6-i 

CHAPTER 6. MARKUPS FOR EQUIPMENT PRICE DETERMINATION

TABLE OF CONTENTS

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

6.2 BASELINE, INCREMENTAL, AND OVERALL MARKUPS ........................................ 6-2

6.2.1 Baseline Markups................................................................................................. 6-2

6.2.2 Incremental Markups ........................................................................................... 6-3

6.2.3 Distribution-Channel Market Shares ................................................................... 6-4

6.2.4 Overall Markups .................................................................................................. 6-4

6.3 BASIC ASSUMPTIONS USED TO ESTIMATE WHOLESALER AND 

MECHANICAL CONTRACTOR MARKUPS ................................................................. 6-5

6.4 ESTIMATION OF WHOLESALER MARKUPS ............................................................. 6-6

6.5 ESTIMATION OF MECHANICAL CONTRACTOR MARKUPS .................................. 6-7

6.6 ESTIMATION OF NATIONAL ACCOUNT MARKUPS ................................................ 6-9

6.7 SALES TAX ....................................................................................................................... 6-9

6.8 OVERALL MARKUPS.................................................................................................... 6-10

REFERENCES .......................................................................................................................... 6-12

LIST OF TABLES

Table 6.2.1 Distribution Channel Market Shares for Baseline and Higher Efficiency 

Level Automatic Commercial Ice Makers ........................................................... 6-4

Table 6.4.1 Typical Wholesaler Expenses and Markups ............................................................. 6-7

Table 6.5.1 Typical Mechanical Contractor Expenses and Markups .......................................... 6-8

Table 6.7.1 Combined State and Local Sales Tax Rates ........................................................... 6-10

Table 6.8.1 Baseline Markups by Distribution Channel and Overall Weighted Average 

Markup, Including the Weighted Average Sales Tax Multiplier ....................... 6-10

Table 6.8.2 Incremental Markups by Distribution Channel and Overall Weighted Average 

Markup, Including the Weighted Average Sales Tax Multiplier ....................... 6-10
6-1 

CHAPTER 6. MARKUPS FOR EQUIPMENT PRICE DETERMINATION

6.1 INTRODUCTION

One of the most important inputs to the life-cycle cost and payback period analysis and 

the national impact analysis is the projected installed cost of the automatic commercial ice

makers. Installed cost includes equipment purchase price and installation costs. The U.S. 

Department of Energy (DOE) projects the equipment purchase price by using multipliers called 

“markups” that are applied to the manufacturer production cost (MPC) to estimate the customer 

purchase price of the equipment. The manufacturer markup, projected as part of the engineering 

analysis (chapter 5 of the preliminary technical support document), converts the MPC into 

manufacturer selling price (MSP). Distribution channel markups are also applied to the MSP 

based on the distribution channels through which customers currently purchase the equipment. 

DOE determined that customers purchase automatic commercial ice makers through three major 

distribution channels: 

Manufacturer  Customer (National Account Channel) 

Manufacturer  Wholesaler  Customer (Wholesaler Channel) 

Manufacturer  Wholesaler  Mechanical Contractor  Customer (Contractor Channel) 

The three distribution channels can also be viewed as a single-step (national accounts)

channel, a two-step (wholesaler) channel, and a three or more step (contractor) channel. DOE 

recognizes, based on input received at the Framework public meeting, that customers frequently 

rely on third parties—dealers or contractors—for installation and repair work because customers 

rely on the equipment and cannot be in a situation where their equipment is not operating,1

though mechanical contractors, specifically, are not commonly used. Thus, DOE has retained the 

contractor channel as a proxy for the three-step chain. DOE seeks additional data from 

stakeholders concerning appropriate markups for the third step of the contractor channel. (See 

the TSD Executive Summary.)

In addition to the manufacturer markup and distribution channel markups, sales tax on the 

equipment is the final markup that determines the customer purchase price of the equipment. 

Sales tax varies by the state in which the equipment is installed.

DOE calculated an aggregate average markup value for each distribution channel. DOE 

then weight-averaged the three distribution channel markup values using the market share of 

each distribution channel to obtain weighted average distribution channel markups (see section 

6.2.3 for market share estimates). Based on suggestions from stakeholders at the Framework 

public meeting, DOE used the same weighted average distribution channel markup values for all 

automatic commercial ice-making (ACIM) equipment classes.

