Skip to content
× FreshBooks App Logo
FreshBooks
Official App
Free - Google Play
Get it
You're currently on our US site. Select your regional site here:

Surcharge: Definition, Meaning & Importance

Updated: November 25, 2022

When you pay for goods or services, there are a number of factors that go into determining the price that you pay. 

One extra cost that can get added to your total purchase price is what’s known as a surcharge.

But what exactly is a surcharge?

Read on as we take you through the definition, how surcharges work, how they’re calculated, and provide you with some examples.

List IconTable of Contents


    KEY TAKEAWAYS

    • A surcharge is an extra money cost that a business levies on top of the value of an existing good or service.
    • Governments often add surcharges to goods and services when they’re purchased at a point of sale.
    • Surcharges can be common in the cable, travel, and telecom industries. This helps offset other regulatory fees or other high costs.
    • Surcharge fees can either be a percentage of the purchase price or a fixed amount.

    What Is a Surcharge?

    A surcharge is an extra cost that gets added on top of a purchase you make. This can be something such as a tax or a fee, and it increases the initially stated price that was listed. Oftentimes, surcharges get added to an existing tax.

    Surcharges can get implemented for any number of reasons and the total amount can significantly vary. For example, a governmental agency or body might want to explore ways to generate additional revenue.

    Save 40 Hours During Tax Season

    How Surcharges Work

    When you purchase a product or service, you might be required to pay an additional surcharge payment on top of the listed price. The seller adds the surcharge to your total purchase price when the consumer gets to the point of sale.

    Surcharges can be fixed prices that get added or they can be a percentage of the total purchase price. Percentage surcharges often work out to be a small fraction of the cost. As well, surcharges are not taxable amounts, meaning sellers can only add surcharges to the retail price. 

    How Are Surcharges Calculated?

    Many products and services don’t automatically include surcharges, which means the proper amount must get calculated. The total amount of the surcharge is based on a customer’s purchase of an item. The calculated fee would appear in the sales and purchase agreement (SPA) or contract. There are surcharge assessments to help determine the various surcharge amounts. 

    Ahead Of Tax Time Every Time

    Examples of Surcharges

    There can be a broad range of businesses and industries that add surcharges to the total purchase price. This can include service provider professionals, governments, mobile telecommunications service companies, and retailers. Two examples would be credit card surcharges charged by credit card companies and surcharges in a retail transaction.

    Fuel surcharge 

    Another example is a taxi driver and fuel surcharges. As a service professional that has to balance fluctuating fuel prices, there can be times when a surcharge can come in handy. The taxi driver might decide to add a $1 surcharge to their fares to offset high fuel costs.

    Summary

    Surcharges are extra fees or costs that get added to the retail price of a purchase you make. The purchase can be for a product or service. Plus, surcharges can be either a fixed amount or a percentage of the purchase price.

    The amount of the surcharge will be listed on its own line on your receipt and it will be outlined in a sales and purchase agreement. Surcharges can be common across industries, such as professional services, telecommunications, retail, and government.

    Less Taxin'. More Relaxin'

    FAQs About Surcharge

    How Is a Surcharge Applied?

    A surcharge gets applied as either a fixed amount or a percentage. It’s added on top of the retail price and will be listed on your receipt under its own line.

    Why Do We Pay Surcharges?

    Many businesses impose surcharge fees to help generate additional revenue or offset costs, such as an increase in fuel prices.

    What’s the Difference Between Surcharge and Fee?

    There isn’t much difference between a surcharge and a fee other than specific context. A surcharge can also be called a fee. However, fees are typically added for different reasons than a surcharge would be.

    WHY BUSINESS OWNERS LOVE FRESHBOOKS

    553 HRS

    SAVE UP TO 553 HOURS EACH YEAR BY USING FRESHBOOKS

    $ 7000

    SAVE UP TO $7000 IN BILLABLE HOURS EVERY YEAR

    30M+

    OVER 30 MILLION PEOPLE HAVE USED FRESHBOOKS WORLDWIDE

    Try It Free for 30 Days. No credit card required. Cancel anytime.