SBA Receipts Calculation Formula (13 CFR § 121.104)

To determine eligibility under receipts-based size standards, businesses must calculate average annual receipts over their last five completed fiscal years [1]. This five-year averaging period is codified in 13 CFR § 121.104, which transitioned from a three-year period following the Small Business Runway Extension Act of 2018.

SBA defines receipts as total income plus cost of goods sold, as reported on IRS tax forms (Form 1120 for corporations or Schedule C for sole proprietorships) [2]. Passive income and certain capital gains must be included, but sub-contractor distributions are not automatically deducted.

Worked Example Calculation

If a software firm applying under NAICS 541511 (size standard: $34.0M) has the following tax filings:

  • Year 1: $28,000,000
  • Year 2: $30,000,000
  • Year 3: $32,000,000
  • Year 4: $35,000,000
  • Year 5: $37,000,000

The sum of receipts is $162,000,000. Dividing by 5 yields an average of $32.4 Million. Because $32.4M is below the $34.0M limit, the firm qualifies as small [1][3].