If I’m looking at a German-language website – a product-selling website – and I see pricing information rendered like so:
20,00 € netto €16,25
… what exactly is “netto” - and the following amount - telling me, the purchaser? I assume I will be paying the higher of the values shown, so 20 euros come out of my pocket. German “Netto” is just translated, unsurprisingly, as English “net” (as in “gross” vs. “net” amounts). But I don’t think English-language signage would use “net” this way in displaying pricing for individual consumers. For wholesalers, maybe.
Is it an alternative way of rendering “price with tax” and “price without tax”?
Yes, that’s the gist of it. In Germany, there’s a general VAT (“Mehrwertsteuer”) of 19 % or 7 % (for special products) on all sold goods and services. “Brutto” means with taxes and “netto” without. So of course the higher price is what you pay. Like many other banking terms (bank itself from banco, the literal bank where the money was stacked, giro etc.), those terms come from Italy where the modern banking system originated.
ETA: the same applies to your salary (Gehalt). “Bruttogehalt” is what your employer pays, but what lands in your pocket is “Nettogehalt” after the deduction of income tax, church tax (if you’re a member of any) and health care.
Yes, thank you, I somehow got confused and thought that “bank” in English has the same double-meaning as “Bank” in German, namely a bench you sit on or a financial institution.
It does, but that does not mean they are completely interchangeable: sitting on a bank (unless it is a bank of snow, etc.), or piling books on a bank, is archaic; on the other hand the earth at the side of a river is formed into a bank, not a bench, etc.
I would assume most/many people know what a bank of instruments or a bank of switches is.
Thanks for the responses, all. EinsteinsHund appears to have gotten it in one. The similarities and differences in word usage between language communities are fascinating.
Yes, but in this case the connotation has drifted from the flat surface something can be set on to the things placed on that surface. So you can get double usages like “the bank of devices on the lab bench”.
It’s not very clear (to me at least) if the “bank” of a river to cognate to the “bank” as a bench.
As the meaning of Brutto and Netto and its origins in Italian have already been explained I’d like to touch on the question:
The reason of listing both Brutto and Netto prices is that these prices are relevant to different kinds of purchasers in a VAT system.
Consider an electrical part that costs brutto: 30.00 € (including 19% VAT) netto: 25.21 €
In the evening, I am an end consumer and order that part for installing in our apartment.
I think: This is going to cost me 30.00 €
During the working day, I am an electrical engineer and order that part on my employer’s behalf, for installing in one of the control cabinets that we are making.
I think: This is going to cost our company 25.21 €
In fact, both I (as an end consumer) and my company (as a company that buys and sells things using VAT) both are invoiced 25.21 € + 4.79 € VAT = 30.00 €, and in both cases the vendor is paid 30.00 €.
Only, in the second case our company offsets the 4.79 € VAT it paid for the part against the VAT it invoiced to our customers for control cabinets, so for the purpose of calculating if we are making a profit or a loss building these control cabinets only the 25.21 € price is relevant.
In a business context we only think and talk about Netto prices (e.g. that 25.21 €); as end consumers we only think and talk about Brutto prices.
As the price list you encountered lists both prices it probably is targeted to both types of buyers.
Price lists in B2C only list Brutto prices (the 30 € in my example).
There are price lists and catalogs in B2B that only have Netto prices (the 25.21 € in my example), as Brutto prices are irrelevant in this context, but vendors are required by law not to make them available to end consumers (as these would be deceived by the smaller numbers). If I am to receive such a catalog in my work context the vendor is going to make me pinky swear that I am not an end consumer.
Well not exactly. Everyone, whether business or end consumer (disregarding discounts) pays the Brutto price (except for exports, where VAT is not levied), it‘s only that businesses pay the Brutto price but only have the Netto price to reckon with when calculating profit/loss because they recover the difference from the tax man.
[off topic]
So what is the big deal made by foreign tourists about USA prices that don’t include the tax in the sticker price? Visitors (and the Youtube videos they produce) seem to act like this is unheard of, something inconceivable to them. But this seems to be quite similar.
The difference is that everywhere I have experience of in the EU the price with tax is the sticker price (in an end consumer context e.g. in supermarkets); the price without tax may additionally be shown (for the convenience of business customers), but only in a way that does not make end consumers mistake the price without tax for the price they have to pay. In a supermarket I add the sticker prices and know exactly what I’ll have to pay at the checkout; my receipt then shows price with VAT, price w/o VAT and VAT amount (for me to use in my accounting in case that I am purchasing for a business that can offset VAT).
