Profit Margin Calculator: Fees, VAT, Target Price

Profit margin is profit divided by the selling price

Profit margin tells you what share of the price you keep after paying for the product and the order. Say you sell a mug for $40. It costs you $18, you pay $4.50 for shipping and $1.50 for packaging, and the marketplace takes a 6.5% fee ($2.60). You keep 40 − 18 − 4.50 − 1.50 − 2.60 = $13.40, so the margin is 13.40 ÷ 40 × 100 = 33.5%.

The calculator above works like a ledger. It starts from the list price, takes off the discount and coupon, then subtracts cost, shipping, packaging, ads, other costs, the fee and, if you switch it on, VAT. Change any line and the price bar shows where each $100 of price goes, while the curve shows how the margin moves as the price goes up or down. Choose "Price for a target margin" to work backwards to the lowest price that still keeps the margin you want.

You can rename or remove any cost line and add more with “+ Per-unit cost” or “+ Monthly fixed cost”. Monthly costs such as wages or rent are split over the units you sell in a month and taken off each unit.

When it pays to recalculate your margin

A margin is not a number you set once. The price can stay put while the costs around it move, so it is worth checking again in situations like these.

Before a sale or a coupon: a discount does not lower your cost or shipping, so almost all of it comes straight out of profit. A 10% discount on the $40 mug drops the margin from 33.5% to 26.83%, which is 6.67 points, but profit falls from $13.40 to $9.66, a 27.91% cut.
When you change where you sell: marketplaces, your own store and wholesale each charge different fees, and some charge differently by category.
When your supplier or carrier raises prices: if the mug costs $19.80 instead of $18 (up 10%), the same $40 price leaves $11.60, a margin of 29%.
When you start offering free shipping: whatever the customer used to pay is now yours to cover.
When you register for VAT: part of the price now belongs to the tax office, so the same sticker price leaves you less.

How the numbers are worked out

Actual price = list price − list price × discount (rounded down to the cent) − coupon you fund
VAT (if switched on) = actual price × rate ÷ (1 + rate), and revenue = actual price − VAT
Fee = actual price × fee rate
Fixed cost share = monthly fixed costs ÷ units sold per month
Profit = revenue − unit cost − per-unit cost lines − fixed cost share − fee
Margin = profit ÷ revenue × 100
Markup = (revenue − unit cost) ÷ unit cost × 100
Break-even price = (unit cost + per-unit cost lines + fixed cost share) ÷ (1 − fee rate), rounded up to the cent
Target price = (unit cost + per-unit cost lines + fixed cost share) ÷ (1 − fee rate − target margin), rounded up to the step you pick

With VAT off, revenue equals the actual price. To reach a 30% margin on the mug, the cost side is 18 + 6 = $24 and the fee is 6.5%, so you need 24 ÷ (1 − 0.065 − 0.30) = $37.795… That rounds up to $37.80 to the cent, where the margin is 30.01%, or to $38.00 to the dollar, where it is 30.34%. If you plan to run 10% off with a $2 coupon, the list price has to be at least $44.22.

With VAT on, put "fee rate × (1 + VAT rate)" in place of the fee rate in the break-even and target formulas, then multiply the result by (1 + VAT rate). The calculator works in whole cents and hundredths of a percent and rounds up exactly, so a rounding error never leaves you a cent below target.

A 30% margin is not a 30% markup

Markup is how much you add on top of cost. Margin is how much of the price you keep. The dollar gap is the same, but you divide it by different things. A $18 item sold at $23.40 has a 30% markup, yet the margin is 5.40 ÷ 23.40 = 23.08%.

Markup needed for a given margin, with no other costs (unit cost $18.00)
Margin you want	Markup needed	Selling price
20%	25%	$22.50
30%	42.89%	$25.72
40%	66.67%	$30.00
50%	100%	$36.00

The classic slip is thinking that a 40% margin means adding 40% to cost. To keep 40% of the price you need a 66.67% markup. The two convert with margin = markup ÷ (1 + markup) and markup = margin ÷ (1 − margin).

Shipping and fees make the gap wider. The $18 mug with $6 of shipping and packaging and a 6.5% fee, priced at a "30% markup" of $23.40, loses $2.12 per sale, a margin of −9.06%. In target mode, the "If you only add 30% to cost" row shows this comparison for your own numbers.

