CHAPTER 6. MARKUPS FOR PRODUCT PRICE DETERMINATION

TABLE OF CONTENTS

6.1 INTRODUCTION ...........................................................................................................6-1

6.1.1 Distribution Channels ..........................................................................................6-1

6.2 MARKUP CALCULATION METHODOLOGY...........................................................6-3

6.3 APPROACH FOR CALCULATING OVERALL MARKUP ........................................6-4

6.3.1 Baseline Markup ..................................................................................................6-4

6.3.2 Incremental Markups ...........................................................................................6-5

6.3.3 Approach for Calculating Overall Markup of the National Accounts 

Distribution Channel............................................................................................6-6

6.4 APPROACH FOR CALCULATING MANUFACTURER MARKUP..........................6-7

6.5 APPROACH FOR CALCULATING WHOLESALER AND CONTRACTOR 

MARKUPS ......................................................................................................................6-8

6.5.1 Key Data Sources and Assumptions of the Markups Methodology .................... 6-8

6.5.2 Approach for Wholesaler Markup .......................................................................6-9

6.5.3 Approach for Mechanical and General Contractor Markup ..............................6-10

6.6 DERIVATION OF MARKUPS ....................................................................................6-11

6.6.1 Manufacturer Markups.......................................................................................6-11

6.6.2 Wholesaler Markups..........................................................................................6-12

6.6.3 Mechanical Contractor Markups........................................................................6-14

6.6.3.1 Aggregate Baseline Markups for Mechanical Contractors ......................6-14

6.6.3.2 Baseline Markups for Mechanical Contractors in the Replacement 

and New Construction Markets................................................................6-14

6.6.3.3 Baseline Markups for Small and Large Mechanical Contractors............. 6-15

6.6.3.4 Baseline Markups by Disaggregated Mechanical Contractor Type .........6-16

6.6.3.5 Incremental Markups for Mechanical Contractors...................................6-17

6.6.4 Estimation of General Contractor Markups.......................................................6-18

6.7 SALES TAX ..................................................................................................................6-19

6.8 OVERALL MARKUPS.................................................................................................6-20

6.8.1 Estimation of National Account Markups .........................................................6-22

REFERENCES ..........................................................................................................................6-23

LIST OF TABLES

Table 6.1.1 Shares of Market by Distribution Channel ....................................................6-3

Table 6.6.1 Manufacturer Gross Margins and Markups.................................................6-12

Table 6.6.2 Manufacturer Markups by Equipment Type ................................................6-12

Table 6.6.3 Wholesaler Expenses and Markups .............................................................6-13

Table 6.6.4 Baseline Markup, All Mechanical Contractors............................................6-14

Table 6.6.5 Baseline Markups for the Replacement and New Construction 

Markets, All Mechanical Contractors..........................................................6-15

Table 6.6.6 Baseline Markups for Small and Large Mechanical Contractors................ 6-16

Table 6.6.7 Baseline Markups by Mechanical Contractor Type.....................................6-17

6-i
Table 6.6.8 Mechanical Contractor Disaggregated Expenses and Markups Based 

on 2007 U.S. Census Bureau Data ...............................................................6-17

Table 6.6.9 Incremental Markups by Mechanical Contractor Type ...............................6-18

Table 6.6.10 General Contractor Expenses and Markups................................................6-18

Table 6.7.1 Average Sales Tax Rates by Census Division and Large State ...................6-20

Table 6.8.1 Summary of Overall Markups – Small (7.5 Tons) ......................................6-21

Table 6.8.2 Summary of Overall Markups – Large (15 Tons) .......................................6-21

Table 6.8.3 Summary of Overall Markups – Very Large (30 Tons) ..............................6-22

Table 6.8.4 National Account Markups..........................................................................6-22

LIST OF FIGURES

Figure 6.1.1 Distribution Channels for CUAC in New Construction Applications...........6-2

Figure 6.1.2 Distribution Channels for CUAC in Replacement Applications...................6-3

6-ii
CHAPTER 6. MARKUPS FOR PRODUCT PRICE DETERMINATION

6.1 INTRODUCTION

To carry out the life-cycle cost (LCC) calculations described in Chapter 8, DOE needed 

to determine the cost to the commercial consumer of a baseline air-conditioning unit, and the 

cost of the more-efficient unit the consumer would purchase under the standards. However, the 

commercial consumer price of such units is not generally known. What is known is the 

manufacturer’s price for both baseline equipment and the more-efficient equipment. By applying 

a multiplier called a “markup” to the manufacturer’s price, DOE was able to estimate the 

commercial consumer’s price. This chapter describes how DOE derived such markups.

The equipment price to the commercial consumer depends on how the consumer 

purchases the equipment. The Department defines two primary types of distribution channels to 

describe how the equipment passes from the manufacturer to the consumer: (1) in the first 

distribution channel, the manufacturer sells the equipment to a wholesaler, who in turn sells it to 

a mechanical contractor, who in turn sells it (and its installation) to a general contractor, who in 

turn sells it to the consumer; (2) in the second distribution channel, the manufacturer sells the 

equipment directly to the consumer through a national account. Figure 7.1.1 illustrates the two 

distribution channels for commercial air conditioners. The Department has further subdivided the 

first distribution channel by mechanical contractor size (as measured in annual revenues).

For wholesalers and contractors, DOE estimated a baseline markup and an incremental 

markup. DOE defined a baseline markup as a multiplier that converts the manufacturing selling 

price of equipment with baseline efficiency to the consumer purchase price for the equipment at 

the same baseline efficiency level. An incremental markup is defined as the multiplier to convert 

the incremental increase in manufacturing selling price of higher efficiency equipment to the 

consumer purchase price for the same equipment. Because companies mark up the price to cover 

business cost and profit margin at each step in the distribution channel, both baseline and 

incremental markups are dependent on the particular distribution channel, as described in Section 

6.1.1.

6.1.1 Distribution Channels

The appropriate markups for determining consumer equipment prices depend on the type 

of distribution channels through which products move from manufacturers to purchasers. At each 

point in the distribution channel, companies mark up the price of the equipment to cover their 

business costs and profit margin. 

There are two primary types of distribution channels describing the way most equipment 

passes from the manufacturer to the consumer, one involving distributors and contractors and 

from manufacturer to consumer via national accounts. Within these two primary channels, DOE 

distinguishes between new and replacement applications, as only new construction applications 

are expected to include a general contractor. DOE also distinguishes between small and large 

mechanical contractors. 

