Work, pay & shifts
How to Calculate Sales Commission
Commission looks like a single multiplication, but the number it multiplies is where most disagreements start: gross or net sales, with or without tax, before or after returns. This guide covers the formula, what usually counts as commissionable sales, and how percentage and flat-per-sale plans compare.
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The formula
Commission = commissionable sales × commission rate. $48,000 in commissionable sales at 5% is $2,400.
What counts as commissionable sales
- Usually net of returns, refunds, and discounts.
- Usually excluding sales tax and shipping charges.
- Sometimes gross profit instead of revenue: $5,000 of margin at 20% is $1,000.
- Sometimes only paid invoices, not booked orders.
A $10,800 invoice that includes $800 of sales tax has $10,000 of commissionable sales; at 8% that is $800, not $864.
Percentage, flat per sale, or both
Twenty sales under three plans, once at $2,400 each and once at $800 each:
| Plan | 20 sales, $48,000 | 20 sales, $16,000 |
|---|---|---|
| 5% of sales | $2,400.00 (5%) | $800.00 (5%) |
| $150 per sale | $3,000.00 (6.25%) | $3,000.00 (18.75%) |
| 2.5% + $75 per sale | $2,700.00 (5.625%) | $1,900.00 (11.875%) |
The effective rate
The percentages in brackets are each plan’s effective rate — commission ÷ sales. A flat amount per sale pays the same whatever the price, so its effective rate rises as the average sale gets smaller. That is why flat-per-sale plans are common where prices are fixed and percentage plans where deal sizes vary.
Checking a commission statement
- Start from the sales the statement lists, and remove anything your plan excludes.
- Subtract returns and refunds from the same period, or check for chargebacks from earlier ones.
- Apply the rate and any flat amounts.
- Compare with the statement and ask about any difference.
Calculating Commission FAQ
- What is a typical sales commission rate?
- It ranges widely, from a few percent on high-value goods to 20% or more on services and low-volume sales. Your plan sets it.
- Is commission calculated before or after sales tax?
- Usually on the price before tax. Sales tax is collected for the government, so most plans exclude it.
- How do I calculate commission on gross profit?
- Use the profit as the sales figure: a sale with $5,000 of gross profit at a 20% rate pays $1,000.
- What is a commission draw?
- An advance paid against future commission. Commission earned later repays the draw first; plans differ on what happens if it is never earned back.
- When is commission earned?
- When your plan says — at booking, invoicing, delivery, or payment. That date also decides which period a sale counts in.
Related guides
- Base Plus CommissionCompare a base-plus-commission plan with commission only: the break-even sales level, how pay swings month to month, and what else to check in an offer.
- Returns and ChargebacksHow returns reduce commission: net-sales plans, chargebacks on commission already paid, flat per-sale amounts, and when commission counts as earned.
Open the tool
Jump into Sales Commission Calculator when you are ready to process your files.
