Net vs gross
As mentioned before, net is an amount before we add the tax (when the tax is added to the base amount, as with VAT or sales tax) or after we deduct it (as with the income tax). This distinction is very important.
Consider two examples:
- You are a shop owner and you sell a huge chocolate bar for
$40. The sales tax or VAT (doesn't really matter in this case) is
25%. The gross price would be
$40 + 25% = $40 + $10 = $50. Net price is
$40, gross price is
$50and the tax is
- You perform a job and your gross pay is
$50. The income tax is
20%, so your net income is
$50 - 20% = $50 - $10 = $40.
In both examples, we had the same gross and net amounts, but the tax percentage turned out to be different This is all down to how, in the first example, the net price was the base for the tax calculation, while in the second one, the gross amount was.
Gross pay vs net pay
The general distinction is simple - gross pay is the amount before taxes are applied. When they are, we have a lower amount - a net wage. The mechanism may be different from country to country; in the US, medical, dental, life insurance and 401(k) payments are handled by the employer and are calculated at an earlier stage. In Poland, on the other hand, the difference between net and gross salary is much bigger - an employee needs to pay social security (split into medical, disability and retirement insurances), which are often higher than the income tax itself.
Tare vs gross weight vs net weight
These terms come into play when packaged goods are considered. Net weight is the goods alone, the weight of the container (a box, jar or a truck) is called the tare, and, finally, the gross weight is how much everything (your jam and the jar) weight. This net to gross calculator isn't really meant to be used to calculate weight, as the calculation is a simple addition:
net weight + tare = gross weight.
Gross profit vs net profit
Gross profit's definition is clear - it's sales revenues minus cost of goods sold. Sales revenue is the figure after customer discounts, returns and allowances are factored in. It's often expressed as a percentage. You may calculate it with our profit margin calculator. It's only a partial measure of profitability, as it doesn't contain other costs (marketing, office upkeep, etc.).
Net profit, on the other hand, is a full measure of profitability - all costs are accounted for. That's why it's often called the bottom line.