In this section we briefly consider some of the many issues that a gross receipts tax brings up and point to specific Vermont firms, industries, and issues that would need to be resolved if a gross receipts tax was to be considered. A gross receipts tax is essentially an added cost of doing business for firms. The ultimate incidence of the tax, however, may not fall entirely on the business or activity that is being taxed. Tax incidence deals with the question of who ultimately pays the tax. The economic incidence of a tax is generally not the same groups or individuals as the statutory incidence of the tax.
Taxes cause people and firms to change their behavior.
Most likely, it might cause some combination of these three changes. Without knowing more about the specifics of each firm, its competitive position, the types of products produced, where the products were sold, the cost structure of the firm, and other information, we cannot generalize about the ultimate incidence of a gross receipts tax. Nor can we generalize about the total impact on a firm's economic competitiveness. But those firms who face competitors in other states would certainly have a harder time passing on the tax to consumers than would firms which sell most of their output to Vermont residents. If these types of firms' receipts are excluded, the base of the tax becomes narrower and its revenue-raising potential, for every percentage point of tax, becomes lower.