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

Last modified October 2, 2018

This article applies to Contextual Commerce. (Looking for Classic Commerce documentation?)

When we sell your products to customers outside the U.S., FastSpring automatically displays prices including applicable taxes such as Value Added Taxes (VAT) or Goods and Services Taxes (GST). All taxes collected by FastSpring are remitted 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.

Beta Testing Note

Net pricing mode is a new feature that is currently in beta testing and must be enabled by FastSpring Support. If you would like to join to the beta test, please contact support.

Before requesting to participate in the beta program, please see the notes under Switching Between Pricing Modes.

Tax Exemption / Deferred Note

In some cases such as EU VAT, customers who represent tax exempt organizations can enter a valid exemption ID (e.g. their VAT number) to prevent 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 highlighting 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-Inclusive
Description Net Pricing Mode /
Tax-Exclusive
€ 20.00 Price Displayed to Customer € 23.80
€ 3.19 VAT Amount Remitted by FastSpring to Germany € 3.80
€ 20.00 Total Paid by Customer € 23.80
€ 16.81 Amount 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. When you specify product prices in non-USD currencies such as EUR or AUD, you are specifying 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 any applicable taxes are deducted 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 any discounts, applicable taxes, affiliate commissions, split shares and FastSpring's processing fee.

Tax Exemption / Deferred Note

When a customer enters a valid exemption ID, no tax will be collected 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 ID. To put that another way, the net product is price is not increased when a customer does not have to pay tax due to entering a valid exemption ID. 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 US Dollars (Gross Pricing)

Gross pricing mode does not affect orders processed in US Dollars. For orders processed in US Dollars (USD), applicable taxes are always added 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 any discounts, affiliate commissions, split shares, and FastSpring's processing fee.


Orders Processed in Non-USD Currencies without Set Prices (Gross 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 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, with the amount of the increase being paid 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 any discounts, applicable taxes, affiliate commissions, split shares and 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.

Description Calculation Amount
Gross Price Net Price + Tax Amount € 10.00
Net Price 1.19x = Gross Price € 8.40
Tax Amount Gross 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.

Description Calculation Amount
Gross Price Net Price + Coupon Discount + Tax Amount € 10.00
Coupon Discount Gross Price * 20% € 2.00
Discounted Price Gross Price - Coupon Discount € 8.00
Net Price 1.19x = Discounted Price € 6.72
Tax Amount Discounted 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 will display the final price to customers with applicable taxes included, but will calculate that final price by adding applicable taxes to the prices you have specified. Since net pricing mode is tax-exclusive, you will receive the same base price for the sale of your product regardless of 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 products are purchased in non-USD currencies for which you have not set prices, FastSpring will not perform price decoration when converting the product's base price to the selected currency.


Orders Processed in US Dollars (Net Pricing)

For orders processed in US Dollars (USD), applicable taxes are always added 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 any discounts, affiliate commissions, split shares, and 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 will automatically convert the base price (usually the USD price) to the selected currency and display 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 any discounts, affiliate commissions, split shares and 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 the 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.

Description Calculation Amount
Net Price Non-USD Price You Have Set € 10.00
Tax Amount Net Price * 0.19 € 1.90
Total Price Net 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.

Description Calculation Amount
Net Price Non-USD Price You Have Set € 10.00
Coupon Discount Net Price * 20% € 2.00
Discounted Price Net Price - Coupon Discount € 8.00
Tax Amount Discounted Price * 0.19 € 1.52
Total Price Discounted Price + Tax Amount € 9.52


Switching Between Pricing Modes

 Net pricing mode is currently available in beta access only. By participating in the beta testing program, you acknowledge that this feature may not be in its complete / final form.  As such, this beta version may potentially include bugs or other unforeseen issues. If you encounter any problems with the feature, please contact FastSpring Support right away.

If you decide to switch from one pricing mode to the other–including switching back to gross pricing mode from net pricing mode--any customers' subscription instances that were created while your Store was set to a given pricing mode will continue to be charged accordingly, even after FastSpring Support sets your Store to the other pricing mode. The pricing mode is stored for each individual subscription instance, so switching from gross pricing mode to net pricing mode does not affect existing subscriptions, and the inverse is also true.