What is the difference between gross and net sales?
Last updated 1 min read
TL;DR
Gross sales are everything rung up; net sales are what is left after refunds, discounts and VAT — the money that is actually yours.
Your till says you took £5,000 on Saturday. Some of that went back as refunds, some was knocked off as discounts, and a sixth of it belongs to HMRC if you are VAT-registered. Net sales is what is left once all of that comes out.
The formulas
Gross sales = the total value of everything sold, at full price
Net sales = gross sales − refunds − discounts − VAT
Businesses that are not VAT-registered do not take VAT out — they do not charge it.
A worked example
| Gross sales (including VAT) | £5,000 |
| Refunds | − £120 |
| Discounts | − £280 |
| Sales after refunds and discounts | £4,600 |
| VAT at 20% (£4,600 ÷ 6) | − £766.67 |
| Net sales | £3,833.33 |
Which one to use
- Net sales for anything about profit: margins, food cost, labour %, prime cost.
- Gross sales for the size of the trade — and next to net sales, the gap shows how much refunds and discounts are costing.
Why it matters
Every ratio you run your business on divides by sales. Divide by gross sales and every cost looks smaller than it is: a 30% food cost on net sales can look like 24% on gross.
Common mistakes
- Comparing gross to someone else's net. Always check which one a benchmark uses.
- Forgetting refunds. A refund given on Monday for Saturday's sale belongs in the numbers.
- Mixing VAT-inclusive and VAT-exclusive figures. Pick one and use it everywhere — net, without VAT, is the safe choice. See VAT-inclusive pricing.
Tracking it in DUMA
The Sales summary report shows gross and net sales, refunds, orders and average order, day by day. Discounts & voids shows what discounts cost you, and the VAT report shows the VAT in your sales, split by rate.
Questions and answers
Is net sales the same as profit?
No. Net sales is revenue after refunds, discounts and VAT. Profit is what is left after your costs are taken off that.
Do tips count as sales?
Tips usually belong to staff rather than the business and are kept out of sales. How they are handled for tax is worth checking with your accountant.
Do card fees come off net sales?
No. Card processing fees are a cost of the business, not a reduction in sales. Track them as an expense.