DOE calculated a weighted average sales tax using the population of each state as the 

corresponding weight. DOE then multiplied the weighted average sales tax by the weighted

average distribution channel markups to estimate overall distribution channel markup values for 

automatic commercial ice makers. 
6-2 

This chapter presents DOE’s methodology for calculating the three distribution channel 

markups, weighted average sales tax, and overall distribution channel markups. 

6.2 BASELINE, INCREMENTAL, AND OVERALL MARKUPS

Baseline markups are the markups that convert the MSP of equipment at the baseline 

efficiency level (Efficiency Level 1) to customer purchase price. Incremental markups are 

markups that convert the projected increase in MSP of equipment at Efficiency Level 2 or higher 

to a projected increase in customer purchase price compared to the price of equipment at 

Efficiency Level 1. Overall markups include the weighted average values of markups based on 

the estimated market share for each distribution channel and the sales tax. 

6.2.1 Baseline Markups

If the baseline equipment is sold through the national account channel, the following 

equation defines the estimated equipment price: 

EQPNATL ACCT BASE = MFGBASE × MUNATL ACCT BASE × (1 + ST)

Eq. 6.1

Where:

MFGBASE = MSP of baseline equipment ($/unit), 

EQPNATL ACCNT BASE = national account price to the customer of baseline equipment ($/unit), 

MUNATL ACCT BASE = national account markup on baseline equipment, and 

ST = weighted average sales tax rate.

If the baseline equipment is sold through the wholesaler channel: 

EQPWHOLE BASE = MFGBASE × MUWHOLE BASE × (1 + ST)

Eq. 6.2

Where:

EQPWHOLE BASE = wholesaler price of baseline equipment ($/unit), and 

MUWHOLE BASE = wholesaler markup on baseline equipment. 

If the baseline equipment is sold to a customer through the contractor channel: 

EQPMECH CONT BASE = MFGBASE × MUWHOLE BASE × MUMECH CONT BASE × (1 + ST) 

Eq. 6.3

Where:

EQPMECH CONT BASE = mechanical contractor price of baseline equipment ($/unit), and

MUMECH CONT BASE = mechanical contractor markup on baseline equipment. 
6-3 

6.2.2 Incremental Markups

Incremental markups are cost multipliers that relate increments in the MSP of equipment 

at higher efficiency levels to the corresponding increments in customer purchase price. DOE 

projects the increment in MSP of equipment at higher efficiency levels by subtracting the MSP 

of equipment at the baseline efficiency level (MFGBASE) from the projected MSP of equipment at 

higher efficiency levels: 

MFGINCR = MFGHIGHER EFF LEVEL−MFGBASE

Eq. 6.4

Where:

MFG INCR = projected increment in MSP of higher efficiency equipment ($/unit), and

MFGHIGHER EFF LEVEL = projected MSP of equipment at higher efficiency level ($/unit). 

If the equipment is sold through the national account channel, DOE projects the increase 

in equipment price using the following equation: 

EQPNATL ACCT INCR = MFGINCR × MUNATL ACCT INCR × (1 + ST)

Eq. 6.5

Where:

EQPNATL ACCNT INCR = projected increment in customer purchase price to the national account 

customer ($/unit), and

MUNATL ACCT INCR = national account incremental markup. 

If the customer acquires the higher efficiency equipment through the wholesaler or 

contractor channels: 

EQPWHOLE INCR = MFGINCR × MUWHOLE INCR × (1 + ST)

Eq. 6.6

Where:

EQPWHOLE INCR = projected incremental wholesaler price ($/unit), and

MUWHOLE INCR = incremental wholesaler markup. 

EQPMECH CONT INCR = MFGINCR × MUWHOLE INCR × MUMECH CONT INCR × (1 + ST) 

Eq. 6.7

Where:

EQPMECH CONT INCR = projected incremental mechanical contractor price ($/unit), and

MUMECH CONT INCR = incremental mechanical contractor markup.
6-4 

6.2.3 Distribution-Channel Market Shares

Table 6.2.1 provides the estimated market shares for the three distribution channels for 

automatic commercial ice makers used for the preliminary analysis. DOE used these distribution

channel market shares to estimate overall markups. DOE obtained the market shares from U.S. 

