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Gross Pricing Mode vs. Net Pricing Mode for Non-U.S. Taxes

Overview

This article describes the difference between Gross Pricing Mode and Net Pricing Mode.

When we sell your products to customers outside the U.S., FastSpring automatically displays prices that include applicable taxes. For example, the prices we display may include Value Added Taxes (VAT) or Goods and Services Taxes (GST). FastSpring remits all collected taxes to the appropriate taxation authorities.

The calculation method for the final prices depends on whether your FastSpring Store is configured to use gross pricing mode or net pricing mode. This is a Store-level setting; each Store uses one mode or the other but never both at the same time.

 Tax Exemption/Deferred Note

In some cases, such as EU VAT, customers who represent tax-exempt organizations can enter a valid VAT ID to prevent the tax from being collected on the order. Since FastSpring remits taxes to the applicable taxation authorities (not to you), this does not impact the amount you receive for the order - only the amount paid by the customer.

At-a-Glance Example

Here is a quick example that highlights the differences between gross pricing mode and net pricing mode. Details of this example:

  • You enter a product price of € 20.00
  • The customer is in Germany (19% VAT rate and the currency is Euros)
  • Your Storefront has Euros enabled
Gross Pricing Mode/Tax-InclusiveDescriptionNet Pricing Mode/Tax-Exclusive
€ 20.00Price Displayed to Customer€ 23.80
€ 3.19VAT Amount Remitted by FastSpring to Germany€ 3.80
€ 20.00Total Paid by Customer€ 23.80
€ 16.81Amount you Receive from FastSpring*€ 20.00

*minus any affiliate commission, split shares and FastSpring's processing fee

 

Gross Pricing Mode

By default, your FastSpring Store is set to "gross pricing mode" or tax-inclusive mode. You can choose to let FastSpring handle currency conversions for you, based on the product's price in the base currency of your Store. Alternatively, you can specify product prices in non-USD currencies such as EUR or AUD. If you do this, you must enter the gross prices (including all applicable taxes) rather than the net prices. 

FastSpring displays and charges the specified prices to customers who pay in those currencies, and deducts any applicable taxes from the net amount you receive. Since tax rates vary by location, the net amount you receive from FastSpring for the sale of a product also varies based on the customer's location. The amount you receive from FastSpring is equal to your specified product price minus each of the following:

  • any discounts
  • applicable taxes
  • affiliate commissions
  • split shares
  • FastSpring's processing fee

 Tax Exemption/Deferred Note

When a customer enters a valid exemption I.D. number, FastSpring does not collect tax on the order. This reduces the total amount paid by the customer but does not affect the amount you receive from FastSpring. With gross pricing mode, the amount you receive from FastSpring is the same regardless of whether or not the customer entered an exemption I.D. Said another way, the net product price is not increased when a customer does not have to pay tax due to entering a valid exemption I.D. The customer still pays the same net amount for the product either way, just not the tax portion of the list price.

 

Orders Processed in U.S. Dollars (Gross Pricing)

Gross pricing mode does not affect orders processed in U.S. Dollars. For orders processed in U.S. Dollars (USD), FastSpring always adds applicable taxes to the USD price you have specified (if any). The final price displayed to customers outside the U.S. includes applicable taxes. The amount you receive from FastSpring for the sale of a product is equal to your specified USD price minus each of the following:

  • any discounts
  • affiliate commissions
  • split shares
  • FastSpring's processing fee

 

Orders Processed in Non-USD Currencies without Set Prices (Gross Pricing)

When a customer orders using a non-USD currency for which you have not specified the product price, FastSpring automatically converts the base price (usually the USD price) to the selected currency. The customer sees the final price (including applicable taxes). The price decoration feature described in Currencies, Conversions and Taxes causes the price to increase so that the last two digits of the final price match the last two digits of the base price. FastSpring pays the amount of the increase to you. The amount you receive from FastSpring for the sale of a product is equal to your specified base price plus the amount of any price decoration, minus each of the following:

  • any discounts
  • affiliate commissions
  • split shares
  • FastSpring's processing fee

 

Gross Pricing Examples

The following examples assume your Storefront is configured to accept relevant non-USD currencies.

Example with No Discount

Suppose you set a gross price of € 10.00 for your product. When a customer in Germany buys the product for € 10.00, a VAT rate of 19% is applied to the order. FastSpring calculates the VAT amount of € 1.60 and the net price (remaining amount) as € 8.40 (that is, € 10.00 - the VAT amount). The amount you receive is equal to the net price of € 8.40, minus any affiliate commissions, split shares, and FastSpring's processing fee.