Same costs, different prices

Unit cost $18.00 · shipping and packaging $6.00 · fee 6.5% · VAT off
Price	Fee	Profit	Margin	Markup
$25.67 (break-even)	$1.67	$0.00	0.01%	42.61%
$30.00	$1.95	$4.05	13.50%	66.67%
$37.80 (30% margin)	$2.46	$11.34	30.01%	110%
$40.00	$2.60	$13.40	33.50%	122.22%
$50.00	$3.25	$22.75	45.50%	177.78%

The higher the price, the higher the margin, but with smaller and smaller gains. Cost and shipping stay the same however you price, so they simply take a smaller slice of a bigger number. Here the margin can only creep toward 93.5%, which is 100% minus the fee, and never pass it. That is why the curve in the calculator flattens out to the right.

At the $25.67 break-even, profit is a fraction of a cent rather than exactly zero, because the price is rounded up to a whole cent. One cent lower, at $25.66, loses a cent per sale.

What a 10% discount really costs you

List price $40.00 · unit cost $18.00 · shipping and packaging $6.00 · fee 6.5%
Discount	Actual price	Fee	Profit	Margin	Profit lost
0%	$40.00	$2.60	$13.40	33.50%	—
10%	$36.00	$2.34	$9.66	26.83%	27.91%
20%	$32.00	$2.08	$5.92	18.50%	55.82%
30%	$28.00	$1.82	$2.18	7.79%	83.73%

A discount does not reduce your cost or shipping, so almost all of it comes out of profit. Only the fee, which scales with price, shrinks a little. That is why 10% off removes 28% of profit and 30% off leaves you with less than a fifth. For this mug, a discount of 35.85% or more pushes the actual price under the $25.67 break-even and you lose money on every sale.

A coupon you fund works the same way. Take 10% off plus a $2 coupon: the actual price is $34.00, the fee $2.21, profit $7.79 and the margin 22.91%. The calculator rounds the discount down to the cent, takes the coupon off, and charges the fee on what the customer actually pays. A coupon that the platform pays for does not reduce what you receive, so leave it out.

Fill in "Margin to protect" and the calculator shows how much you can cut. To keep 30% on the $40 mug, the actual price has to stay at or above $37.80, which leaves room to take off $2.20 (5.50%) in discount and coupons combined.

VAT, sales tax and the switch

How tax shows up in your price depends on where you sell, and the switch "Price includes VAT" is only right for some of it.

United States: leave the switch off

US sales tax is a percentage of the sale price that varies by state and locality, and some items are not taxed at all (USA.gov). If your listed price does not include it, because the checkout adds it on top, that money is collected for the state and never was your revenue, so the margin works out correctly with the switch off. Don't turn it on for US sales tax.

United Kingdom: prices include VAT

The standard rate of VAT is 20% for most goods and services, with 5% for some items and 0% for others such as most food and children's clothes (GOV.UK). A VAT-registered business has to include VAT in its prices, and you must register once your taxable turnover for the last 12 months goes over £90,000. The calculator shows dollars, but the arithmetic is the same in pounds.

Take a $40 price with VAT at 20%. Revenue is 40 × 100 ÷ 120 = $33.33 and the other $6.67 is VAT you pass on to HMRC. Profit falls from $13.40 to $6.73 and the margin from 33.5% to 20.20%, measured on the $33.33. The break-even price rises from $25.67 to $31.24 and the price for a 30% margin from $37.80 to $46.31.

In return, VAT you pay on business purchases is input tax that you reclaim (GOV.UK). If a supplier invoices $21.60 with VAT, you divide by 1.20 and the real cost is $18.00. With the switch on, enter costs without the VAT you can reclaim. Where a fee invoice shows VAT separately, enter the rate before VAT.

What is a good margin?

It depends heavily on the type of business. As a yardstick, Aswath Damodaran's January 2026 data for US listed companies shows gross margins of 33.18% for general retail, 56.88% for apparel and 32.24% for restaurants, against 37.76% for the whole market. After all operating costs, the pre-tax operating margins are 6.80%, 9.11%, 15.79% and 12.82%.

These are not comparable with the calculator's figure. The calculator's margin is closer to a gross margin: it removes the costs of one unit, but not rent, wages or software. An operating margin comes after all of that. A 30% margin on one product can turn into single digits once the shop and staff are paid. So each unit needs to contribute enough to cover its share of monthly fixed costs. If those are $1,500 a month and you sell 300 units, each unit has to bring in $5 before you make a cent.

In the calculator, add the $1,500 with “+ Monthly fixed cost” and enter 300 as units sold per month. The $5 share then comes off every unit and the result gets closer to an operating profit: in the mug example the margin falls from 33.5% to 21%. A monthly ad budget works the same way: $300 a month over 150 units sold is $2 per unit.