6-1
Distribution channels for new construction applications are shown in Figure 6.1.1. In the 

first new construction distribution channel, the manufacturer sells the equipment to a wholesaler, 

who in turn sells it to either a small or large mechanical contractor, who in turn sells it to a 

general contractor, who in turns sells it to the consumer and performs the installation. In the 

second new construction distribution channel, the manufacturer sells the equipment directly to 

the consumer through a national account.

Figure 6.1.1 Distribution Channels for CUAC in New Construction Applications

Distribution channels for replacement applications are shown in Figure 6.1.2. In the first 

replacement distribution channel, the manufacturer sells the equipment to a wholesaler, who in 

turn sells it to either a small or large mechanical contractor, who in turns sells it to the consumer 

and performs the installation. In the second replacement distribution channel, the manufacturer 

sells the equipment directly to the consumer through a national account.

Wholesaler

Small 

Mechanical 

Contractor

General 

Contractor

Consumer

Manufacturer

Large

Mechanical 

Contractor

General 

Contractor

Consumer

Manufacturer National Account Consumer

6-2
Figure 6.1.2 Distribution Channels for CUAC in Replacement Applications

Based on information that equipment manufacturers provided, end-use commercial 

consumers purchase 50 percent of equipment through small mechanical contractors, 32.5 percent 

through large mechanical contractors, and the remaining 17.5 percent through national accounts.

In addition, 20 percent of commercial air-conditioning equipment is purchased for the 

new construction market while the remaining 80 percent is assumed to serve the replacement 

market. Table 6.1.1 lists each distribution channel’s share of the full commercial air conditioner 

market.

Table 6.1.1 Shares of Market by Distribution Channel

Distribution Channel Share of Market

New Construction, Small Mechanical Contractor 10.0%

New Construction, Large Mechanical Contractor 6.5%

New Construction, National Account 3.5%

Replacement, Small Mechanical Contractor 40.0%

Replacement, Large Mechanical Contractor 26.0%

Replacement, National Account 14.0%

6.2 MARKUP CALCULATION METHODOLOGY

At each point in the distribution channel, companies mark up the price of the equipment 

to cover their business costs and profit margin. In financial statements, gross margin is the 

difference between the company revenue and the company cost of sales or cost of goods sold 

(CGS). The gross margin includes the expenses of companies in the distribution channel—

including overhead costs (sales, general, and administration); research and development (R&D) 

Wholesaler

Small 

Mechanical 

Contractor

Consumer

Manufacturer

Large

Mechanical 

Contractor

Consumer

Manufacturer National Account Consumer

6-3
and interest expenses; depreciation and taxes—and company profits. In order for sales of a 

product to contribute positively to company cash flow, the product’s markup must be greater 

than the corporate gross margin. Products command lower or higher markups, depending on 

company expenses associated with the product and the degree of market competition. 

Equipment manufacturers sell most of their products directly to wholesalers. 

Wholesalers sell to contractors at the wholesale price. Wholesalers absorb short-term imbalances 

in supply and demand, allowing manufacturers to operate more efficiently and satisfying 

consumer needs for fast deliveries. In addition, wholesalers are important sources for parts. 

Most contractors compete at the local level. Many carry more than one brand of air conditioner, 

and most install the products they sell. 

In addition to the wholesaler and mechanical contractor markups, in new construction the 

general contractor adds a markup. In retrofit installations, sales tax applies to the final consumer 

cost.

6.3 APPROACH FOR CALCULATING OVERALL MARKUP 

6.3.1 Baseline Markup 

DOE used the overall baseline markup to estimate the consumer product price of baseline 

models, given the manufacturer cost of the baseline models. DOE considers baseline models to 

be product sold under existing market conditions (i.e., without new energy conservation 

standards). The following equation shows how DOE used the overall baseline markup to 

determine the product price for baseline models in the first new construction distribution 

channel.

CPPBASE =

COSTMFG × �MUMFG × MUWHOLE_BASE × MUMCONTRACT _BASE × MUGCONTRACT _BASE � =

COSTMFG × MUOVERALL _BASE

Where:

CPPBASE = Consumer product price for baseline models,

COSTMFG = Manufacturer cost for baseline models,

MUMFG = Manufacturer markup,

MUWHOLE_BASE = Baseline wholesaler markup,

MUMCONTRACT_BASE = Baseline mechanical contractor markup,

MUMGENERAL_BASE = Baseline general contractor markup, and

MUOVERALL_BASE = Baseline overall markup.

The following equation shows how DOE used the overall baseline markup to determine 

the product price for baseline models in the first replacement distribution channel.

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CPPBASE = COSTMFG × �MUMFG × MUWHOLE_BASE × MUMCONTRACT_BASE × TAXSALES � =

COSTMFG × MUOVERALL _BASE

Where:

CPPBASE = Consumer product price for baseline models,

COSTMFG = Manufacturer cost for baseline models,

MUMFG = Manufacturer markup,

MUWHOLE_BASE = Baseline wholesaler markup,

MUMCONTRACT_BASE = Baseline mechanical contractor markup,

TAXSALES = Sales tax, and

MUOVERALL_BASE = Baseline overall markup.

6.3.2 Incremental Markups

Similarly, DOE used the overall incremental markup to estimate changes in the consumer 

product price, given changes in the manufacturer cost from the baseline model cost resulting 

from an energy conservation standard to raise product energy efficiency. The total consumer 

product price for more energy-efficient models is composed of two components: the consumer 

product price of the baseline model and the change in consumer product price associated with the 

increase in manufacturer cost to meet the new energy conservation standard. The following 

equation shows how DOE used the overall baseline markup to determine the product price for 

more energy-efficient models in the first new construction distribution channel.

CPPBASE = COSTMFG × �MUMFG × MUWHOLE_INCR × MUMCONTRACT_INCR × MUGCONTRACT_INCR�

= COSTMFG × MUOVERALL_INCR

Where:

CPPBASE = Consumer product price for baseline models,

COSTMFG = Manufacturer cost for baseline models,

MUMFG = Manufacturer markup,

MUWHOLE_INCR = Incremental wholesaler markup,

MUMCONTRACT_INCR = Incremental mechanical contractor markup,

MUMGENERAL_INCR = Incremental general contractor markup, and

MUOVERALL_INCR= Incremental overall markup.

