Taxes Vs. Revenue
As of 2007, there were about 27.75 million firms and 29.4 million other business establishments operating in the United States. About three-fourths of these businesses had no payroll as most of them were self-employed individuals, according to the U.S. Census Bureau. Regardless to its size, if a business earns revenue, it must pay taxes to the government. Taxes and revenue are relative measures, but the two hold many differences.
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Revenue
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On a business's income statement, revenue is a combination of all of the gross income generated from the goods a business sells or the fees a business receives by performing services. Some businesses also earn interest revenue and revenue from selling business assets, which a business adds to sales to obtain a revenue calculation. Revenue must not be confused with net income, which subtracts any losses, such as expenses. Revenue is also a term used in government that describes its income from taxes, excise duties, customs and other sources associated with paying public expenses.
Taxes
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Businesses must pay taxes such as income taxes, estimated taxes, employment taxes, excise taxes and self-employment taxes. The types and amounts of taxes the business must pay depends on the nature of the business. Income taxes apply to all businesses except for partnerships, which must file an information return. Some businesses pay estimated taxes throughout the year, which is income tax. Employees pay estimated taxes each paycheck as it is withheld from their pay. Many businesses do not have taxes withheld from their earnings and must pay taxes on their own accord. If a business has employees, it must pay employment taxes such as Social Security and Medicare taxes, federal income tax withholding and federal unemployment tax. There are many reasons a business is required to pay excise taxes, such as the manufacture or sale of certain products or the receipt of payment for certain services. Self-employed individuals must also pay self-employment taxes to contribute to their Social Security coverage, according to the Internal Revenue Service.
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Taxes and Revenue
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Taxes and revenue have a direct relationship. Generally, when revenue increases, the amount of taxes the business must pay also increases. Expenses other measures also affect the amount of taxes the business pays, but revenue and taxes generally move in the same direction. In addition, for the government, taxes are a major source of revenue.
Taxes Vs. Revenue
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While revenue is money that comes into a business, taxes are money that leaves the business. A business's main form of revenue is sales. But the business also earns revenue by earning interest. The business calculates its own revenue and it has control over its operations. The business cannot control consumer behavior, but it has some level of control over its revenue through forecasting, marketing strategy and product or service quality. The government calculates taxes, controls the type allocated to each business and gives little leeway on the amount of taxes a business pays. In other words, the business controls revenue and the government controls taxes.
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References
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