Common mistakes

Reading markup as margin: a 30% markup is a 23.08% margin, not 30%.
Charging the fee on cost: marketplace and card fees usually come off what the customer pays.
Turning VAT on and entering VAT-inclusive costs: you count the VAT you reclaim as a cost and the margin looks lower than it is.
Turning VAT on for US sales tax: the tax is added at checkout and was never in your price.
Entering a monthly bill as a per-unit cost: ads, wages and rent are monthly amounts. Put them on a “+ Monthly fixed cost” line and enter units sold per month, so $300 over 150 units becomes $2 each.
Ignoring returns: if 5% of orders come back and the round trip costs $8, put $0.40 in "Other costs".

Limits

This is an estimate for one unit. Income tax and inventory losses are left out, and rent or wages count only if you add them as monthly fixed cost lines.
The fixed cost share assumes your monthly units sold stay the same. The curve and the price options do not model how sales volume changes with price.
Tiered fees, minimum fees and category rates are not filled in for you. Use the rate from your seller statement and put flat per-order fees under "Other costs".
The fee is charged on the whole actual price. If your platform also takes a cut of the shipping the customer pays, results will differ slightly.
Amounts are entered to the cent and percentages to two decimals. Profit and target checks use the unrounded values.
Your inputs stay on this page and only go into the address if you press "Copy link".

Checked on 22 October 2026: the GOV.UK pages, USA.gov and the Damodaran dataset (January 2026).

Sources

01GOV.UK, VAT ratesStandard rate 20%, reduced rate 5%, zero rate 0%
02GOV.UK, when to register for VATRegister if taxable turnover for the last 12 months goes over £90,000
03GOV.UK, how VAT worksRegistered businesses include VAT in their prices; VAT paid on purchases is set against VAT charged
04GOV.UK, reclaiming VAT on purchasesDivide a 20% VAT-inclusive price by 1.20 to find the price without VAT
05USA.gov, state taxesSales tax is a percentage of the sale price and differs by place and by item
06Damodaran, margins by sector (US)January 2026: retail (general) gross 33.18%, operating 6.80%; apparel 56.88%, 9.11%; restaurant and dining 32.24%, 15.79%; total market 37.76%, 12.82%

Frequently asked questions

How do you calculate profit margin?

Divide profit by the selling price and multiply by 100. Profit is the price minus unit cost, shipping and packaging, and the fee. Sell at $40 with a $18 cost, $6 of shipping and packaging and a 6.5% fee ($2.60) and you keep $13.40, a margin of 33.5%.

What is the difference between margin and markup?

Markup is profit on cost, margin is profit on price. An $18 item sold at $23.40 has a 30% markup but a margin of 5.40 ÷ 23.40 = 23.08%. To keep 40% of the price you need a markup of 66.67%.

How do I get a 30% margin?

Divide your total costs by (1 − fee rate − 0.30). With $18 cost, $6 shipping and packaging and a 6.5% fee, that is 24 ÷ 0.635 = $37.795, so $37.80 to the cent or $38.00 to the dollar.

What is a good profit margin?

It varies by business. Damodaran's January 2026 US data shows gross margins of 33.18% for general retail and 56.88% for apparel, with operating margins of 6.80% and 9.11%. Without monthly fixed cost lines, the calculator's margin comes before rent and wages, so compare it with your monthly fixed costs per unit, or add them with “+ Monthly fixed cost”.

How much does a 10% discount cut my profit?

More than 10%, because cost and shipping stay put. On a $40 item with a 33.5% margin, 10% off gives a 26.83% margin: 6.67 points lower, but profit drops from $13.40 to $9.66, a 27.91% cut.

Should I include VAT or sales tax in my margin?

Only if your price includes it. UK VAT is normally included in the price (standard rate 20%), so turn the switch on and enter costs without the VAT you can reclaim. US sales tax is added at checkout and is not your revenue, so leave the switch off.

What is a break-even price?

The lowest price at which you make no loss: (unit cost + other costs) ÷ (1 − fee rate), rounded up to the cent. With $18 cost, $6 other costs and a 6.5% fee, it is $25.67. Sell for less and you lose money on every unit.

How do I include rent and wages in a margin?

Add them with “+ Monthly fixed cost” and enter your units sold per month; the calculator splits the total over the units and takes the share off each one. With $1,500 a month and 300 units, that is $5 per unit, and the mug example drops from a 33.5% to a 21% margin, close to an operating margin.