The following equation shows how DOE used the overall baseline markup to determine 

the product price for more energy-efficient models in the first replacement distribution channel.

CPPBASE = COSTMFG × �MUMFG × MUWHOLE_INCR × MUMCONTRACT_INCR × TAXSALES�

= COSTMFG × MUOVERALL_INCR

Where:

6-5
CPPBASE = Consumer product price for baseline models,

COSTMFG = Manufacturer cost for baseline models,

MUMFG = Manufacturer markup,

MUWHOLE_INCR = Incremental wholesaler markup,

MUMCONTRACT_INCR = Incremental mechanical contractor markup,

TAXSALES = Sales tax, and

MUOVERALL_INCR= Incremental overall markup.

6.3.3 Approach for Calculating Overall Markup of the National Accounts Distribution 

Channel 

Equipment purchased through national accounts is an exception to the usual distribution 

of HVAC equipment to end users. Large commercial consumers of HVAC equipment use 

national accounts to circumvent the typical chain of distribution, thereby allowing them to 

negotiate equipment prices directly with the manufacturer. Due to the large volume of equipment 

purchased, large commercial consumers, such as national retail chains, are able to purchase 

equipment directly from the manufacturer at significantly lower prices than could be obtained 

through the typical distribution chain.

To capture the price savings realized from equipment purchased through national 

accounts, DOE derived a “national account” markup, assuming that the resulting equipment price 

increase was one half of that realized from a typical chain of distribution. In other words, if the 

price increase resulting from the product of the wholesale, mechanical contractor, and general 

contractor markups is $100, the “national account” markup is such that the price increase is onehalf of that, or $50. The Department based the use of a “national account” markup that is onehalf of that realized from a typical chain of distribution on the assumption that the resulting 

“national account” equipment price must fall somewhere between the manufacturer price (i.e., a 

markup of 1.0) and the commercial consumer price under a typical chain of distribution. Because 

DOE did not know typical values for the actual “national account” equipment price, it chose a 

value of one-half.

The estimates of national account markups are estimated through a weighted average of

the overall markups for the other distribution channels. As stated above, 50% of all sales are 

through a distribution channel involving a small mechanical contractor and 32.5% are through a 

distribution channel involving a large mechanical contractor, and 17.5% are through a national 

account. Therefore, of all sales involving mechanical contractors, 61% are small contractors and 

39% are large contractors. Thus weights of 61% and 39% to the markups for small and large 

contractors, respectively, in the overall markup calculation. 

6-6
This is calculated separately for new construction and replacement, as well as baseline 

and incremental markups. The national account markups for new construction are calculated 

using the following equations:

MUOVERALL = MUMFG × MUWHOLE × MUMCONTRACT × MUGCONTRACT (New Construction), or,

MUOVERALL = MUMFG × MUWHOLE × MUMCONTRACT × TAXSALES (Replacement)

Where:

MUMFG = Manufacturer markup,

MUWHOLE = Wholesaler markup,

MUMCONTRACT = Mechanical contractor markup (weighted as described above),

MUMGENERAL = General contractor markup, and

TAXSALES = Sales tax, and

MUOVERALL= Overall markup.

The half of the overall markup proportion above cost is then calculated as follows:

ρNA_MU_COST = 1 − MUOVERALL

2

Where:

MUOVERALL= Overall markup, and 

ρNA_MU_COST = National account markup proportion above cost.

Adding 1 to the national account markup proportion above cost, DOE arrives at the 

estimated national account markup:

MUOVERALL _NA = 1 + ρNA_MU_COST

Where:

ρNA_MU_COST = National account markup proportion above cost, and

MUOVERALL_NA= National account overall markup.

6.4 APPROACH FOR CALCULATING MANUFACTURER MARKUP 

DOE uses manufacturer markups to transform a manufacturer’s product cost into a 

manufacturer sales price. Using the CGS and gross margin, the manufacturer markup can be 

calculated as follows:

MUMFG = CGSMFG + GMMFG

CGSMFG

6-7
Where:

MUMFG = Manufacturer markup,

CGSMFG =Manufacturer cost of goods sold, and

GMMFG =Manufacturer gross margin.

6.5 APPROACH FOR CALCULATING WHOLESALER AND CONTRACTOR 

MARKUPS 

DOE examined the manner in which markups change by efficiency level and other 

factors for wholesalers and contractors. DOE determined that markups are neither fixed-dollar, 

nor proportional to all direct costs, which means that the selling price of a product may not be 

strictly proportional to the purchase price of the equipment. Using the available data, DOE has

found measurable differences between incremental markups on direct equipment costs and the 

average aggregate markup on direct business costs. Additionally, DOE discovered significant 

differences between average and incremental markups for heating, ventilation, air-conditioning 

and refrigeration (HVACR) wholesalers and for HVAC contractors. 

The main reason that the selling price of a product may not be strictly proportional to the 

purchase price of the equipment is that businesses incur a wide variety of costs. When the 

purchase price of equipment and materials increases, only a fraction of the business expenses 

increase, while the remainder of the businesses’ expenses stays relatively constant. Certain 

business expenses are uncorrelated with the cost of equipment or cost of goods. For example, if 

the unit price of an air conditioner increases by 30 percent, it is unlikely that the cost of 

secretarial support in an administrative office will increase by 30 percent also.

6.5.1 Key Data Sources and Assumptions of the Markups Methodology

DOE derived the wholesaler and contractor markups from three key assumptions about 

the costs associated with furnaces and central air conditioners and heat pumps. DOE based the 

wholesaler and mechanical contractor markups on firm-level income statement data, while it 

based the general contractor markups on U.S. Census Bureau data for the residential building 

construction industry. DOE obtained the firm income statements from the Heating, Airconditioning & Refrigeration Distributors International (HARDI) 2010 Profit Planning Report 

and from the Air Conditioning Contractors of America (ACCA).1, 2 HARDI and ACCA are trade 

associations representing wholesalers and mechanical contractors, respectively. DOE used the 

financial data from the 2007 US Census of Business to develop general contractor markups in 

the same form as the income statement data for wholesalers and mechanical contractors.3, 4 These 

income statements break down the components of all costs incurred by firms that supply and 

install air conditioning equipment.1

The key assumptions used to estimate markups using these financial data are:

1 Wholesalers and mechanical contractors to which these reports refer handle multiple commodity lines, including 

residential and commercial air-conditioners.

