Is There a Role for Gross Receipts Taxation?*

States are showing renewed interest in using Gross Receipts Taxes (GRTs) as a method for taxing business. This paper discusses the advantages and disadvantages of GRTs along three dimensions—as a stand alone tax against standard tax principles, as a replacement for an existing business tax structure, and finally as a "fill–in" or corrective tax to rebalance a state’s tax system. In addition, the paper offers estimates of current state and local tax levies on business relative to estimates of the benefits that business receives through public services. The paper concludes that the GRT is not a first best option, and that an origin–based value added tax would be a preferred business tax structure.