Mike Woolsey Web Development and Marketing
Below is a calculator I created to accurately calculate the desired "minimum net revenue" where additional fees and taxes are included in a transaction.
A vendor may choose to include fees or other costs through a customer's transaction (e.g. bank and on-line shopping cart fees, maybe taxes too). The common practice is to simply calculate the percentage of the fee times the "minimum net revenue" to arrive at the total amount to charge. HOWEVER, this is inaccurate if the percentage amount IS FIGURED IN BEFORE the transaction is completed. This is common for bank transaction fees. (Commonly omitted is the percentage deducted from THE PERCENTAGE ITSELF that IS added into the charge to the customer.)
Thus, the formula for maintaining the net revenue is:
Minimum Net Revenue / 1 - x% of fee = Total Charge to Customer
The differences in revenue and/or profit margins may be small for each item or transaction but can add up to significant loss after numerous transactions.
For a transaction of $800 with a 7% included transaction free, the common method for calculating how much of the cost to pass on to the customer would result in $4.22 under the minimum net revenue. After 20 transactions that is a loss of $84.40!