6-8

 
1. The firm income statements faithfully represent the various average costs incurred by 

firms distributing and installing HVAC products including commercial air conditioners.

2. These costs can be divided into two categories: 1) costs that vary in proportion to the 

manufacturer selling price (MSP) of commercial air conditioners (variant costs); and 2) 

costs that do not vary with the MSP commercial air conditioners (invariant costs).

3. Overall, commercial air-conditioner wholesaler and contractor prices vary in proportion 

to commercial air-conditioner wholesaler and contractor costs included in the income 

statements.

In support of the first assumption, the income statements itemize firm costs into a number 

of expense categories, including direct costs to purchase or install the equipment, operating labor 

and occupancy costs, and other operating costs and profit. Although wholesalers and contractors 

tend to handle multiple commodity lines, including room air conditioners, furnaces, central air 

conditioners and heat pumps, and boilers, the data provide the most accurate available indication 

of the expenses associated with commercial air conditioners.

Information obtained from the trade literature, and from selected heating, ventilating, and 

air-conditioning (HVAC) wholesalers, contractors, and consultants, tends to support the second 

assumption; this information indicates that wholesale and contractor markups vary according to 

the quantity of labor and materials used to distribute and install appliances In its analysis, DOE

assumes a division of costs between those that do not scale with the manufacturer price (labor 

and occupancy expenses), and those that do (operating expenses and profit). This division of 

costs led to the estimate of wholesale and contractor markups described below. 

In support of the third assumption, the HVAC wholesaler and contractor industry is 

competitive, and consumer demand for commercial heating and air conditioning is inelastic, i.e., 

the demand is not expected to decrease significantly with an increase in price of equipment. The 

large number of HVAC firms listed in the 2007 Census indicates the competitive nature of the 

market. For example, there are more than 700 HVAC manufacturers,5 5,300 wholesalers of heat 

pumps and air-conditioning equipment,6 more than 170,000 general residential contractors,

36,000 commercial and institutional building contractors,7, 8 and 91,000 HVAC contractors listed 

in the 2007 Census.9 Additionally, the 2007 Census estimated that the four firm concentration 

ratio (FFCR) for the HVAC wholesale sector is 29.7%.10 The FFCR is the market share of the 

four largest firms in the industry; FFCR under 40% represents a competitive industry.11, 12 

Following standard economic theory, competitive firms facing inelastic demand either set prices 

in line with costs or quickly go out of business.13

6.5.2 Approach for Wholesaler Markup 

Using the above assumptions, DOE developed baseline and incremental markups 

for wholesalers using the firm income statement from the Heating, Air-conditioning & 

Refrigeration Distributors International (HARDI) 2010 Profit Report (Appendix 6A.1). DOE 

used the baseline markups, which cover all of the wholesaler’s costs (both invariant costs and 

variant costs), to determine the sales price of baseline models. Here variant costs were defined as 

6-9
costs that vary in proportion to the change in MSP induced by increased efficiency standards; in 

contrast, invariant costs were defined as costs that do not vary in proportion to the change in 

MSP due to increased efficiency standards. The baseline markup relates the manufacturer sales 

price to the wholesaler sales price. DOE calculated the baseline markup for wholesalers using the 

following equation:

MUWHOLE_BASE = CGSWHOLE + GMWHOLE

CGSWHOLE

= CGSWHOLE + (IVCWHOLE + VCWHOLE )

CGSWHOLE

Where:

MUWHOLE_BASE = Baseline wholesaler markup, 

CGSWHOLE = Wholesaler cost of goods sold,

GMWHOLE = Wholesaler gross margin, 

IVCWHOLE = Wholesaler invariant costs, and

VCWHOLE = Wholesaler variant costs.

Incremental markups are coefficients that relate the change in the manufacturer sales 

price of more energy-efficient models, or those products that meet the requirements of new 

energy conservation standards, to the change in the wholesaler sales price. Incremental markups 

cover only those costs that scale with a change in the manufacturer’s sales price (i.e., variant

costs, VC). DOE calculated the incremental markup for wholesalers using the following 

equation:

MUWHOLE_INCR = CGSWHOLE + VCWHOLE

CGSWHOLE

Where:

MUWHOLE_INCR = Incremental wholesaler markup,

CGSWHOLE = Wholesaler cost of goods sold, and

VCWHOLE= Wholesaler variant costs.

6.5.3 Approach for Mechanical and General Contractor Markup 

Similar financial data to that used to estimate wholesaler markups are also available for 

mechanical contractors and general contractors from ACCA and the 2007 Economic Census.

2, 9

To estimate mechanical contractor markups for furnaces and central air conditioners and heat 

pumps, DOE collected financial data from ACCA and from the Plumbing and HVAC 

Contractors(NAICS 23822) series from the 2007 Economic Census. To estimate general 

contractor markups, DOE collected data from the Commercial and Institutional Building 

Construction series from the 2007 Economic Census (NAICS 236220). 

ACCA financial data provides gross margin (GM) as percent of sales for the mechanical 

contractor industry; therefore, the mechanical contractor baseline markup is derived using the 

following equation:

6-10
MUMCONTRACT_BASE = SALES (%)

SALES (%)− GM (%)

The 2007 Economic Census data include the number of establishments, payroll for 

construction workers, value of construction, cost of materials, and cost of subcontracted work at 

both state and national level. DOE calculated another estimate of the baseline markup for 

mechanical contractors and general contractors using the following equation:

MUBASE = VCONSTRUCT

PAY + MATCOST + SUBCOST

Where:

MUBASE = Baseline mechanical contractor or general contractor markup,

VCONSTRUCT = Value of construction,

PAY = Payroll for construction workers,

MATCOST = Cost of materials, and

SUBCOST = Cost of subcontracted work.

Analogously, DOE estimated the incremental mechanical contractor and general 

contractor markups by only considering those costs that scale with a change in the 

manufacturer’s sales price (variant costs, VC) for higher energy efficiency products. As stated in 

Section 6.5.1, DOE assumes a division of costs between those that do not scale with the 

manufacturer price (labor and occupancy expenses), and those that do (other operating expenses 

and profit). Hence, DOE categorized the 2007 Economic Census cost data in each major cost 

category and estimated incremental contractor markups using the following equation:

MUCONTRACT_INCR = CGSCONTRACT + VCCONTRACT

CGSCONTRACT

Where:

MUCONTRACT_INCR = Incremental contractor markup,

CGSCONTRACT = Contractor cost of goods sold, and

VCCONTRACT= Contractor variant costs.

