Net Commission (After Tax)
What is net commission?
Net commission is gross commission minus withholding. Gross is what the plan says you earned. Net is what arrives.
The gap is larger and stranger than for salary, because the IRS classifies commission as a supplemental wage — alongside bonuses, severance, and prize payouts — and applies a different withholding method to it.
How commission is withheld in the US
Per IRS Publication 15 (2026), Section 7, employers have two methods:
On top of federal withholding sit FICA (6.2% Social Security up to the wage cap, 1.45% Medicare, plus 0.9% additional Medicare above $200K) and state tax, which varies enormously — California withholds 10.23% on bonuses and stock options and 6.6% on other supplemental income, while Texas and Florida withhold nothing (Deel, 2026 supplemental tax rates by state).
A worked example
Dev, an AE in Austin, Texas. Q3 commission: $10,000, paid as a separate line.
The same $10,000 for a rep in California would net roughly $6,375 after a 6.6% state supplemental withholding.
What this means?
Dev earned $10,000 and received $7,035. Nothing was taken from him. The 22% is an estimate the IRS uses because his employer cannot know his year-end tax picture in September — it is trued up when he files. If his effective tax rate ends the year below 22%, he gets money back; above, he owes.
This is the single most misunderstood mechanic in sales compensation, and it produces a predictable message every quarter: "why is my commission taxed higher than my salary?" It isn't. It's withheld differently. That distinction is one sentence long and defuses a recurring morale problem.
Common mistakes with net commission
1. Reps budgeting on gross
A rep who plans their life around a $10,000 commission and receives $7,035 experiences a 30% pay cut that never happened. Publishing an estimated-net figure alongside gross on the statement fixes it permanently.
2. Letting reps believe commission is "taxed at a higher rate"
It is withheld at a flat rate, not taxed at one. The final liability is settled at filing.
3. Forgetting the $1M cliff for top earners
Once cumulative supplemental wages cross $1M in a calendar year, the 37% mandatory rate applies to the excess. For a top enterprise rep or a leader with a large payout, that is a real cash-flow event and should be flagged in advance, not discovered on a paystub.
Why net commission matters for finance teams
Withholding is a payroll function, but the communication of it is a comp function — and when it is not handled, finance absorbs the disputes. A commission statement that shows gross only is technically correct and practically useless to the person reading it, because it never matches their bank account. That mismatch is one of the most common triggers for a commission dispute ticket that has nothing wrong with the commission.
Withholding rates and thresholds cited here are US federal rules as of 2026 and change with legislation. Visdum is not a tax advisor; confirm treatment with your payroll provider or tax counsel.
How Visdum handles net commission
Visdum calculates earned commission and passes it cleanly to payroll — Deel, ADP, and other payroll systems integrate directly — so the number a rep sees in their statement is the number that hits payroll, not a re-keyed approximation. Reps see gross, the deal-by-deal breakdown behind it, and the payout period it lands in, which turns the "why is this less than I expected?" conversation into a two-line answer instead of a spreadsheet forensics exercise. Where the gap is withholding rather than calculation, that becomes visible immediately.
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Related terms
Commission Statement · Payout Period · Commission vs Bonus Tax · Sales Commission · Commission Dispute
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Frequently asked questions
How much tax is withheld from sales commission?
In the US, when commission is paid separately from salary, employers withhold a flat 22% federal rate on supplemental wages up to $1 million per calendar year, and a mandatory 37% on anything above that. FICA (6.2% Social Security up to the wage cap, 1.45% Medicare) and state tax apply on top. A $10,000 commission commonly nets around $6,500–$7,000.
Why is my commission taxed more than my salary?
It isn't taxed more — it is withheld differently. The IRS treats commission as a supplemental wage and lets employers apply a flat 22% withholding rate rather than running it through your W-4 tables. That is an estimate, not your final tax rate. It is trued up when you file: if your effective rate for the year is below 22%, the difference comes back as a refund.
Is the 22% supplemental rate a tax rate or a withholding rate?
A withholding rate. It is a convenient flat percentage employers use because they cannot know your year-end tax picture mid-year. Your actual tax liability on that commission is determined by your total taxable income for the year, settled at filing — not by the 22% that appeared on the paystub.
What happens when commission exceeds $1 million?
Once cumulative supplemental wages cross $1 million in a calendar year, federal withholding on the excess jumps to a mandatory 37%. It is not optional, and it applies even where an employee has claimed exemption on their W-4. For top enterprise reps and leaders with large payouts, this is a real cash-flow event that should be flagged before it lands.
Does state tax apply to commission?
Yes, and it varies enormously. California withholds 10.23% on bonuses and stock options and 6.6% on other supplemental income, while Texas and Florida withhold no state income tax at all. Two reps on identical plans in different states will see materially different net commission on the same gross number.
Should commission statements show net or gross?
Both. Showing gross alone is technically correct and practically useless, because it never matches the rep's bank account — which is a common trigger for disputes that have nothing wrong with the underlying commission. Publishing an estimated net alongside gross removes an entire category of avoidable confusion.