Gross or net? Calculating prices and margins with VAT

Converting gross and net

The VAT you charge is collected for the tax office. Converting is a division, not a subtraction of the percentage:

What €49.90 gross is worth in different countries

Standard rates (reduced rates for books, food etc. differ). The same shelf price brings different revenue depending on where the sale is taxed:

Which costs contain VAT?

For VAT-registered sellers only net costs count, because input VAT is reclaimed. In practice the cost types behave differently, so check your invoices:

• Purchases from domestic suppliers usually include VAT that you can reclaim – enter them net (or switch on “Costs include VAT”).
• Shipping and packaging bought domestically usually include VAT as well.
• Payment fees are usually VAT-exempt – the full fee is a cost.
• Marketplace and advertising fees to VAT-registered businesses are often invoiced without VAT under the reverse-charge rules.

Tax in the price or on top: UK style and US style

Two display styles lead to different revenue. If the shown price includes the tax – like the UK standard rate of 20% in the table above – your revenue is the price divided by 1.20: €49.90 gives €41.58. If the tax is added at checkout on top of the shown price and passed on, the shown price itself is your revenue: €49.90 stays €49.90.

That is why the calculator leaves the United States at 0%: its note says US sales tax is collected on top of the price and passed through. Which style applies to you, and which rate, depends on your country and your customers. This guide lists no US state rates, because we have not verified them – take your rate from the official source of your tax authority.

Without VAT registration

Sellers under a small-business exemption charge no VAT, so the full price is revenue. But they cannot reclaim the VAT on their purchases, shipping or fees – it is a real cost. The calculator handles both cases with the “VAT-registered” switch.