Premium Audit: Definition of Sales

The definition of sales taken from the Insurance Services Office Commercial Lines Manual is as follows:

Gross Sales

1. Definition - The gross amount charged by the named insured, concessionaires of the named insured or by others trading under the insured's name for:
   
   
   1. All goods or products, sold or distributed;
   2. Operations performed during the policy period;
   3. Rentals; and
   4. Dues or fees.
   
   
2. Inclusions - The following items shall not be deducted from gross sales:
   
   
   1. Foreign exchange discounts;
   2. Freight allowance to customers;
   3. Total sales of consigned goods and warehouse receipts;
   4. Trade or cash discounts;
   5. Bad debts; and
   6. Repossession of items sold on installments (amount actually collected).

3. Exclusions - The following items shall be deducted from gross sales:
   
   
   1. Sales or excise taxes which are collected and submitted to a governmental division;
   2. Credits for repossessed merchandise and products returned.
   3. Allowances for damaged and spoiled goods;
   4. Finance charges for items sold on installments;
   5. Freight charges on sales if freight is charged as a separate item on customer's invoice;
   6. Royalty income from patent rights or copyrights which are not product sales, and
   7. Rental receipts for products liability coverage only.