Glossary
Net sales
Net sales: Net sales is gross sales minus contractual deductions allowed by the licensing agreement — typically returns, allowances, freight, sales tax, and (where permitted) trade discounts. The royalty rate is most commonly applied to net sales, not gross sales, though some agreements use gross-sales-based royalty calculations instead.
// In practice
A period with $250,000 gross sales, $12,500 in returns, and $5,000 in allowed freight has net sales of $232,500. At a 10% royalty rate, the royalty amount is $23,250.
// Related terms
Related glossary terms
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