Census Bureau data for the commercial refrigeration equipment sector, of which automatic 

commercial ice makers comprise one of the component product lines. Stakeholders at the 

Framework public meeting indicated that the majority of automatic commercial ice makers are 

purchased through a three-step distribution channel, consistent with the estimates listed in the 

table. 

Table 6.2.1 Distribution Channel Market Shares for Baseline and Higher Efficiency Level 

Automatic Commercial Ice Makers

National Account Channel Wholesaler 

Channel Contractor Channel

Automatic 

Commercial Ice 

Makers, All

6% 32% 62% 

Source: U.S. Census Bureau, Sector 42: EC0742SXSB01: Wholesale Trade: Subject Series - Misc Subjects: Sales by Class of 

Customer for the United States: 2007, data for NAICS code 423740, Refrigeration equipment and supplies merchant wholesalers. 

Downloaded March 4, 2011.

6.2.4 Overall Markups

DOE estimated overall markup values separately for both baseline and incremental 

markups by combining the weighted-average sales tax with the weighted-average distribution 

channel markups. DOE estimated overall baseline markup values using:

EQPCUST BASE = MFGBASE

× (WTNATL ACCT BASE × MUNATL ACCT BASE + WTWHOLE BASE × MUWHOLE BASE

+ WTMECH CONT BASE × MUWHOLE BASE × MUMECH CONT BASE)

× (1 + ST) 

 = MFGBASE × MUOVERALL BASE

Eq. 6.8

Where:

EQPCUST BASE = customer purchase price for baseline equipment ($/unit),

WTNATL ACCNT BASE = estimated market share of baseline equipment sold through national account 

channel (%),

WTWHOLE BASE = estimated market share of baseline equipment sold through wholesaler channel 

(%),

WTMECH CONT BASE = estimated market share of baseline equipment sold through contractor channel 

(%), and

MUOVERALL BASE = estimated overall baseline markup. 
6-5 

DOE projected overall incremental markups using: 

EQPCUST INCR = MFGINCR

× (WTNATL ACCT INCR × MUNATL ACCT INCR + WTWHOLE INCR × MUWHOLE INCR

+ WTMECH CONT INCR × MUWHOLE INCR × MUMECH CONT INCR) × (1 + ST) 

 = MFGINCR × MUOVERALL INCR 

Eq. 6.9

Where:

EQPCUST INCR = projected increment in customer purchase price of equipment at a higher 

efficiency level compared to baseline equipment ($/unit), 

WTNATL ACCNT INCR = projected market share of higher efficiency level equipment sales through 

national account channel (%), 

WTWHOLE INCR = projected market share of higher efficiency level equipment sales through 

wholesaler channel (%), 

WTMECH CONT INCR = projected market share of higher efficiency level equipment sales through 

contractor channel (%), and

MUOVERALL INCR = overall incremental markup. 

EQPCUST = EQPCUST BASE + EQPCUST INCR

Eq. 6.10

DOE used the overall baseline and overall incremental markups to estimate the baseline 

customer price (EQPCUST BASE) and to project the incremental customer price (EQPCUST INCR). For a 

particular piece of equipment at a higher efficiency level, the projected total price of that 

equipment to the customer (EQPCUST) is the sum of the baseline customer price (EQPCUST BASE) and 

the projected incremental customer price (EQPCUST INCR).

6.3 BASIC ASSUMPTIONS USED TO ESTIMATE WHOLESALER AND 

MECHANICAL CONTRACTOR MARKUPS

DOE based the wholesaler markups on industry balance sheet data and based the 

mechanical contractor markups on U.S. Census Bureau data for the plumbing, heating, and air 

conditioning (PHAC) industry.2 DOE obtained the industry balance sheet data from the Heating, 

Air-conditioning & Refrigeration Distributors International (HARDI), the trade association

representing wholesalers of refrigeration and heating, ventilating, and air conditioning (HVACR) 

equipment.3 DOE compiled the U.S. Census Bureau PHAC data following the same format as 

used for the balance sheet data for wholesalers. These balance sheets itemize the costs incurred 

by firms that supply and install PHAC equipment. DOE estimated the wholesaler and mechanical 

contractor markups based on three key assumptions about ACIM costs: 
6-6 

1. The balance sheets accurately represent the various average costs incurred by firms 

distributing and installing automatic commercial ice makers. 