6.6 DERIVATION OF MARKUPS

6.6.1 Manufacturer Markups

DOE developed a set of base case manufacturer markups by examining the annual 

Securities and Exchange Commission (SEC) 10-K reports filed by seven publicly-traded 

manufacturers engaged in the production of small, large and very large air-cooled commercial 

package air conditioners and heat pumps.14 DOE evaluated manufacturer markups for the years 

between 2006 and 2011, inclusive. 

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Table 6.6.1 lists the average net revenues, estimated corporate gross margin, and 

estimated manufacturer markup for the years 2006 to 2011 for the seven manufacturers. 

Table 6.6.1 Manufacturer Gross Margins and Markups

Descriptions Mfr A Mfr B Mfr C Mfr D Mfr E Mfr F Mfr G

Average Net Revenues

(Million) $255 $10,876 $12,000 $34,759 $3,359 $2,117 $54,630

Corporate Gross Margin 22% 33% 28% 14% 27% 28% 27%

Markup 1.28 1.48 1.39 1.17 1.37 1.39 1.37

Source: SEC 10-K reports (2006-2011)

The weighted average manufacturer markup based on public filings by these seven

companies is 1.34. To further refine the base case markup, DOE solicited feedback from 

manufacturers in confidential interviews. Based on manufacturer information, DOE calculated

and applied the following industry average manufacturer markups for covered equipment.

Table 6.6.2 Manufacturer Markups by Equipment Type

Equipment Markup

Small Commercial Package Air-Conditioners (Air-Cooled) - ≥65,000 Btu/h and 

<135,000 Btu/h 1.30

Small Commercial Package Heat Pumps (Air-Cooled) - ≥65,000 Btu/h and 

<135,000 Btu/h 1.30

Large Commercial Package Air-Conditioners (Air-Cooled) - ≥135,000 Btu/h and 

<240,000 Btu/h 1.34

Large Commercial Package Heat Pumps (Air-Cooled) - ≥135,000 Btu/h and 

<240,000 Btu/h 1.34

Very Large Commercial Package Air-Conditioners (Air-Cooled) - ≥240,000 Btu/h 

and <760,000 Btu/h 1.41

Very Large Commercial Package Heat Pumps (Air-Cooled) - ≥240,000 Btu/h and 

<760,000 Btu/h 1.41

6.6.2 Wholesaler Markups 

Wholesalers reported median data in a confidential survey that HARDI conducted across 

its members. In the survey, HARDI itemized revenues and costs into categories, including direct 

equipment expenses (cost of goods sold), labor expenses, occupancy expenses, other operating 

expenses, and profit. DOE presents these data in full in appendix 6A.1, Detailed Data for 

Equipment Price Markups. Table 6.6.3 summarizes them in terms of cost-per-dollar sales 

revenue in the first data column and in terms of cost-per-dollar of cost of goods sold in the 

second column. 

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Table 6.6.3 Wholesaler Expenses and Markups

Descriptions

Per Dollar

Sales Revenue

$

Per Dollar Cost 

of Goods

$

Direct Cost of Equipment Sales: Cost of goods sold 0.737 1.000

Labor Expenses: Salaries and benefits 0.151 0.205

Occupancy Expense: Rent, maintenance, and utilities 0.036 0.049

Other Operating Expenses: Depreciation, advertising, and insurance. 0.055 0.075

Operating Profit 0.020 0.027

Baseline Revenue: Baseline revenue earned per dollar cost of goods sold 1.357

Wholesaler Baseline Markup (MUWHOLE BASE) 1.357

Incremental Revenue: Increased revenue per dollar increase cost of goods sold 1.103

Incremental Markup (MUWHOLE INCR) 1.103

Source: Heating, Air Conditioning & Refrigeration Distributors International. 2012. 2012 Profit Report (2010 Data).

In this case, direct equipment expenses (cost of goods sold) represent about $0.74 per 

dollar sales revenue, so for every $1 wholesalers take in as sales revenue, $0.74 is used to pay 

the direct equipment costs. Labor expenses represent $0.15 per dollar sales revenue, occupancy 

expenses represent $0.04, other operating expenses represent $0.06, and profit accounts for $0.02

per dollar sales revenue.

DOE converted the expenses per dollar sales into expenses per dollar cost of goods sold, 

by dividing each figure in the first data column by $0.74 (i.e., cost of goods sold per dollar of 

sales revenue). For every $1.00 the wholesaler spends on equipment costs, the wholesaler spends 

$0.205 to cover labor costs, $0.049 to cover occupancy expenses, $0.075 for other operating 

expenses, and $0.027 in profits. This totals to $1.357 in sales revenue earned for every $1.00 

spent on equipment costs. Therefore, the wholesaler baseline markup (MUW HOLE BASE) is 1.357

($1.357 ÷ $1.00). 

DOE also used the data in column two to estimate the incremental markups. The 

incremental markup depends on which of the costs in Table 6.6.3 are variant or invariant with 

respect to MSP. For example, for a $1.00 increase in the MSP, if all of the other costs scale with 

the MSP (i.e., all costs are variant), the increase in wholesale price will be $1.357, implying that 

the incremental markup is 1.357, or the same as the baseline markup. At the other extreme, if no 

other costs are variant, then a $1.00 increase in the MSP will lead to a $1.00 increase in the 

wholesale price, for an incremental markup of 1.0. 

As stated in section 6.5, DOE believes that the labor and occupancy costs are invariant

with respect to MSP, while other operating costs and profit are variant. In this case, for a $1.00 

increase in the MSP, the wholesale price will increase in line with changes in the categories 

“other operating costs” and “operating profit”; these are approximately of $0.067, which when 

divided by $0.737 cents in cost of goods sold yields an increase of $0.103, giving a wholesaler

incremental markup (MUW HOLE INCR) of 1.103. See appendix 6.A for cost details.

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6.6.3 Mechanical Contractor Markups 

6.6.3.1 Aggregate Baseline Markups for Mechanical Contractors

The HVAC contractors, represented here as mechanical contractors, reported median cost 

data in an ACCA financial analysis of the HVAC industry. These data are shown in Table 6.6.4. 

