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Talk to our experts- Net price
- In B2B pricing, a net price is the price a business buyer actually pays for an item after the discounts that apply to that buyer come off the list price, such as an account discount, a contract price or a quantity break. Two buyers can start from the same list price and pay different net prices for the same item.
How it works
A net price is the list price minus the trade discounts that apply to a buyer. The IRS calls the differences between the stated prices of articles and the actual prices you pay for them trade discounts, and tells the buyer to use only the net amount as the cost of the merchandise purchased.
The calculation is simple once the discount is known:
- Percentage discount: net price = list price x (1 - discount rate)
- Fixed contract price: the net price is the agreed price, whatever the list price says
- Quantity break: the net price changes with the quantity ordered
In distribution, the hard part is deciding which discount applies. An item can carry a list price, a customer group price, a contract price and quantity breaks at once, and the system that sets prices has to pick one answer for each buyer.
List price vs. net price
- List price: the published price of the item in a catalog or price list, before any discounts. It is the same for everyone.
- Net price: the price one buyer actually pays after the discounts that apply to it. It can differ by account, quantity and date.
The IRS notes that trade discounts are reductions from list or catalog prices and are usually not written into the invoice or charged to the customer. So the invoice usually shows only the net amount.
Net price and cash discounts
A cash discount is a separate step after the net price. The IRS describes cash discounts as amounts your suppliers let you deduct from your purchase invoices for prompt payments. A buyer whose net price is $60.00 and who takes a 2% cash discount for paying early pays $60.00 x 0.98 = $58.80. This is general information, not tax or accounting advice.
Example
A distributor lists a valve at $80.00.
- Contractor account, 25% off list: $80.00 x 0.75 = $60.00 net price
- Small account, 10% off list: $80.00 x 0.90 = $72.00 net price
- Contractor order of 100 valves: 100 x $60.00 = $6,000.00
Both accounts see the same $80.00 list price. Each pays a different net price.
On Shopify
In Shopify B2B, catalogs set the prices at which B2B customers buy the included products. You can add overall price adjustments and fixed prices to products using catalogs, and fixed prices override any overall adjustments. Volume pricing allows up to 10 quantity breaks. A catalog's Compare At field can display the product's original base price or MSRP next to the buyer's price.
On the Basic, Grow and Advanced plans you can assign up to 3 active catalogs across all your B2B markets, and on Shopify Plus you can create an unlimited number of catalogs. On Shopify Plus, when several catalogs assigned directly to the same company location price the same product differently, your B2B store displays the lowest price for that item, not including quantity rules or volume pricing breaks.
How Uncap helps
Uncap's guide to how ERPs decide what a B2B buyer pays explains why net price lives in the ERP: each ERP evaluates its pricing rules through its own hierarchy, most specific rule first, so the net price is the survivor of that evaluation. This is the architecture Uncap Connect is built on: the ERP resolves customer-specific pricing, credit terms, and tax the way it already does, and Shopify displays the result.
Sources
Frequently asked questions
What is a net price?
In B2B pricing, a net price is what a buyer actually pays for an item after its discounts come off the list price. The IRS describes the gap as trade discounts and tells buyers to record only the net amount as the cost of goods purchased.
Is net price the same as list price?
No. The list price is the published catalog price before discounts and is the same for every buyer. The net price is what a specific buyer pays after its discounts, so it is usually lower and can differ from account to account.
What is distributor net pricing?
Distributor net pricing is the price a distributor charges a specific account after its discounts, contract prices and quantity breaks are applied to the list price. A contractor with 25% off an $80.00 list price has a net price of $60.00.
How to calculate net price?
Multiply the list price by one minus the discount rate. A $80.00 list price at 25% off is $80.00 x 0.75 = $60.00. If the buyer has a fixed contract price, that price is the net price.
