Help in determining what are the tax rates for marketing agents? And what are the basis, gross sales or net income, that is after all deductions. I am currently in quandary as to my commission from as marketing agent for an agricultural sales that imade. The management said that I will get 5 to 7% based on figure on what's left from sales less all expenses such as materials,overhead and all. And after the commission.This is not fair I think. And they will still deduct withhold tax from my commission!

Please help.. Thanks

You're asking two different questions. I personally can't tell you anything about the commission rate. That isn't really an accounting question. I am curious why you didn't find all this out prior to taking the job. Did you not sign some type of agreement about it?

As for tax rates... there aren't any special tax rates based on the job that you do. It's just included in your overall earned income and how your taxes will come out depends on a zillion other different factors.

Everyone has taxes. They aren't doing that of their own free will or to screw you over. So that really has nothing whatsoever to do with whether your commission rate is fair.

Quote:

---

Originally Posted by morgaine300

You're asking two different questions. I personally can't tell you anything about the commission rate. That isn't really an accounting question. I am curious why you didn't find all this out prior to taking the job. Did you not sign some type of agreement about it?

As for tax rates... there aren't any special tax rates based on the job that you do. It's just included in your overall earned income and how your taxes will come out depends on a zillion other different factors.

Everyone has taxes. They aren't doing that of their own free will or to screw you over. So that really has nothing whatsoever to do with whether your commission rate is fair.

---

Thanks morgaine.. Yes we did not draft a contract for this.. Actually this is not my line of work. And we are friends(owner of business) Just so happened that I got a business for him and assumed he will give me the same rate as what his agent is receiving. That is, 7% based on gross contract sales price... In fairness to him, he told me after the sales was conusmmated that he will give me commission for the job well done by me. The problem came up when I remind him that I want to claim my commission. He give me computation that goes like this.:
Gross sales xxx
Less:govt. taxes xx
Net SAles xxxx - - - this is where i should have get the comm.rate
and the usual practice he give to others. Less;direct because,etc. xxxx
Gross profit xxxx
Less: Operating exp. Xxxx

Net Income xxxxx - - - - but he computed my rate based on this figure
I think not fair because this is supposed to be sales
Commission, meaning, shold be based on net sales.
Just like what real estate agent gets, commission
Based on contract price of the property.
I want to bring this matter to revenue authorities so as to give us both rulings of the right tax bases for sales commission. I feel so aggrieved and our friendship is at stake.

Thanks morgaine. Will really appreciate whatever help you can give. Godbless

The only two possibles.
1. they are 1099 workers, and they are paid their entire earnings and they have to file their own taxes as self employed. ** this is common for salespeople.

2. you hold out regular taxes on all earnings based on their exemptions for each person

That is your only two real choices

Quote:

---

Originally Posted by Fr_Chuck

The only two possibles.
1. they are 1099 workers, and they are paid thier entire earnings and they have to file thier own taxes as self employed. ** this is common for salespeople.

2. you hold out regular taxes on all earnings based on thier exemptions for each person

That is your only two real choices

---

Thanks Fr_Chuck.. I think I should be on No.1 possibility.. I should receive a certain percentage of the commission based on Net Sales not on Net Income...

And I will pay my own income tax related to the commissions I earned.. (self employed)Anyway I am not a staff of that company to share with their expenses and be given commission based on what was left from sales less expenses.. :)

Well, commissions generally are on sales. And sounds like this is typical. Doing a commission on the net income didn't sound normal to me, but I didn't want to comment without knowing for sure.

Is he taking advantage of your friendship, thinking you're just doing him a favor instead of doing real work for him? If he agreed to pay you a commission, it is my opinion that it's fair that you "assumed" it would be what is normal for that line of business.

Unfortunately things sometimes do go cockeyed when you try to do something like this among friends.

As for the taxes, I'm staying out of that one. I can see this is not where I'm at, because we don't take government taxes off gross sales to get net like that. The sales price is the sales price, and any taxes wouldn't be considered part of gross sales to begin with, so wouldn't need subtracted back off. That's leading me to believe you aren't where I'm at. Unless there's something special about that business I'm unaware of.

Here... something like this would not have income taxes deducted cause this wouldn't be considered an employee relationship. Of course, you'd still have to pay them.

Where are you at? (Just country is fine.)

Posted at the same time.. :-)

This reminds me of a situation I once had. I was working for a small corporation that was also a partner in another company, and my work to the partnership was contracted out. The other partner was complaining that our end was not doing enough work to be entitled to the percent of net income we got.

So the one owner of the corporation got this brilliant idea that I should do some of the work the other partners were doing, which would lower their burden and raise what "we" were doing.

