Per Treasury Regulation section 1.41-3(c)(1), gross receipts include all income derived by the taxpayer from all its activities and from all sources, with the following exceptions:
- Returns or allowances.
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Receipts from the sale or exchange of capital assets, defined under section 1221.
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Repayments of loans or similar instruments.
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Receipts from a sale or exchange not in the ordinary course of business, such as the sale of an entire trade or business or the sale of property used in a trade or business as defined under section 1221(2).
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Amounts received with respect to sales tax or other similar state and local taxes if, under the applicable state or local law, the tax is legally imposed on the purchaser of the goods or service, and the taxpayer merely collects and remits the tax to the taxing authority.
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Amounts received by a taxpayer in a taxable year that precedes the first taxable year in which the taxpayer derives more than $25,000 in gross receipts other than investment income.
Gross Receipts should not be reduced by cost of goods sold. Tax exempt interest and other tax exempt income should be included in the gross receipts computation.