Begin with the price display convention
A displayed selling price may include indirect tax in some markets. If the full customer price is treated as revenue and tax is also subtracted elsewhere, sales can be overstated or tax can be counted twice. Identify the tax-inclusive and tax-exclusive amounts first.
Separate the tax layers
- Customer-facing tax included in or added to the order price.
- Tax charged on marketplace, advertising, or other service fees.
- Import taxes and duties tied to inventory movement.
- Recoverable amounts handled through the applicable tax process.
- Permanent tax cost that remains in product or operating economics.
Use net sales for margin rates
Where customer tax is collected for an authority, exclude it from the revenue base used to calculate operating margin. Keep the order total visible for cash reconciliation but distinguish it from business revenue.
Confirm local treatment before relying on the model
Registration, rates, invoicing, recovery, and marketplace responsibilities vary by country and seller situation. Use current official guidance and qualified tax advice to determine the correct treatment; the margin model should reflect that confirmed position.