# Commission Rates
The **Commission Rate** is the percentage of a product’s subtotal that a Channel receives from a Merchant when an item is sold. Violet facilitates the transfer of this commission at the time of sale, but **does not dictate or manage the commercial agreement** between the Channel and Merchant.
Each Merchant can define a separate commission rate per Channel during onboarding or from their [Merchant Dashboard](https://merchant.violet.io/overview). This rate can be set between **0% and 100%**, and is exclusive to that Channel-Merchant pairing.
Channels can also set or lock commission rates programmatically via API or manually through the [Channel Dashboard](https://channel.violet.io/merchants). See the *Commission Rate Management* section for more details.
## How Commission is Calculated
Commission is applied **only to the subtotal**—not tax, shipping, or other charges.
### Calculation Breakdown:
1. **Commission Base**: `Subtotal`
2. **Commission Amount**: `Subtotal × Commission Rate`
3. **Merchant Payout**: `Subtotal + Shipping + Tax - Commission`
4. **Channel Net Distribution Amount**: `Commission - Stripe Fee`
{% hint style="info" %}
Payment provider processing fees are always deducted from the **Channel’s share**, not the Merchant’s payout.
{% endhint %}
The table below highlights which components are included in the commission calculation and how they are distributed:
| Component | Included in Commission | Recipient (in Distribution Amount) | Notes |
| ----------- | ---------------------- | ---------------------------------- | --------------------------------------------------------------------- |
| Subtotal | ✅ Yes | Merchant (net of commission) | Commission is only applied here |
| Tax | ❌ No | Varies (Merchant or Channel) | Depends on tax remitter configuration |
| Shipping | ❌ No | Merchant | Always passed through in full |
| Stripe Fees | ❌ No | Deducted from Channel | Based on total order value, always subtracted from Channel commission |
For a deeper understanding of how funds are split between merchants, channels, and fees, visit our the [Distributions docs](/prism/payments/payouts/distributions.md).
## Example Calculations
Single-Merchant Order
**Order Summary:**
* Subtotal: $90.00
* Tax: $5.00
* Shipping: $5.00
* Commission Rate: 10%
* Stripe Fee: $3.20 (2.9% + $0.30 on $100.00)
**Step-by-Step:**
1. Commission = $90 × 10% = $9.00
2. Merchant Payout = $90 + $5 + $5 - $9 = $91.00
3. Channel Receives = $9 - $3.20 = $5.80
**Summary:**
* Customer Pays: $100.00
* Merchant Receives: $91.00
* Channel Receives: $5.80
Multi-Merchant Order
| Merchant | Subtotal | Commission % | Commission | Proportional Tax/Shipping | Payout |
| -------- | -------- | ------------ | ---------- | ------------------------- | ------ |
| A | $60.00 | 15% | $9.00 | $6.00 | $57.00 |
| B | $40.00 | 20% | $8.00 | $4.00 | $36.00 |
* Total Order: $117.00 (Subtotal $100 + Tax $7 + Shipping $10)
* Total Commission: $17.00
* Stripe Fee (2.9% + $0.30): $3.69
* Channel Receives: $17.00 - $3.69 = $13.31
## Refunds and Chargebacks
### Refunds
When a refund is initiated (full or partial):
* Commissions are reversed proportionally based on the refunded subtotal.
* To ensure accurate commission reversals, merchants must correctly specify the SKU amount, shipping amount, and tax amount when initiating the refund from their ecommerce platform.
* Stripe fees are refunded when applicable and automatically returned to the channel.
## Commission Rate Management
Violet supports flexible commission rate management across the Channel–Merchant relationship. Rates can be set during onboarding and updated anytime via dashboard or API.
### Channel-Controlled Rates
Channels can override or lock commission rates at the Merchant level based on the Channel’s business model or agreements with Merchants. This allows Channels to maintain control over commission structures while still providing Merchants the flexibility to set their own rates:
#### **Via Dashboard**
* Go to the [Channel Dashboard](https://channel.violet.io/merchants)
* Select a Merchant from the list
* Click into the “Commission Rate” field to edit
* Toggle the **“Lock Rate”** setting if you want to prevent merchant overrides
#### **Via API**
Use the [`Set Merchant/Channel Commission Rate`](/api-reference/apps/commission-rates/set-merchant-app-commission-rate.md) endpoint to:
* Set or update the commission rate
* Pass the `lock` parameter to restrict merchant changes
### Merchant-Controlled Rates
Merchants can define or update the commission rate for each Channel they’re connected to:
* Go to the [Merchant Dashboard](https://merchant.violet.io/overview)
* Locate the relevant Channel under “Connected Channels”
* Click the current rate to edit
* Enter the new percentage and confirm
> Each Channel relationship can have a unique commission rate. Updates apply immediately to future orders.
---
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