Except that, my work was contracted out and I was one of the expenses that came off the revenues before that income split was done! If I did more work and had to get paid more, the partnership just has lower net income to split up. Great solution.

(If that made any sense.)

I have done commission several ways,
One was percent of gross sales,
And the other was percentage of profit
That way I could deal with the sell price, so if I sold a product for under the listed retail price, my commssion was based off a percent of the profit of the sale. I did this for several years. But in insurance I merely get a percent of the gross premium

Quote:

---

Originally Posted by morgaine300

Posted at the same time.. :-)

This reminds me of a situation I once had. I was working for a small corporation that was also a partner in another company, and my work to the partnership was contracted out. The other partner was complaining that our end was not doing enough work to be entitled to the percent of net income we got.

So the one owner of the corporation got this brilliant idea that I should do some of the work the other partners were doing, which would lower their burden and raise what "we" were doing.

Except that, my work was contracted out and I was one of the expenses that came off the revenues before that income split was done! If I did more work and had to get paid more, the partnership just has lower net income to split up. Great solution.

(If that made any sense.)

---

Great morgaine! REally, that made sense to me.. I can relate because it happened to me once too.

Thanks to both of you Fr._Chuck and Morgaine fof the very enlightening advices. It somehow keep me at peace with myself for the time being.. I really got so attentive to all that both of you saying.. And what an exchange of information!!

I posted the question on a weekend and govt. offices are closed so I can't wait till Monday to solve this case. So, thanks God that Ive found this site and got replied so very quick from you Morgaine and Fr._chuck. So, now I resolved that I can face this friend of mine with much confidence that I really know what I'm fighting for. Monday, I will get printed rulings on commissions-of what is the correct basis, and show it to him.

I think with proper explanation coupled with gov't. Rulings, he will finally accept the fact.
Thanks so much my friends!

Quote:

---

Originally Posted by morgaine300

Posted at the same time.. :-)

This reminds me of a situation I once had. I was working for a small corporation that was also a partner in another company, and my work to the partnership was contracted out. The other partner was complaining that our end was not doing enough work to be entitled to the percent of net income we got.

So the one owner of the corporation got this brilliant idea that I should do some of the work the other partners were doing, which would lower their burden and raise what "we" were doing.

Except that, my work was contracted out and I was one of the expenses that came off the revenues before that income split was done! If I did more work and had to get paid more, the partnership just has lower net income to split up. Great solution.

(If that made any sense.)

---

Morgaine, I'm from Philippines. The gov't tax I was referring to was VAT and contractor's tax that the customer withhold from gross sales. We call that as Expanded(Creditable) Tax.. Customer acts as withholding agent of the gov't to make sure seller will report all his sales, so they deducted certain portion from sales and remit to gov't.. for the seller, that amount is his advance income tax and can be used to offset from his annual tax due.

And you are correct, form an agent's point of view, sales are sales and that withhlding tax will not affect the sales amount and should not affect me either. It is the seller who will benefit from that withholding at year end, as deduction to his tax dues.

Quote:

---

Originally Posted by Fr_Chuck

I have done commission several ways,
one was percent of gross sales,
And the other was percentage of profit
That way I could deal with the sell price, so if I sold a product for under the listed retail price, my commssion was based off of a percent of the profit of the sale. I did this for several years. but in insurance I merely get a percent of the gross premium

---

Yes I agree with you. But I think commissions are really based on gross sales if agent is involved. Maybe if it is based on net profit, it is not an agent relationship but a staff or employee/employer relationship, on top of their fixed salaries fromthat same company.

An agent should not share the operating expenses of the principal. The commissions to be paid to agent can be considered direct cost or part of the operating/marketing expenses.

Thank you once again. May Godbless you..

Wow, around here it's the businesses who are responsible for taxes, whether they be sales taxes or employee income taxes. I think we'd have a hard time of it if we made customers responsible for anything, cause too many people go freaky over their own money, let alone worrying about anyone else's. :p

Quote:

---

The commissions to be paid to agent can be considered direct cost or part of the operating/marketing expenses.

---

I'd have to agree with that. But two parties can also work out anything they want.

Quote:

---

Originally Posted by morgaine300

You're asking two different questions. I personally can't tell you anything about the commission rate. That isn't really an accounting question. I am curious why you didn't find all this out prior to taking the job. Did you not sign some type of agreement about it?

As for tax rates... there aren't any special tax rates based on the job that you do. It's just included in your overall earned income and how your taxes will come out depends on a zillion other different factors.

Everyone has taxes. They aren't doing that of their own free will or to screw you over. So that really has nothing whatsoever to do with whether your commission rate is fair.

---

HI my friend...again thank you for everything...hope to give me again another minute of your time in the future...:)