What's the Difference Between Gross Receipts and Net Income for a Business?

Gross receipts and net income are both measures of a business's financial activity, but they tell you very different things. Gross receipts (sometimes called gross revenue or total sales) is the total amount of money coming into the business before any expenses are deducted — it's every dollar the business collected from selling products or services. Net income is what's left after you subtract all business expenses, including the cost of goods sold, payroll, rent, supplies, and other operating costs. Net income is what gets reported as profit and is subject to income tax. The IRS uses gross receipts for certain threshold calculations — for example, businesses with average annual gross receipts over $30 million must use accrual accounting — while net income determines the actual tax liability.