2. The wholesaler and contractor costs can be divided between (a) costs that vary in 

proportion to the MSP (variable costs) and (b) costs that do not vary with MSP (fixed 

costs).

3. Wholesaler and contractor prices vary in proportion to the wholesaler and contractor 

costs included in the balance sheets.

The basis for the first assumption is that the industry balance sheets itemize costs

incurred by a firm by a number of cost 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 equipment lines (including refrigerators, 

freezers, beverage dispensers, and other related equipment), the data provide the most credible

available information for ACIM distribution costs. 

The basis for the second assumption is that firms must incur some costs regardless of the 

cost of the goods being sold—costs such as sales, accounting and management staff, office 

expenses, depreciation, and many other operating costs do not vary with the MSP. For purposes 

of this analysis, DOE refers to these costs as fixed. Other costs, such as uncollectable accounts, 

bad debts, and profit margins, vary as a function of the total cost of sales, including the cost of 

goods sold. For purposes of this analysis, DOE refers to these costs as variable. 

The basis for the third assumption is that the HVACR wholesaler and contractor industry 

is competitive, while customer demand for ACIM equipment is assumed to be inelastic (i.e., the 

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

large number of HVACR firms listed in the 2007 economic census indicates the competitive 

nature of the market. For example, there are more than 700 HVACR manufacturers,4

 1,300 

wholesalers of refrigeration equipment,5 36,000 commercial and institutional building 

contractors,6 and 91,000 HVAC contractors7 listed in the 2007 census. Following standard 

economic theory, competitive firms facing inelastic demand either set prices in line with costs or 

quickly go out of business.8

6.4 ESTIMATION OF WHOLESALER MARKUPS

Annually, HARDI conducts a confidential survey of its member firms in which 

wholesalers report median data. For what they describe as a typical distributor, HARDI

disaggregates revenues into categories, including direct cost of goods sold (equipment (MSP), 

materials, fuels, and contracted services), labor costs, occupancy costs, other operating costs, and 

profit. Appendix 6A presents the data for a typical HARDI distributor in terms of specific types 

of expenses within these categories. Table 6.4.1 summarizes these expenses in units of expenses

per dollar of sales revenue and revenue per dollar of goods sold. As shown in the first column of 

Table 6.4.1, the direct cost of equipment sold represents $0.734 per dollar of sales revenue. In 

other words, for every $1.00 the typical wholesaler takes in as sales revenue, it pays $0.734 in

direct costs. Labor expenses account for $0.161 per dollar of sales revenue, occupancy expenses 

account for $0.038, other operating expenses account for $0.054, and profit accounts for $0.013 

per dollar sales revenue.
6-7 

Table 6.4.1 Typical Wholesaler Expenses and Markups

Description

Wholesale Firm Expenses or Revenue

Per Dollar

Sales Revenue

Per Dollar Cost 

of Goods Sold

Direct Cost of Equipment Sales: Cost of goods sold $0.734 $1.000

Labor Expenses: Salaries and benefits $0.161 $0.219

Occupancy Expenses: Rent, maintenance, and utilities $0.038 $0.052

Other Operating Expenses: Depreciation, advertising, and insurance $0.054 $0.074

Profit $0.013 $0.018

Baseline Markup (MUWHOLE BASE): Revenue per dollar cost of goods sold * 1.362

Incremental Markup (MUWHOLE INCR): Increased revenue per dollar increase cost of goods sold* 1.091

Source: Heating, Air-conditioning & Refrigeration Distributors International. 2010. 2010 Profit Report (2009 Data). 

* Numbers are rounded and may not add up to the totals.

The last column of Table 6.4.1 shows the data converted from costs per dollar revenue 

into revenue per dollar cost of goods sold. DOE performed this conversion by dividing each cost 

category in the first data column of Table 6.4.1 by $0.734 (i.e., equipment expenditure per dollar 

revenue). The data in this column show that, for every $1.00 the wholesaler spends on equipment 

costs, the wholesaler earns $1.00 in sales revenue to cover the equipment cost, $0.22 to cover 

labor costs, $0.05 to cover occupancy expenses, $0.07 for other operating expenses, and $0.02 in 

profits. This totals to $1.36 in sales revenue earned for every $1.00 spent on equipment costs. 