DescriptionCalculationAmount
Gross PriceNet Price + Tax Amount€ 10.00
Net Price1.19x = Gross Price€ 8.40
Tax AmountGross Price - Net Price€ 1.60

 

Discount Example

Now suppose another customer, also in Germany, buys the same € 10.00 product but enters a coupon code and receives a 20% discount, paying a total of € 8.00. FastSpring calculates the VAT amount based on the discounted order subtotal of € 8.00 rather than the gross price of € 10.00. The VAT amount is € 1.28, and the net price is € 6.72. The amount you receive is equal to the net price of € 6.72, minus any affiliate commissions, split shares, and FastSpring's processing fee.

DescriptionCalculationAmount
Gross PriceNet Price + Coupon Discount + Tax Amount€ 10.00
Coupon DiscountGross Price * 20%€ 2.00
Discounted PriceGross Price - Coupon Discount€ 8.00
Net Price1.19x = Discounted Price€ 6.72
Tax AmountDiscounted Price - Net Price€ 1.28

 

Net Pricing Mode

Upon request, FastSpring Support can configure your Store to use "net pricing mode" or tax-exclusive mode. In that case, when you specify prices in non-USD currencies such as EUR or AUD, FastSpring displays the final price to customers with applicable taxes included. However, FastSpring calculates that final price by adding applicable taxes to the prices you have specified. Since net pricing mode is tax-exclusive, you receive the same base price for the sale of your product regardless of the tax rate in the customer's country. The amount you receive from FastSpring is equal to your specified price minus any discounts, affiliate commissions, split shares, and FastSpring's processing fee.

 Note

The price decoration feature is currently not supported when net pricing mode is enabled for your Store. If customers order in non-USD currencies for which you have not set prices, FastSpring does not perform price decoration when converting the product's base price to the selected currency.

 

Orders Processed in U.S. Dollars (Net Pricing)

For orders processed in U.S. Dollars (USD), FastSpring always adds applicable taxes to the USD price you have specified (if any). The final price displayed to customers outside the U.S. includes applicable taxes. The amount you receive from FastSpring for the sale of a product is equal to your specified USD price minus each of the following:

  • any discounts
  • affiliate commissions
  • split shares
  • FastSpring's processing fee

 

Orders Processed in Non-USD Currencies without Set Prices (Net Pricing)

For orders processed in non-USD currencies where you have not specified the product price in the selected currency, FastSpring automatically converts the base price (usually the USD price) to the selected currency and displays the final price (including applicable taxes) to the customer. The amount you receive from FastSpring for the sale of a product is equal to your specified USD price minus each of the following:

  • any discounts
  • affiliate commissions
  • split shares
  • FastSpring's processing fee

 

Net Pricing Examples

The following examples assume your Storefront is configured to accept relevant non-USD currencies.

Example with No Discount

Suppose you set a net price of € 10.00 for your product. When a customer in Germany buys the product, a VAT rate of 19% is applied to the order. FastSpring calculates the VAT amount of € 1.90 and displays a total of € 11.90 (that is, € 10.00 + the VAT amount). The amount you receive from FastSpring is your specified € 10.00 price, minus any affiliate commissions, split shares, and FastSpring's processing fee.

DescriptionCalculationAmount
Net PriceNon-USD Price You Have Set€ 10.00
Tax AmountNet Price * 0.19€ 1.90
Total PriceNet Price + Tax Amount€ 11.90

 

Discount Example

Suppose another customer, also in Germany, buys the same € 10.00 product but enters a coupon code and receives a 20% discount. FastSpring calculates the VAT amount based on the discounted order subtotal of € 8.00 rather than the net price of € 10.00. The VAT amount is € 1.52, and the amount displayed and charged to the customer is € 9.52 (that is, € 8.00 + the VAT amount). The amount you receive is equal to the discounted price of € 8.00, minus any affiliate commissions, split shares, and FastSpring processing fee.

DescriptionCalculationAmount
Net PriceNon-USD Price You Have Set€ 10.00
Coupon DiscountNet Price * 20%€ 2.00
Discounted PriceNet Price - Coupon Discount€ 8.00
Tax AmountDiscounted Price * 0.19€ 1.52
Total PriceDiscounted Price + Tax Amount€ 9.52

 

Switching Between Pricing Modes

At your request, FastSpring Support can help you switch from one pricing mode to the other, including switching back to gross pricing mode from net pricing mode. If you do this, any customers' subscription instances that were created while your Store was set to a given pricing mode will continue to be charged according to that mode. FastSpring stores the pricing mode for each subscription instance. Therefore, switching from gross pricing mode to net pricing mode does not affect existing subscription instances. The inverse is also true.

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