Operations · draft
How prices are calculated
Understand source cost, excise inclusion, retail markup, discounts and sales tax.
Content updated 2026-10-29
Draft article for local review. Instructions may change before release.
An item's selling price starts with its supplier source cost. Retail markup and excise rules come from the selected supplier profile. Package discounts and the location's sales-tax rate complete the calculation.
Calculation order
| Step | Calculation |
|---|---|
| Source cost | Extend the supplier's cost per base unit to the number of units in the package. |
| Excise | If inclusion is enabled for the location and category, add fixed excise per base unit and any percentage excise based on source cost. If disabled, add no excise. |
| Retail markup | Apply the inherited markup percentage to source cost plus any included excise. |
| Package discount | Subtract the package's percentage or fixed-dollar discount. |
| Sales tax | Apply the location's percentage to the discounted retail subtotal. |
The package's customer total is its discounted retail price plus sales tax. At checkout, sales tax is rounded on the transaction subtotal, so the tax for several packages can differ from multiplying a single-package preview.
Example for one cigar
The following values are an arithmetic example, not suggested tax rates or prices.
| Component | Example |
|---|---|
| Source cost | $10.00 |
| Included fixed excise | $1.00 |
| Base for retail markup | $11.00 |
| Retail markup at 50% | $5.50 |
| Retail before discount | $16.50 |
| Package discount at 10% | −$1.65 |
| Discounted retail | $14.85 |
| Sales tax at 8% | $1.19 |
| Customer total | $16.04 |
If excise inclusion is off, the calculation skips the $1.00 excise addition entirely. It is not added later at checkout.
Enter source cost
In Edit pricing, enter the price per base unit. For a cigar this is the price per stick.
To derive it from a supplier box, choose Enter source cost as → Package cost divided by its item count. For example, a $200 box containing 20 cigars gives a $10 source cost per cigar. Sellable packages use that unit source cost and their own counts.
Source cost is displayed with two decimal places. A cost derived by dividing a supplier package total retains up to six decimal places internally, so display rounding does not change the package calculation. Opening or leaving the cost field without editing it preserves that precision. Confirm whether the amount you are entering already includes a supplier charge you intend to recover; the system does not identify embedded excise in an invoice amount for you.
Configure excise inclusion
For the selected location, open Tax policy → Location pricing settings. Under Include excise in purchase price, select the tobacco categories for which you want excise included, then choose Save location settings.
Set the actual fixed and percentage excise rules in the item's supplier pricing editor. The category switch decides whether to include them; it is not an additional rule level.
Markup is not gross margin
A 50% markup on a $10 pricing base adds $5 and produces $15 before later steps. It does not mean that half of the selling price is profit. Enter the markup percentage you intend to apply to the pricing base.
MSRP
Manufacturer MSRP per unit is an optional reference amount. It does not change source cost, markup, discounts or taxes.
Rounding
Source cost is extended to the package before rounding to cents. Source cost, percentage excise, retail markup and discount calculation stages use half-up cent rounding. Register sales tax is rounded on the transaction subtotal after package discounts. A fixed package discount cannot reduce retail below zero.
See Understand cascading rules and Set the location's sales tax.
Choose which categories include excise
Open Location pricing settings and find Include excise in purchase price. Choose On or Off beside each tobacco category, then choose Save location settings. On adds the configured excise to source cost before retail markup; Off excludes it entirely.
Only categories marked Contains tobacco have this control. If the list is empty, expand Manage tobacco categories to classify an existing category or add a tobacco category. Save each category change first. Classification is shared across your organization; the inclusion setting is specific to this location. To remove a tobacco classification, first turn off its excise inclusion at every location.