Gross Profit Percentage (Installment Sale)

Definition

The gross profit percentage (GPP) is a ratio calculated in the year of an installment sale by dividing the gross profit from the sale by the total contract price. This percentage is applied to every principal payment received in current and future tax years to determine how much of each payment is taxable gain. The GPP is computed once at the time of sale and remains fixed throughout the life of the installment contract.