Net Amount

Definition

The net amount is the price of goods or services before tax or VAT is added.

Net is the pre-tax base to which VAT or sales tax is applied. Multiplying the net by the tax rate gives the tax, and net plus tax gives the gross. When only a tax-inclusive total is known, the net is recovered by dividing that total by one plus the rate. Businesses often quote prices net of VAT to other businesses, which can reclaim the tax, and gross to consumers, who cannot. Keeping the two clearly labelled prevents double-counting tax.