Therefore, the wholesaler baseline markup (MUWHOLE BASE) is 1.36 ($1.36 ÷ $1.00). 

DOE also used the data in the last column of Table 6.4.1 to estimate the incremental 

markups. The total incremental markup depends on which of the costs in Table 6.4.1 are variable 

and which are fixed. For example, for a $1.00 increase in the manufacturer equipment price, if all 

of the other costs scale with the MSP (i.e., all costs are variable), the increase in wholesaler price 

will be $1.36, implying that the incremental markup is 1.36, or the same as the baseline markup. 

However, if none of the other costs is variable, then a $1.00 increase in the MSP will lead to a 

$1.00 increase in the wholesaler price, for an incremental markup of 1.0. DOE assumed that the

labor and occupancy costs will be fixed and that the other operating costs and profit will scale 

with the MSP (i.e., be variable). In this case, for a $1.00 increase in the MSP, the wholesaler 

price will increase by $1.09. Therefore, the wholesaler incremental markup (MUWHOLE INCR) is 1.09 

($1.09 ÷ $1.00). See appendix 6A for additional details and data used for markup calculations.

6.5 ESTIMATION OF MECHANICAL CONTRACTOR MARKUPS

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

PHAC contractors. This sector includes establishments primarily engaged in installing and 

servicing PHAC equipment, which may include installations, additions, alterations, maintenance, 

and repairs. The U.S. Census Bureau data for the PHAC 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 for the 

PHAC industry as a whole in total dollars, rather than in typical values for the average or 

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

U.S. Census Bureau reported, once converted to percentages, represent revenues and expenses 

for the average or typical contracting business. Table 6.5.1 summarizes the typical expenses for 

mechanical contractors. The first data column of Table 6.5.1 lists expenses per dollar sales 

revenue (appendix 6A contains the full set of data). The direct cost of sales represents about 
6-8 

$0.678 per dollar sales revenue to the mechanical contractor. Labor expenses account for $0.175 

per dollar sales revenue, occupancy expenses account for $0.022 per dollar sales revenue, other 

operating expenses account for $0.039, and profit makes up $0.086 per dollar sales revenue.

Table 6.5.1 Typical Mechanical Contractor Expenses and Markups

Description

Mechanical Contractor Firm 

Expenses or Revenue

Per Dollar

Sales Revenue

Per Dollar Cost 

of Goods Sold

Direct Cost of Equipment Sales: Cost of goods sold $0.678 $1.000

Labor Expenses: Salaries (indirect) and benefits $0.175 $0.258

Occupancy Expense: Rent, maintenance, and utilities $0.022 $0.032

Other Operating Expenses: Depreciation, advertising, and insurance $0.039 $0.058

Net Profit Before Taxes $0.086 $0.127

Baseline Markup (MUMECH CONT BASE): Revenue per dollar cost of goods sold * 1.475

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

sold*

1.184

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

Series: Detailed Statistics for Establishments: 2007; DOE estimates. 

* Numbers are rounded and may not add up to the totals.

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 $0.678. The data in the last column of Table 

6.5.1 show that, for every $1.00 the mechanical contractor spends on equipment costs, the typical 

mechanical contractor earns $1.00 in sales revenue to cover the equipment cost, $0.26 to cover 

labor costs, $0.03 to cover occupancy expenses, $0.06 for other operating expenses, and $0.13 in 

profits. This totals $1.47 in sales revenue earned for every $1.00 spent on equipment costs. This 

results in a mechanical contractor baseline markup (MUMECH CONT BASE) of 1.47 ($1.47÷ $1.00).

DOE was also able to use the data in the last column in Table 6.5.1 to estimate the 

incremental markups by separating the fixed and variable costs. For example, if all of the other 

costs scale with the equipment price (i.e., all costs are variable), the increase in mechanical

contractor price will be $1.47, an incremental markup of 1.47, or the same as the baseline 

markup. However, if none of the other costs are variable, then a $1.00 increase in the equipment 

price will lead to a $1.00 increase in the mechanical contractor price, for an incremental markup 

of 1.0. DOE assumed the labor and occupancy costs are fixed and the other operating costs and 

profit scale with the equipment price (i.e., are variable). In this case, for a $1.00 increase in the 

equipment price, the typical mechanical contractor price will increase by $1.18, giving a 

mechanical contractor incremental markup (MUMECH CONT INCR) of 1.18 ($1.18 ÷ $1.00).