Table 6.6.4 Baseline Markup, All Mechanical Contractors

Description

Contractor Expenses or Revenue

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost of goods sold 0.73 1.00

Gross Margin: Labor, occupancy, operating expenses, and profit 0.27 0.37

Revenue: Baseline revenue earned per dollar cost of goods 1.37

Baseline Markup (MUMECH CONT BASE) 1.37

Source: Air Conditioning Contractors of America. 2005. Financial Analysis for the HVACR Contracting Industry.

Data reported in this analysis are not as detailed as those provided by HARDI and the 

U.S. Census, containing only cost of goods sold and gross margin. Since the gross margin is the 

sum of labor, occupancy expenses, operating expenses, and profit, the data are sufficient to 

estimate the baseline markup. The first data column in Table 6.6.4 provides the cost of goods 

sold and gross margin, expressed as dollars per dollar of sales revenue. The only important 

difference is that the direct cost of equipment sales in this table includes installation costs as well 

as the cost of goods sold. As shown in the table, the direct cost of sales represents about $0.73 

per dollar sales revenue to the contractor and the gross margin is $0.27 per dollar sales revenue. 

DOE converted these expenses per dollar sales into revenue per dollar cost of goods sold 

by dividing each figure in the first data column by $0.73. For every $1.00 the mechanical 

contractor spends on equipment costs, the mechanical contractor earns $1.00 in sales revenue to 

cover the equipment cost, and $0.37 in sales revenue to cover the other costs. This totals $1.37 in 

sales revenue earned for every $1.00 spent on equipment costs, for a baseline markup (MUMECH 

CONT BASE) of 1.37 for mechanical contractors. This is the beginning point for the determination of 

mechanical contractor markups.

The baseline markup derived above for mechanical contractors is the average value for 

all contractors, including large and small contractors serving the replacement and new 

construction markets. The following sections describe how DOE further derived the baseline and 

incremental markups for four distinct categories of mechanical contractors: (1) small contractors

in the replacement market; (2) small contractors in the new construction market; (3) large 

contractors in the replacement market; and (4) large contractors in the new construction market.

6.6.3.2 Baseline Markups for Mechanical Contractors in the Replacement and 

New Construction Markets

As presented above for all mechanical contractors in aggregate , the ACCA financial data 

provided only gross margin data, which allows for the determination of only the baseline markup 

for the four types of contractor, since the gross margin is the sum of all contractor labor and 

operating expenses plus profit. 

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Table 6.6.5 summarizes the gross margin and resulting baseline markup data for all 

mechanical contractors that serve the replacement and new construction markets. Note that while 

this data is disaggregated by the market served, it aggregates mechanical contractors of all sizes.

Table 6.6.5 Baseline Markups for the Replacement and New Construction Markets, All 

Mechanical Contractors

Description

Contractor Expenses or Revenue by Market Type

Replacement New Construction

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost 

of goods sold 0.703 1.000 0.745 1.000

Gross Margin: Labor, occupancy, 

operating expenses, and profit 0.297 0.422 0.255 0.342

Baseline Markup (MUMECH CONT BASE): 

Revenue per dollar cost of goods NA 1.42 NA 1.34

% Difference from Aggregate 

Mechanical Contractor Baseline MU NA 3.6% NA -2.2%

Source: Air Conditioning Contractors of America. 2005. Financial Analysis for the HVACR Contracting Industry.

Using the baseline markup data for replacement and new construction contractors from 

Table 6.6.5, DOE calculated that the baseline markups for the replacement and new markets are 

3.6 percent higher and 2.2 percent lower, respectively, than that for all mechanical contractors 

serving all markets shown in Table 6.6.4. These percentage differences are later used, along 

with those defined in section 6.6.3.3, to estimate separate markups for the four categories of 

mechanical contractor of interest.

6.6.3.3 Baseline Markups for Small and Large Mechanical Contractors 

ACCA provides data for contracting businesses earning annual revenues in each of the 

four following categories: (1) below one million dollars; (2) from one to two million dollars; (3) 

from two to five million dollars; and (4) over five million dollars. DOE aggregated the data into 

two categories: contractors earning annual revenue below two million dollars and contractors 

earning annual revenue above two million dollars. The values reported for small contractors are 

the average of the categories: (1) below one million dollars, and (2) from one to two million 

dollars. The values reported for large contractors are the average of the categories: (3) from two 

to five million dollars, and (4) over five million dollars.

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Table 6.6.6 Baseline Markups for Small and Large Mechanical Contractors

Description

Contractor Expenses or Revenue by Market Type

Small ( < $2 million) Large ( > $2 million)

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost 

of goods sold 0.653 1.000 0.753 1.000

Gross Margin: Labor, occupancy, 

operating expenses, and profit 0.347 0.532 0.247 0.328

Baseline Markup (MUMECH CONT BASE): 

Revenue per dollar cost of goods NA 1.53 NA 1.33

% Difference from Aggregate 

Mechanical Contractor Baseline MU NA 11.6% NA -3.2%

Source: Air Conditioning Contractors of America. 2005. Financial Analysis for the HVACR Contracting Industry.

Using the baseline markup data for small and large contractors from Table 6.6.6, DOE 

calculated that the baseline markups for small and large are 11.6 percent higher and 3.2 percent 

lower, respectively, than that for all mechanical contractors serving all markets shown in 

Table 6.6.4. 

6.6.3.4 Baseline Markups by Disaggregated Mechanical Contractor Type 

Using the percentage difference from the aggregate mechanical contractor baseline 

markup (Table 6.6.4), DOE then estimated the baseline markup for each of the four mechanical 

contractor types: (1) small contractors in the replacement market; (2) small contractors in the 

new construction market; (3) large contractors in the replacement market; and (4) large 

contractors in the new construction market. The baseline markup for each mechanical contractor 

type is estimated using the following equation:

MUMCONTRACT_BASE = MUAGGREGATE + MUAGGREGATE × μSIZE + MUAGGREGATE × μMARKET

Where:

MUAGGREGATE = Baseline markup for aggregate of all mechanical contractors,

μSIZE = Size modifier (small or large contractor 

percentage difference from aggregate of all contractors’ markup),

μMARKET = Market modifier (replacement or new 

construction contractor percentage difference from aggregate of all 

contractors’ markup), and,

MUMCONTRACT_BASE = Baseline markup for specific mechanical contractor type.

