Margin Calculator
Enter any two values above to calculate the rest.
What Is Gross Margin?
Gross margin is the percentage of revenue remaining after subtracting the direct cost of goods sold (COGS). It is the foundation of Canadian business profitability analysis, used by accountants, the CRA, and business advisors across every province.
Formula: Gross Margin % = (Revenue − COGS) ÷ Revenue × 100
Example: A Toronto retailer buys a product for C$50 and sells it for C$120. Gross margin = (C$120 − C$50) ÷ C$120 = 58.3%.
Gross Margin and HST/GST — A Critical Canadian Distinction
Canadian businesses registered for GST/HST collect tax on behalf of the CRA — this is not your revenue. Calculating margin on a tax-inclusive price overstates your profitability. HST rates vary by province: Ontario 13%, Nova Scotia 15%, Alberta GST-only 5%.
Example (Ontario): You charge a client C$113 incl. 13% HST. Your actual revenue = C$100. Cost = C$45. Correct gross margin = (C$100 − C$45) ÷ C$100 = 55%. Calculating on C$113 gives 60.2% — a dangerous overstatement.
Use the HST/GST toggle in the calculator above to strip tax before calculating margin.
Gross Margin vs Markup
| Metric | Formula | Example (cost C$45, sell C$100) |
|---|---|---|
| Gross Margin | (Revenue − Cost) ÷ Revenue | 55% |
| Markup | (Revenue − Cost) ÷ Cost | 122.2% |
Canadian retailers and wholesalers often negotiate in markup terms. Financial statements report gross margin. A 100% markup = only 50% gross margin — not the same thing.
Canadian Industry Gross Margin Benchmarks
| Sector | Typical Gross Margin |
|---|---|
| Food retail | 25–35% |
| Clothing retail | 50–60% |
| Restaurants / food service | 60–75% |
| Professional services | 50–70% |
| Software / technology | 65–80% |
| Construction | 18–30% |
| Manufacturing | 25–40% |
Step-by-Step: Pricing with a Target Margin
- Calculate your landed cost — e.g. C$40 per unit (product + customs duties + freight).
- Choose your target gross margin — e.g. 60%.
- Calculate ex-tax selling price: C$40 ÷ (1 − 0.60) = C$100 ex-tax.
- Add applicable HST/GST for the final customer price — e.g. Ontario: C$100 × 1.13 = C$113 incl. HST.
- Confirm: gross margin on ex-tax price = (C$100 − C$40) ÷ C$100 = 60% ✓
Frequently Asked Questions
What is a good gross margin for a Canadian small business?
It depends on your sector — use the benchmarks above. The critical question is whether your gross margin covers all fixed costs: provincial payroll taxes (CPP contributions, EI premiums), rent, utilities, insurance, and salaries. If not, you are losing money operationally.
Do I include HST/GST in my gross margin calculation?
No. HST/GST collected belongs to the CRA. Always calculate margin on pre-tax revenue. Use the tax toggle in this calculator to handle this automatically.
How does gross margin relate to the CRA's business income benchmarks?
The CRA uses industry gross margin benchmarks as part of business income verification. If your reported margin is significantly below the industry norm, it may raise questions. Accurate margin tracking helps you demonstrate legitimate cost structures.
What is the difference between gross margin and contribution margin?
Gross margin deducts COGS (direct materials, direct labour). Contribution margin additionally deducts variable overheads. Both are used in Canadian management accounting — which one you use depends on your cost accounting approach.
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