobody wants a GRT, the answer was, plainly, that some legislators just want more information. 

So, here is where we are:

1. If the formula I have is the real GRT in the making, then we are looking at a tax increase of such proportions that it takes us right back to the Taxmageddon package. In this case, HB0051 is a gateway to a business-hostile tax environment.

2. If the formula I have is not the GRT, but there are plans for a GRT behind HB0051, then what tax rate and tax-base calculation method do the GRT proponents have in mind?

3. If, as this one legislator explained, there are no plans whatsoever for a GRT, then there is absolutely no reason for anyone to vote for HB0051. Government should not be collecting information on private citizens just for the fun of it. 

With that in mind, here is the formula. Let R be your business gross receipts. Let T be your county sales tax and let G be the gross receipts tax your business owes the state:

G = (R x (1+T)) x 0.0523

In other words: 
  • Suppose your business gross receipts are $100,000;
  • Suppose your county sales tax is five percent;
  • You multiply $100,000 with 1.05 to get $105,000; this is the tax base from which you are going to calculate your gross receipts tax;
  • Multiply $105,000 by 5.23 percent, or 0.0523; you now get $5,491.50; this is the tax you owe the state. 

The formal GRT tax rate, according to this formula, is 5.23 percent. The actual tax rate is higher, 5.49 percent, and the reason is that the formula increases the tax base so that it is higher than your gross receipts. The variable that increases your gross receipts is the county sales tax.

It is this "increase variable" that makes me suspect this might be the actual GRT formula. By increasing the gross receipts tax base by the county sales tax, the legislature could increase its gross receipts tax revenue without having to raise the gross receipts tax itself. All they would have to do is raise the sales tax - or give counties the opportunity to raise their taxes and then collect more revenue on their backs. 

Again: I am not going to suggest that this is the GRT formula, but the source from which I got it, plus the formula itself, leads me to believe that it could actually be the real deal. 

So, friends, if you have any information to contribute in either direction; if you happen to talk to a legislator; please feel free to share with the rest of us. 

Thank you.

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