# Product Sales > Product Sales means gross revenue from the sale of a product. **Term:** Product Sales **Last updated:** 2026-07-29 ## Definition ## What Product Sales Means in a Contract Product Sales refers to the total revenue a party earns from selling a specified product during a given period, as defined within a written agreement. The term is most often used as a financial benchmark, a number against which royalties, commissions, milestone payments, or profit shares are calculated. Because so much can turn on this figure, contracts rarely leave it undefined and instead spell out exactly what counts and what does not. In practice, Product Sales is a defined term with a specific formula behind it. Two parties might use the same phrase but mean very different things depending on whether the definition captures gross invoiced amounts, net amounts after returns, or revenue net of specific carve outs like taxes and shipping. This is why the definition clause, not the plain English meaning of the words, controls how the term operates throughout the agreement. ## How Product Sales Is Defined or Measured Most agreements measure Product Sales using one of two starting points, gross sales or net sales, then apply a list of permitted deductions. Common deductions include trade discounts, returns and allowances, freight charges, and value added or sales taxes actually paid. The resulting figure is often described as Net Product Sales, though many contracts simply use Product Sales to mean the adjusted figure once deductions are applied. Measurement also depends on timing rules, such as whether revenue is recognized when an order is placed, when goods ship, or when payment is received. Contracts frequently borrow from generally accepted accounting principles or the law governing the contract to anchor these timing questions, reducing the chance of disputes over which accounting period a sale belongs to. - Gross invoiced price of units sold - Deductions for returns, rebates, and discounts - Exclusions for taxes, duties, and freight - Currency conversion methodology for international sales ## Where Product Sales Appears in Agreements The term surfaces most frequently in licensing agreements, distribution arrangements, and royalty structures, where a licensor is paid a percentage of the licensee's Product Sales. It also appears in earnout provisions attached to business acquisitions, where a seller's additional payment depends on the acquired product line hitting agreed Product Sales targets after closing. Commercial documents such as a