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Table 6.6.7 Baseline Markups by Mechanical Contractor Type

Mechanical Contractor Type Size Modifier Market Modifier Baseline Markup Size Market

Small Replacement 11.6% 3.6% 1.58

New Construction 11.6% -2.2% 1.50

Large Replacement -3.2% 3.6% 1.38

New Construction -3.2% -2.2% 1.30

6.6.3.5 Incremental Markups for Mechanical Contractors 

Calculation of the incremental markups for each mechanical contractor type required 

separation of the invariant and variant costs. Since this was not possible using the ACCA data, 

DOE used more detailed 2007 U.S. Census Bureau data for all plumbing, heating, and airconditioning contractors. The U.S. Census Bureau data were used to calculate the baseline and 

incremental markups as shown in Table 6.6.8. Appendix 6A.2 contains the full set of data used in 

this calculation.

Table 6.6.8 Mechanical Contractor Disaggregated Expenses and Markups Based on 2007 

U.S. Census Bureau Data

Description

Contractor Expenses or Revenue

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost of goods sold 0.68 1.00

Labor Expenses: Salaries (indirect) and benefits 0.17 0.26

Occupancy Expense: Rent, maintenance, and utilities 0.02 0.03

Other Operating Expenses: Depreciation, advertising, and insurance. 0.04 0.06

Net Profit Before Taxes 0.09 0.13

Baseline Markup (MUMECH BASE): Revenue per dollar cost of goods 1.47

Incremental Markup (MUMECH INCR): Increased revenue per dollar increase cost of goods sold 1.18

Percent difference between Baseline and Incremental Markup 20.0%

Source: U.S. Census Bureau. 2007. Plumbing, Heating, and Air-Conditioning Contractors. Sector 23: 238220. Construction: 

Industry Series, Preliminary Detailed Statistics for Establishments, 2007.

Using the data in Table 6.6.8, the incremental markup is 20 percent lower than the 

baseline markup. By applying this 20 percent differential between baseline and incremental 

markup to the baseline markups estimated for the four specific mechanical contractor types, 

DOE estimates the incremental markup for each type (Table 6.6.9).

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Table 6.6.9 Incremental Markups by Mechanical Contractor Type

Mechanical Contractor Type Incremental

Size Market Markup

Small Replacement 1.26

New Construction 1.20

Large Replacement 1.10

New Construction 1.04

6.6.4 Estimation of General Contractor Markups 

DOE derived markups for general contractors from U.S. Census Bureau data for the 

commercial building construction sector. The commercial construction sector includes 

establishments primarily engaged in construction work, including new construction work, 

additions, alterations, and repairs. 

The U.S. Census Bureau data for the construction sector include detailed statistics for 

establishments with payrolls, similar to the data reported by HARDI for wholesalers. The 

primary difference is that the U.S. Census Bureau reports itemized revenues and expenses in 

total dollars for the construction industry as a whole, rather than in typical values for an average 

or representative business. Because of this, DOE assumed that the total dollar values that the 

U.S. Census Bureau reported, once converted to a percentage basis, represented revenues and 

expenses for an average or typical contracting business. Similar to the data for wholesalers, 

Table 6.6.10 summarizes the expenses for general contractors as expenses per dollar sales 

revenue in the first data column (Appendix 6A.3 contains the full set of data). 

Table 6.6.10 General Contractor Expenses and Markups

Description

Wholesale Firm Expenses or Revenue

Per Dollar

Sales Revenue

$

Per Dollar 

Cost of Goods

$

Direct Cost of Equipment Sales: Cost of goods sold 0.76 1

Labor Expenses: Salaries (indirect) and benefits 0.08 0.10

Occupancy Expense: Rent, maintenance, and utilities 0.01 0.01

Other Operating Expenses: Depreciation, advertising, and insurance. 0.03 0.04

Net Profit Before Taxes 0.12 0.15

Baseline Markup (MUGEN CONT BASE): Revenue per dollar cost of goods 1.31

Incremental Markup (MUGEN CONT INCR): Increased revenue per dollar increase cost of goods sold 1.19

Source: U.S. Census Bureau. 2007. Sector 236220 (Commercial Building Construction). Construction: Industry Series: 

Preliminary Detailed Statistics for Establishments: 2007.

As shown in the first column, the direct cost of sales represents about $0.76 per dollar 

sales revenue to the general contractor. Labor expenses represent $0.08 per dollar sales revenue, 

occupancy expenses represent $0.01 per dollar sales revenue, other operating expenses represent 

$0.03, and profit makes up $0.12 per dollar sales revenue.

DOE converted these expenses per dollar sales into revenue per dollar cost of goods sold, 

by dividing each figure in the first data column by $0.76. The data in column two show that, for 

every $1.00 the general contractor spends on equipment costs, the general contractor earns $1.00 

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in sales revenue to cover the equipment cost, $0.10 to cover labor costs, $0.01 to cover 

occupancy expenses, $0.04 for other operating expenses, and $0.15 in profits. This totals to 

$1.31 in sales revenue earned for every $1.00 spent on equipment costs. Thus, the general 

contractor baseline markup (MUGCONTRACT_ BASE) is 1.31.

DOE was also able to use the data in column two of Table 6.6.10 to estimate the 

incremental markups, after classifying the costs as either invariant or variant. At one extreme, if 

all of the other costs scale with the equipment price (i.e., all costs are variant), the increase in 

general contractor price will be $1.48, implying that the incremental markup is 1.48, or the same 

as the baseline markup. At the other extreme, if none of the other costs are variant, then a $1.00 

increase in the equipment price will lead to a $1.00 increase in the general contractor price, for 

an incremental markup of 1.0. DOE believes the labor and occupancy costs are invariant, while

the other operating costs and profit to scale with the equipment price (i.e., are variant). In this 

case, for a $1.00 increase in the equipment price, the general contractor price will increase by 

$1.19, giving a general contractor incremental markup (MUGCONTRACT_INCR) of 1.19.

6.7 SALES TAX 

The sales tax represents state and local sales taxes that are applied to the consumer price 

of the equipment. The sales tax is a multiplicative factor that increases the consumer equipment 

price.

