PURPOSE: This rule defines gross receipts and clarifies how vendors are to report use tax when their accounting method approximates gross receipts.
- (1) Section 144.655, RSMo requires vendors to file returns with the director of revenue showing the amount of gross receipts from taxable sales and services. Gross receipts, as defined in section 144.010.1(3), RSMo, is the total amount received by the vendor for the sale or lease of property or taxable services, less refunds for returned property.
- (2) In order to conform with generally accepted accounting principles, many businesses recognize and account for sales on an accrual basis for financial reporting and federal income tax purposes. Under the accrual basis of accounting, sales are recognized in the period in which the transaction is completed, rather than the period in which payment is actually received.
(3) Vendors may report sales on an accrual basis for the vendors’ administrative convenience, if that method materially equals gross receipts over several reporting periods. Accrual basis reporting must meet the following criteria:
- (A) The difference between accrual and gross receipts basis reporting shall be limited to changes in accounts receivable balances and refunds to purchasers during the reporting period;
- (B) Periodic adjustments for bad debts must be reasonable and verifiable, must not exceed the bad debts expense claimed on the federal income tax return and may not exceed the taxable sales reported for the period in which the adjustment is taken; and
- (C) The taxpayer must use a consistent basis of reporting. Any taxpayer changing the basis of reporting shall notify the director of revenue of the change and its effective date.
- (4) The director of revenue reserves the right, upon written notification, to require any taxpayer to report future periods on a gross receipts basis with no accrual provision.
AUTHORITY: section 144.705, RSMo 1994.* Original rule filed Oct. 24, 1990, effective March 14, 1991. *Original authority: 144.705, RSMo 1959.