Mechanical contractor costs differ in various regions of the country depending on 

availability of labor, cost of living, and union versus non-union workforce. Because many 

mechanical contractor costs differ systematically by state, DOE characterized the markups 

developed from U.S. Census Bureau data with a probability distribution based on a state-by-state

analysis of U.S. Census Bureau data for PHAC contractors. The state-by-state analysis provided 

a distribution on the relative markups of mechanical contractors in the United States. 

Appendix 6A provides the state markup data that DOE used to characterize the 

mechanical contractor baseline and incremental markups. DOE used the state-level markup data 

in combination with state-level electricity and water prices in the LCC and PBP analyses to 
6-9 

provide additional granularity in the analysis of whether customers are better or worse off at the 

efficiency levels analyzed in this rulemaking. 

6.6 ESTIMATION OF NATIONAL ACCOUNT MARKUPS

National accounts are generally large accounts—large enough to circumvent the 

wholesaler channel and negotiate directly with, and purchase directly from, manufacturers to 

achieve significantly lower equipment prices. The manufacturers, in turn, must cover additional 

expenses related to the distribution of the equipment, but gain in terms of negotiating agreedupon sales volumes with each national account. 

To estimate the price savings realized from equipment purchased through the national 

account distribution chain, DOE assumed that the resulting equipment price increase is one half 

of that realized from distribution through the wholesaler channel. In other words, if the price 

markup resulting from the wholesaler markups is $100, the national account markup is $50. 

Because DOE does not have data suggesting typical values for the actual national account 

markup, it chose a value halfway between the MSP and the wholesaler markup. 

For example, using a baseline MSP of $1,000 for an automatic commercial ice maker

delivered to a restaurant, and a baseline wholesaler markup of 1.36, the resulting baseline 

customer equipment price for sales through a wholesaler (without sales taxes) is $1,360 ($1,000 

× 1.36). The dollar value increase due to the above distribution channel markups is $360 ($1,360 

- $1,000). Under the assumption that national account customers realize equipment price 

increases equal to one half of that through the wholesaler distribution channel, the dollar value of 

the estimated equipment price increase under the national account is $180. The resulting 

equipment price is $1,180 ($180 + $1,000), which results in a national account baseline markup 

of 1.18 ($1,180 ÷ $1,000). Using a value of 1.09 for the wholesaler incremental markup and a 

similar calculation results in a total national account incremental markup of 1.046 ($1,046 ÷ 

$1,000). 

6.7 SALES TAX

Sales tax includes state and local sales taxes that are applied to the customer price of 

automatic commercial ice makers. The sales tax is a multiplicative factor that increases the 

customer equipment price by an amount equal to MSP plus markups multiplied by the sales tax 

rate. DOE derived sales tax rates from the Sales Tax Clearinghouse.

9 Table 6.7.1 lists tax rates 

by state. DOE applied the state-level combined tax rate to the estimated value of state-level 

ACIM shipments to obtain the total purchase cost to a customer located in a given state. 

Sales tax rates range from zero to 9.45 percent, with a mean value of 6.25 percent. DOE 

applied sales taxes to the customer equipment price irrespective of the distribution channel or the 

state in which the customer is located. For the national impact analysis and other national-level 

analyses, DOE calculated a weighted-average, national-level sales tax rate by multiplying the 

relative population of each state by the tax rates listed in Table 6.7.1. The weighted-average,