I second this. Back when I lived in the States, I was used to the American way of showing prices, but now that I’ve been in Europe and become accustomed to a different approach, the American way just feels weird to me.
A value added tax is something different to a sales tax, which is why there are so many complications.
A VAT gets applied to nearly everything, but only once. The trick is that if you are part way down the chain you get your VAT back, rather than not being charged it. You need to prove that something you paid VAT on has somehow been on-sold and has had VAT applied to it. Then you can claim your VAT back. This has the effect of turning businesses into tax collectors with a clear incentive to make sure VAT is paid. There is no easy way for businesses to defraud the government, like can happen with a sales tax. What one gets when purchasing are receipts that are legal documents that record the payment of a VAT. Most people don’t care that their receipts break out the base price and the VAT. But if you are buying for your business, and are not the final purchaser, you care greatly.
You could have a simple business that provides goods or services. Say you have a small restaurant. You buy ingredients for the kitchen. You may well buy from the same supermarket as everyone else. But you get a tax receipt that lists the VAT you paid. If this is a legitimate input into your business, and you are charging your customers VAT, you get the VAT you paid back. But you then collect even more VAT on the meals you sell. Your customers are very likely the final purchasers, so they won’t be looking to get reimbursed for VAT. But you might have a business come in that is on-selling meals in tourist packages, and they bring in a bus load of customers. If that company is paying for the meals, they may well see the meals as an input into their business. They charge the tourists they are punting around VAT on the total package. So they get the VAT back on the meals they bought from you.
Fabulous amounts of paperwork flows about, and everyone is making sure that they get the VAT they need to charge. The VAT is a flat rate over nearly everything.
Making a VAT work requires a lot of effort. But it is generally considered a fairer tax system, in that everyone has to pay, and there is no set of mechanisms for the very wealthy to reorganise their finances to avoid it, unlike with income tax. It is of course harder on the very poor. Here in Australia we have the goods and services tax, which is a VAT by a different name. Part of the deal to bring it in was that all sales taxes were removed. So the states lost that income. In return, the GST income basically goes back to the states. The federal government levy income tax, and that goes into the federal budget. As a sop to the poor, food ingredients are not taxed. But made up food is. (So here in Oz, the example with restaurants is a bit more complicated, but overall the idea holds.)
This seems more like a particular price system used in the US that I’ve usually seen at amusement parks and other entertainment venues. The prices are listed as “small soda $1.84 tax .16 total $2.00” . They don’t just put “$2.00 tax included” on the menu for a variety of reasons.
The exception is wholesalers like Costco whose customer base is mostly businesses. I used to have a Costco card and even though I was well aware of the tax (VAT) it was always a shock at the till when they added 17.5% (as it was then).
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I would like it if we could do the same in the US.
I imagine the current system arose because of 50 states with countless municipalities all with different tax rates makes it hard to print labels on products. Imagine printing magazines with the price on the cover for the newsstand (back when those were popular).
But this plays into the merchant’s desire to make things look artificially cheaper, like prices ending in “.99” and that latest scourge of showing pricing as “3 for $7.99” where we need to do math to figure things out.
So, I don’t see our system ever changing to the sensible one where the full real price is printed on the label.
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The places you have experienced in the EU - at what level of government is the tax rate set? Because part of the reason that US prices are shown without tax is that tax rates are set by state, county and or municipality. Pre-printed prices are an issue but a relatively small one compared to advertising. If there was a national sales tax rate , then Costco, Target , Walmart , etc. could advertise an item for $10, tax included, but they can’t really do that with different tax rates unless they are somehow going to target all advertisements to a very small area. I live in Queens NY and our sales tax rate is 8.875%. In Nassau county , the sales tax rate might be 8.63% or more if a tax is imposed by the municipality. In Queens, clothing items under $110 are completely exempt from sales tax , in Nassau they are not. Nearly all the media that contain advertisements cover both areas - it’s not like Queens has a bunch of TV/radio stations that can’t be heard in Nassau or vice versa. So what price does Walmart/Target/Costco set for a T shirt - and remember , if they set the price high enough to account for the highest tax rate, a competitor without stores in that jurisdiction can advertise a lower price. Another issue is that tax rates sometimes are not applied at the place of purchase but the place of delivery or registration - if I buy a car in a state that doesn’t have sales tax but register it in NY, I will have to pay NY sales tax when I register it.
There are plenty of weird things that happen in the US - but sometimes the weird things are a side-effect of multiple jurisdictions.