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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).


  1. 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.

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