Net profit is not gross margin
Gross margin subtracts only cost of goods sold. Contribution margin subtracts the variable costs of serving the order. A management net profit goes further: it also charges the order for advertising, payment and platform fees, expected returns and any absorbed tax. This calculator uses that third view and keeps overhead outside the model.
That distinction matters when you compare tools. A 55% gross margin can coexist with a 12% net margin once acquisition, returns and fees are counted. Neither number is wrong; they answer different questions.
Start with discounted revenue, not list price
A $49.99 order with a 10% discount does not produce $49.99 of revenue. Merchandise value is price × units, then the discount is subtracted. Payment and platform fees are calculated on the discounted amount because that is what the gateway processes.
Multi-unit orders also change COGS and fulfillment. The model multiplies product cost by units, while packaging and fulfillment stay per order. If your fulfillment cost scales with units, enter the average per-order cost that reflects your actual mix.
Treat returns as an expected value
Not every order is returned, so charging every order with a full refund overstates the loss. The model multiplies the return rate by the refunded revenue plus return handling, then credits the value recovered from resale or salvage. A 5% return rate on a $44.99 order with $4 handling and $14 recovered value produces a $1.75 expected return loss.
The recovered value is an assumption, not a guarantee. If returned items are destroyed, set it to zero. A 100% return rate still leaves the store paying fulfillment, fees, advertising and handling, which is why the model shows a loss rather than a clean zero.
Choose how to treat sales tax
Sales tax collected from the customer and remitted to the tax authority is not revenue and should not be treated as profit. Select “collected and remitted” when that describes your store. If you absorb the tax as a cost, select “absorbed” and enter the effective rate; the model subtracts it from the order.
The tax treatment is a management assumption. It does not determine your filing position, and it does not replace a tax professional's advice.
A worked example with every cost visible
Price $49.99, one unit, 10% discount, COGS $14, packaging $1, fulfillment $6.50, payment 2.9% + $0.30, no platform fee, ads $8, 5% return rate, $4 handling per return and $14 recovered per return. Discounted revenue is $44.99; the expected refund is $2.25; COGS, packaging and fulfillment total $21.50; payment fees are $1.60; ads are $8; the net return impact is $1.75.
Net profit is about $12.14 per order, about a 27.0% net margin. At 300 orders a month the model produces about $3,641.01. Change one assumption at a time — the 5% return rate, the $8 ad cost or the 10% discount — and you can see which line has the most leverage.
Where the model stops
The model assumes payment and platform fees are charged on the sale and are not refunded when an order is returned. If your provider returns fees, reduce the return handling input or model the difference separately. Chargebacks, currency conversion, subscription software, payroll and rent are outside the order-level view.
Use this calculator to compare products, discounts and return policies, then reconcile the result with your accounting records. For a simpler per-order contribution view, use the Shopify profit margin calculator; for the price floor, use the break-even price calculator.