Description: Learn about the difference between Gross Sales and Net Sales below.
Gross vs. Net Sales
Over the years, various POS systems and cash registers have used countless formulas to calculate Gross Sales and Net Sales. The most common misconception is that Gross Sales include sales tax. If you operate with that definition of Gross Sales, then your understanding of SkyTab reports will not match what’s displayed on those reports.
What are Sales?
Sales are sales, right? On the surface, yes, but in accounting and reporting, there are two important types: Gross Sales and Net Sales.
- Gross Sales refer to the total amount at the register before any discounts are applied, not including sales tax.
- Sales Tax is collected on behalf of the government and is not counted as a sale.
- Net Sales refer to the total amount at the register after discounts have been applied, not including Sales Tax.
United States (US) and Canada Definitions
SkyTab uses the standard formula accepted by Generally Accepted Accounting Principles (GAAP) standards, which are those used by all CPAs and Accountants (refer to this link for a detailed description and explanation). In short, many POS dealers and merchants may be used to other POS systems or cash registers, where Gross is considered to be Net+Tax, and that’s not the accepted definition.
Note: Taxes are for the government. They are not part of revenue and should not be included in Gross or Net Sales.
In the US and Canada:
On SkyTab, following accepted accounting definitions:
- Gross = The total amount of all items added to tickets and paid before taxes and before discounts.
- Net = The total amount of all items added to tickets and paid before taxes and after discounts.
Example (US/Canada)
You sell a hamburger for $10.00 with no discounts. The Financial Overview report would be:
- Gross: $10.00
- Net: $10.00
- Discounts: $0.00
In this example, Gross and Net are the same, $10.00, because we had no discounts.
You sell a hamburger for $10.00 with a $1.00 discount and a $3.00 tax. The Financial Overview report would be:
- Gross: $10.00
- Net: $9.00
- Discounts: $1.00
- Tax: $3.00
- Grand Total: $12.00
In this example, Gross and Net are a difference of $1.00 due to the discount.
International Definitions for the United Kingdom (UK) and Europe (EU)
In contrast, many European countries like Germany, Ireland, and the United Kingdom include inclusive tax in Gross Sales. This means the Gross value includes tax, a significant difference from U.S. and Canadian standards.
In the UK and EU:
- Gross = Total sales amount including tax (inclusive tax pricing)
- Net = Total sales minus tax and discounts
Example (UK/EU)
You sell a hamburger for $12.00 with a $2.00 discount and a $3.00 tax:
- Gross: $12.00 (includes $3.00 tax)
- Discount: $2.00
- Grand Total: $10.00
- Tax (included): $3.00
- Net: $7.00
Side-by-Side Comparison
| Region | Gross Formula | Net Formula |
| US/Canada | Total sales (before tax, no discounts) |
Gross - Discounts |
| UK/Europe | Total sales (with tax included) | Gross - Tax - Discounts |
Tip: If you're viewing reports and notice that Gross includes tax, check whether your location is set to a country using inclusive tax rules.
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