Gross vs net

Gross is the total amount including tax; net is the amount before tax. On an invoice, the gross is what the buyer pays in total, while the net is the supplier's earned revenue (with the tax portion owed to the tax authority).

Applies in: Global

The gross/net distinction lives at the boundary between what the buyer pays and what the seller keeps. On a UK invoice for GBP 1,000 plus 20% VAT, the net is GBP 1,000 (the seller's revenue, before tax), the VAT is GBP 200, and the gross is GBP 1,200 (the total the buyer transfers). The seller deposits the gross but recognises only the net as revenue; the VAT portion is held on behalf of HMRC and remitted in the next VAT return.

The convention varies by jurisdiction and audience. In B2B invoicing across most of the world, the unit prices on the invoice are net (tax shown separately as a line). In European B2C retail, displayed prices are typically gross (tax included in the sticker price) so the buyer sees what they will actually pay. In US retail, displayed prices are net (sales tax added at checkout). Cross-border B2C ecommerce gets messy fast because the convention changes based on whether the buyer is consumer or business and which country they are in.

On the invoice itself, the breakdown removes the ambiguity. Show the subtotal (net), the tax amount, and the total (gross), all three explicitly. The buyer's AP team can then match against whichever convention their accounting system uses without back-calculating.

Common questions about Gross vs net

Is the invoice total a gross or a net number?

Total is gross: it includes all taxes. The subtotal is net: it is the sum of line items before tax. Between them, the tax line shows the amount being collected. A buyer paying an invoice transfers the gross total; the supplier recognises the net subtotal as revenue and owes the tax portion to the tax authority.

Should I show gross or net prices on the invoice?

For B2B invoicing, show net prices on the line items, with tax shown separately and the gross as the final total. This is the convention almost everywhere and matches how AP teams expect to read the document. For B2C in Europe, gross-only price displays are common in retail but invoices still typically break out the tax.

What does "net of tax" mean?

Net of tax means the amount after tax has been removed. "I earned GBP 1,200 net of VAT" means GBP 1,200 is the post-tax amount you keep. "Net of" is also used in other contexts ("net of withholding," "net of fees") to indicate the figure is after a specific deduction has been taken out.

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Related terms

Subtotal VAT GST Discount Withholding tax

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