005 Merch Settlements

The Proper Way To Settle Merchandise Fees

I recently came across a venue in Houston, TX, while I was on the Ice Cube tour, that had no idea how to settle a simple mechandise percentage. Furthermore, they told me that I was in the wrong and this came after a day of hearing them gloat about being the best promoters - “we know what we’re doing here, we sell tickets unlike the other venues in town, we’re basically the training camp for them since they steal our employees.” Well “Bob,” perhaps if you trained them right the other venues would appreciate it a little more.
So, here we go. I lesson in the proper way to settle an evidently not-so-simple merchandise percentage so swaggies/merchies alike, if you’re doing this the wrong way take down some notes and you just might get a raise, or keep your job.

This is really simple if you can handle basic math, and I do mean basic. So here are the first few rules:

Always take the fee off of your ADJUSTED GROSS SALES.
Always check the contract for proper percentages, it varies per show/agent - its not a house standard.
Keep in mind it is VERY common for the venue fee to be different on clothing vs media.
Find out the CURRENT Tax Rate of the city you are in. I use google a lot.
Ask if the artist or venue retains the tax. If it’s the venue, ask for a Tax-ID (EIN) Number before handing over any tax. If the venue retains they absolutely have to give you this information.
In some markets such as Minneapolis there will be no tax on clothing, but everything else. Certain cities/states are unique. The only states WITHOUT any sales tax are New Hampshire & Oregon.
Always divide the tax, never multiply. (We’ll Get There)

Let’s assume that if you are doing merch, you are doing it the proper way and counted in and out, accounted for any comps and/or half-sales and you have your correct GROSS SALES and your money matches up. Okay? Good.

For this equation let’s use a safe round number and make our GROSS $1,000, the sales tax is 10% (we must be in Chicago), and the venue fee is 15% on everything we sold.

Here is our Formula.

First we find our net and sales tax:
Gross Sales / (1+Sales Tax) = ADJUSTED Gross Sales Gross Sales - ADJ Gross Sales = Tax

After this is formulated we take the venue fee off of our Net:

ADJ Gross Sales X Venue % = Venue Fee

So Artist Total Take Will Be:

Net Sales - Venue Fee

Of course, whoever retains the tax will have that added to their take. Don’t forget who retained or you’ll have an accounting nightmare.

With Numbers:

First we find our net and sales tax:
$1000 [GS] / 1.10 = $909.09 [ADJ]
$1000 [GS] - $909.09 [ADJ] = 90.91 [TAX]

After this is formulated we take the venue fee off of our Net:

$909.09 [ADJ] X 0.15 [VENUE %] = $136.36 [VENUE FEE/MERCH RATE]

So Artist Total Take Will Be (Also, lets say we retain tax):

$909.09 [ADJ] + 90.91 [TAX] - $136.36 [VENUE FEE/MERCH RATE] = $863.64 [NET SALES]

Why bother with all of this math?

If you did the quick and incorrect way it would look like this:

$1000 [GS] X .15 [VENUE %] = $150.00
$150 [WRONG WAY] - $136.36 [CORRECT WAY] = $13.64

It might not look like a lot, but ask the band youre working for if they’d like to give away $13 - chance are they aren’t too willing. Let me kick it up a notch to some real numbers to show you the difference...

I’ve done merch for bands that have done $40,000 in sales for a night. Skipping all of the math, here is a breakdown of what it would be each way on a 25% Venue Fee (sadly, this rate is normal for bands that are considerably larger. How their booking agent doesnt fight for them is beyond me.)

CORRECT WAY: The band would pay $5,454.55 to the venue.
WRONG WAY: The band would pay $6,000.00 to the venue.
A difference of... $545.45 - So yes, the headache is ALWAYS worth the extra 3 minutes of math.

Here is a screen shot of how our example looks on my spreadsheet:



And yes, I am an expert spreadsheet maker having to amend so many of them in the past. If you need a good one to use e-mail me and I’ll help you come up with one best suited for your current tour.

I hope this proves to be helpful, I know there a LOT of merchandisers doing this the wrong way, I know that I did on my first few tours - just start settling the correct way and if the venue tries to tell you that you aren’t doing it properly offer politely to call your tour manager, band manager, and booking agent for them to talk to as well. Usually they’ll realize you’re serious by that point.

Questions/Comments? Leave a comment on here or email me from my profile page and I’ll hit you back as soon as I can.

- Joseph A. Lemble