DOE derived state and local taxes from data provided by the Sales Tax Clearinghouse.15

These data represent weighted averages that include county and city rates. DOE then derived 

population-weighted average tax values for each Census division and large state, as shown in 

Table 6.7.1 below. The average sales tax presented in the bottom row of the table is the weighted 

average accounting for commercial building floor space with packaged cooling by Census 

division, calculated using CBECS 2003. Detailed sales tax data by each state can be found in 

Appendix 6A.4.

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Table 6.7.1 Average Sales Tax Rates by Census Division and Large State

Census Division/State Tax Rate

New England 6.91%

Mid Atlantic 8.01%

East North Central 7.47%

West North Central 6.44%

South Atlantic 5.68%

East South Central 7.65%

West South Central 6.50%

Mountain 7.09%

Pacific 8.13%

New York 8.40%

California 8.45%

Texas 7.90%

Florida 6.65%

Average 7.16%

Source: The Sales Tax Clearinghouse at https://thestc.com/STRates.stm(Accessed March, 2014)

6.8 OVERALL MARKUPS 

The overall markup for each distribution channel is the product of the appropriate 

markups, as well as sales tax in the case of replacement applications. These values are provided 

for each capacity of CUAC in Table 6.8.1 through Table 6.8.3. 

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Table 6.8.1 Summary of Overall Markups – Small (7.5 Tons)

Distribution Channel 

Segment

Replacement New Construction

Baseline 

Markup

Incremental 

Markup

Baseline 

Markup

Incremental 

Markup

Manufacturer 1.30 1.30 1.30 1.30

Wholesaler 1.36 1.10 1.36 1.10

Mechanical Contractor 

(large/small)

1.38 / 1.58 1.10 / 1.26 1.30 / 1.50 1.04 / 1.20

General Contractor 

(new construction only) -- -- 1.31 1.20

Sales tax 

(replacements only)

1.07 1.07 -- --

Overall Markup

(large/small contractor)

2.60 / 2.99 1.70 / 1.94 3.00 / 3.47 1.78 / 2.06

Table 6.8.2 Summary of Overall Markups – Large (15 Tons) 

Distribution Channel 

Segment

Replacement New Construction

Baseline 

Markup

Incremental 

Markup

Baseline 

Markup

Incremental 

Markup

Manufacturer 1.34 1.34 1.34 1.34

Wholesaler 1.36 1.10 1.36 1.10

Mechanical Contractor 

(large/small)

1.38 / 1.58 1.10 / 1.26 1.30 / 1.50 1.04 / 1.20

General Contractor 

(new construction only) -- -- 1.31 1.20

Sales tax 

(replacements only)

1.07 1.07 -- --

Overall Markup

(large/small contractor)

2.68 / 3.08 1.75 / 2.00 3.10 / 3.58 1.84 / 2.12

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Table 6.8.3 Summary of Overall Markups – Very Large (30 Tons) 

Distribution Channel 

Segment

Replacement New Construction

Baseline 

Markup

Incremental 

Markup

Baseline 

Markup

Incremental 

Markup

Manufacturer 1.41 1.41 1.41 1.41

Wholesaler 1.36 1.10 1.36 1.10

Mechanical Contractor 

(large/small)

1.38 / 1.58 1.10 / 1.26 1.30 / 1.50 1.04 / 1.20

General Contractor 

(new construction only) -- -- 1.31 1.20

Sales tax 

(replacements only)

1.07 1.07 -- --

Overall Markup

(large/small contractor)

2.82 / 3.24 1.84 / 2.11 3.26 / 3.77 1.93 / 2.23

6.8.1 Estimation of National Account Markups 

DOE derived markups for national accounts through a weighting of the overall markups 

estimated for the other distribution channels. National accounts markups are estimated 

separately for replacement and new construction applications. To capture the price savings 

realized from equipment purchased through national accounts, DOE applies a national account 

markup one half of that of a typical chain of distribution (Table 6.8.4).

Table 6.8.4 National Account Markups

Equipment Market Baseline 

Markup

Incremental

Markup

Small (7.5 tons)

New Construction 2.14 1.47

Replacement 1.92 1.42

Large (15 tons)

New Construction 2.20 1.50

Replacement 1.96 1.42

Very Large (30 tons)

New Construction 2.28 1.56

Replacement 2.04 1.50

6-22
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1. Heating Air Conditioning & Refrigeration Distributors International, 2010 Profit Report, 

2010. 

2. Air Conditioning Contractors of America, 2005 Financial Analysis for the HVACR 

Contracting Industry, 2005. 

3. U.S. Census Bureau, Data set for Sector 23, EC0723A1, Construction: Geographic Area 

Series, Detailed Statistics for Establishments, 2007. 

4. U.S. Census Bureau, Data set for Sector 23: EC0723I1, Construction: Industry Series, 

Preliminary Detailed Statistics for Establishments: 2007. 2007. 

5. U.S. Census Bureau, Manufacturing Industry Series: Detailed Statistics for the United 

States: 2007. Air-Conditioning and Warm Air Heating Equipment and Commercial and 

Industrial Refrigeration Equipment Mnufacturing. Data set for Sector 31: EC073111 

2007. 

6. U.S. Census Bureau, Wholesale Trade: Industry Series: Preliminary Summary Statistics 

for the United States: 2007. HVAC Equipment Merchant Wholesaler. Data set for Sector 

42: EC0742111, 2007. 

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Establishments: 2007. New Single-Family General Contractors, New Multifamily 

Housing Construction (Except Operative Builders), New Housing Operative Builders 

Residential., 2007. 

9. U.S. Census Bureau, Plumbing, Heating, and Air-Conditioning Contractors. Sector 23: 

238220. Construction: Industry Series, Preliminary Detailed Statistics for 

Establishments, 2007., 2007. 

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Statistics by Concentration of Largest Firms for the United States: 2007. Data set for 

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11. University of Maryland University College, Note on Industry Structure, 2002. (Last 

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<http://info.umuc.edu/mba/public/AMBA607/IndustryStructure.html>

12. QuickMBA, Industry Concentration, 2010. (Last accessed February, 2013.) 

<http://www.quickmba.com/econ/micro/indcon.shtml>

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13. Pindyck, R. and D. Rubinfeld, Microeconomics. 2000. Prentice Hall.

14. Security Exchange Commission, SEC 10-K Reports, 2006-2011. <http://www.sec.gov/>

15. The Sales Tax Clearinghouse, <https://thestc.com/STRates.stm>

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