Written for online stores in the US selling on their own site or on marketplaces: direct-to-consumer brands, private-label and FBA sellers, dropshippers and subscription sellers.
The short version
- Build landed cost, not the supplier's price.Add freight, duty and broker fees to the supplier's FOB price. Without them, every margin you work out is too high.
- Work out what one order leaves.Start from the price before sales tax. Take off landed cost, packing, shipping, card and marketplace fees, and an allowance for returns.
- Turn that margin into break-even ROAS.Divide 1 by your margin percentage: the ROAS, or sales per ad dollar, you need to break even. Rerun it whenever duty changes.
Revenue and ROAS tell you very little on their own. What matters is what a single order leaves after the product, its freight and duty, the packing, the free shipping, the card fee and the returns. That is your contribution margin per order, and it sets how much you can spend to win a customer.
Start with landed cost
Landed cost is the FOB product cost plus inbound freight, plus duty (including any Section 301 or 232 tariff on the entered value), plus broker and entry fees. If you work from the supplier's price alone, every margin you calculate is too high. If your landed cost still carries IEEPA tariffs, rerun it: the Supreme Court held on February 20, 2026 that IEEPA does not authorize tariffs, and they ended February 24, 2026. Section 301 tariffs on China, the Section 301 forced-labor tariffs on 60 economies (since July 24, 2026) and Section 232 tariffs remain. As of Oct 2026.
Then the margin per order
Measure on revenue before sales tax: the sales tax you collect is a liability, never revenue. Take off picking, packing and packaging, outbound shipping, payment and marketplace fees, and a returns provision. Take marketplace fees from the platform's dated fee page: Amazon's referral fee, for example, is a category percentage of the total sales price, including shipping and gift wrap, with a per-item minimum.
| Price | $48 |
| Landed cost: FOB $10.00, freight $1.20, duty at an assumed 25% ($2.50); broker fees left out for simplicity | -$13.70 |
| Picking, packing and packaging | -$3.10 |
| Shipping, offered free to the customer | -$5.80 |
| Card fee at an assumed 2.9% + $0.30 | -$1.69 |
| Returns provision: 8% x $9.00 lost per return | -$0.72 |
| Contribution margin per order (47.9% of revenue) | $22.99 |
| Margin after an $18.00 CAC | $4.99 |
$22.99 less $18.00Indicative figures with assumed inputs. Put in your own.
Break-even ROAS is 1 divided by your margin percentage: on this worked example, 1 / 0.479 = 2.09. LTV is margin per order times the orders a customer places in a stated 12 months, undiscounted. At 1.5 orders that is $34.49, so LTV to CAC is 1.92 and payback is 0.78 orders.
When the tariff moves
| Contribution margin at 25% duty | $22.99 |
| Extra duty: a further 25% of the $10.00 entered value | -$2.50 |
| Contribution margin at 50% duty (42.7% of revenue) | $20.49 |
Break-even ROAS rises from 2.09 to 2.34. Reprice or cut CAC before the next purchase order.
Duty is charged on the entered value at the rate on the entry date, so your margin moves with every tariff change even when your price does not.
Small parcels shipped direct
The $800 duty-free exemption for low-value commercial shipments has been suspended for all countries since August 29, 2025, and is repealed by statute from July 1, 2027. A commercial parcel shipped direct from an overseas supplier now needs an entry, and applicable duties, taxes and fees apply. For example, a $40 order with a $16.00 entered value at an assumed 10% duty pays $1.60, before the carrier's brokerage fee, which often costs more than the duty itself on a single parcel. As of Oct 2026.
Have a licensed customs broker confirm the classification and rate before each purchase order.
Asked in Greymill
Landed cost: $10 + $1.20 freight + $5.00 duty (50% of the $10 entered value) = $16.20, before any broker fees
Left per order: $48 less $16.20 landed, $3.10 packing, $5.80 shipping, $1.69 card fee and $0.72 returns = $20.49, or 42.7%
Break-even ROAS (sales needed per ad dollar): 1 / 0.427 = 2.34, up from 2.09
Ad cost per order at 2.2: $48 / 2.2 = $21.82
Before the duty rise: the same ads made $1.17 an order
Why your margin moved: duty is charged on the entered value at the rate on the entry date.
Reprice, or cut what you pay to win each customer, before the next purchase order. Have a licensed customs broker confirm the rate.
Want me to find the price that gets you back above break-even?
Ask it about your own business
Paste this into Greymill with your own figures, and Cash & Profit works it through for your business.
I run an online shop in [state], in the US. Work out contribution margin per order and break-even ROAS for my main product: price [$], FOB cost [$], freight per unit [$], duty rate [%] on entered value [$], broker fees per unit [$], packing [$], shipping [$], card and marketplace fees [rates], returns rate [%] and loss per return [$], CAC [$]. Then show me what a duty rise to [%] would do.
More for online retail and ecommerce in the US
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Open the interactive lesson · Every online retail and ecommerce lesson · What Greymill knows about the trade
Sources
The primary sources behind this lesson, checked Oct 2026.
- comptroller.texas.gov (Unit economics, landed cost and worked examples in dollars)
- Fin. Code §22800 to §22805 (Unit economics, landed cost and worked examples in dollars)
- Financial Services Law Art. 8 (Unit economics, landed cost and worked examples in dollars)
- Quarterly Retail E-Commerce Sales, 2nd quarter 2026, Table 1 and notes (Unit economics, landed cost and worked examples in dollars)
- 17 USC 105 (no copyright in US government works) (Unit economics, landed cost and worked examples in dollars)
- FOMC statement Sep 16, 2026 (Unit economics, landed cost and worked examples in dollars)
- 16 CFR Part 465; 16 CFR 1.98 (Hard cases: sales tax, FEDERAL tax, cash and exit)
- 15 USC 381 (Hard cases: sales tax, FEDERAL tax, cash and exit)
- Thresholds (Hard cases: sales tax, FEDERAL tax, cash and exit)
- IRC §111 (Hard cases: sales tax, FEDERAL tax, cash and exit)
- Tax Law §1141(c); R&TC §6811 (Hard cases: sales tax, FEDERAL tax, cash and exit)
- 19 USC 1484; 1508; 1304 (Imports: de minimis, importer of record and where tariffs live)
- Federal Register final rule, "Background" and 19 CFR 145.12; Public Law 119-21 section 70531(b); 19 USC 1321(a)(2)(A) and (C). (Imports: de minimis, importer of record and where tariffs live)
- CBP de minimis guidance; Executive Order of Jul 30, 2025; 2025 reconciliation act (Pitfalls that embarrass the product)
- Threshold (Pitfalls that embarrass the product)
- Custom Communications, Inc. v. FTC (8th Cir. Jul 8, 2025) (Pitfalls that embarrass the product)
- 16 CFR Part 464 (Pitfalls that embarrass the product)
- Learning Resources, Inc. v. Trump, No. 24-1287, slip opinion; CBP CSMS #67834313 (Pitfalls that embarrass the product)
- FTC guidance (Marketplaces: fees, account health, INFORM act and brand protection)
- Account Health help pages (Marketplaces: fees, account health, INFORM act and brand protection)
- 37 CFR 2.6(a)(1) (Marketplaces: fees, account health, INFORM act and brand protection)
- 17 USC 512(c), (f) (Marketplaces: fees, account health, INFORM act and brand protection)
- "Who is covered by the INFORM Consumers Act?", "What information must online marketplaces collect?" (Marketplaces: fees, account health, INFORM act and brand protection)