national-level sales tax rate is 7.26 percent. 
6-10

Table 6.7.1 Combined State and Local Sales Tax Rates 

State Sales Tax State Sales Tax State Sales Tax

Alabama 8.25% Kentucky 6.00% North Dakota 5.85%

Alaska 1.40% Louisiana 8.75% Ohio 6.80%

Arizona 8.15% Maine 5.00% Oklahoma 8.20%

Arkansas 8.20% Maryland 6.00% Oregon 0.00%

California 9.20% Massachusetts 6.25% Pennsylvania 6.40%

Colorado 6.40% Michigan 6.00% Rhode Island 7.00%

Connecticut 6.00% Minnesota 7.20% South Carolina 7.15%

Delaware 0.00% Mississippi 7.00% South Dakota 5.50%

Dist. of Col. 6.00% Missouri 7.25% Tennessee 9.45%

Florida 6.65% Montana 0.00% Texas 8.05%

Georgia 6.95% Nebraska 6.00% Utah 6.70%

Hawaii 4.35% Nevada 7.85% Vermont 6.05%

Idaho 6.05% New Hampshire 0.00% Virginia 5.00%

Illinois 8.20% New Jersey 6.95% Washington 8.80%

Indiana 7.00% New Mexico 6.55% West Virginia 6.00%

Iowa 6.85% New York 8.45% Wisconsin 5.45%

Kansas 8.05% North Carolina 7.85% Wyoming 5.35%

Source: The Sale Tax Clearinghouse, www.thestc.com/STrates.stm. 

6.8 OVERALL MARKUPS

Table 6.8.1 presents the baseline markup values for each distribution channel and the 

overall baseline markup values used for automatic commercial ice makers. Table 6.8.2 presents 

the incremental markup values for each distribution channel and the overall incremental markup 

values. Note that the markups shown for wholesaler/contractor represent the product of the 

wholesaler chain and contractor chain markups (i.e., they are the product of two terms shown 

separately in the equations in section 6.2).

Table 6.8.1 Baseline Markups by Distribution Channel and Overall Weighted Average

Markup, Including the Weighted Average Sales Tax Multiplier 

Wholesaler Wholesaler/

Contractor

National Account

(Mfg Direct) Overall Markup

Channel Mult 1.3624 2.0086 1.1812 1.7522

Sales Tax 1.0726 1.0726 1.0726 1.0726

Overall Multiplier 1.4613 2.1544 1.2670 1.8794

Table 6.8.2 Incremental Markups by Distribution Channel and Overall Weighted Average 

Markup, Including the Weighted Average Sales Tax Multiplier 

Wholesaler Wholesaler/

Contractor

National Account

(Mfg Direct) Overall Markup

Channel Mult 1.0913 1.2925 1.0456 1.2133

Sales Tax 1.0726 1.0726 1.0726 1.0726

Overall Multiplier 1.1705 1.3863 1.1216 1.3014

DOE used the overall markups to estimate the customer price of baseline and higher 

efficiency equipment. For example, if the MSP of a baseline self-contained unit is $1,000, DOE 
6-11

obtained the customer purchase price for this baseline equipment by multiplying the MSP by the 

overall markup value of 1.8794, or $1,879.40. If the incremental MSP of the equipment at a 

higher efficiency level is $100, then DOE obtained the incremental customer purchase price of 

this equipment by multiplying the MSP by the overall incremental markup of 1.3014 to obtain an 

incremental customer purchase price of $130.14. The customer purchase price of this higher

efficiency equipment is the sum of the baseline price and the increment, or $2,009.52 ($1,879.40 

+ $130.14).
6-12

REFERENCES

1. U.S. Department of Energy, Transcripts: Public Meeting on Energy Conservation Standard 

Framework Document for Automatic Commercial Ice-Makers, December 16, 2010, pp. 

165–167. Washington, D.C. 

<http://www1.eere.energy.gov/buildings/appliance_standards/commercial/pdfs/acim_frame

work_public_meeting_transcript_12_16_2010.pdf> 

2. U.S. Census Bureau. 2007 Economic Census, Release Date: 11/24/2009. Sector 23: 

EC0723A1: Construction: Geographic Area Series: Detailed Statistics for Establishments: 

2007. (Last accessed May 28, 2010.) 

<http://factfinder.census.gov/servlet/IBQTable?_bm=y&-ds_name=EC0723A1&-

NAICS2007=238220&-_lang=en.> 

3. Heating, Airconditioning & Refrigeration Distributors International. 2010 Profit Report 

(2009 Data). 2010. Columbus, OH. 

4. U.S. Census Bureau. 2007 Economic Census, Release Date: 10/30/2009, Sector 31: 

EC0731I1: Manufacturing: Industry Series: Detailed Statistics by Industry for the United 

States: 2007. Air-Conditioning, Refrigeration, and Forced Air Heating Manufacturing. 

(Last accessed March 2, 2011.) <http://factfinder.census.gov/servlet/IBQTable?_bm=y&-

fds_name=EC0700A1&-geo_id=&-_skip=300&-ds_name=EC0731I1&-_lang=en > 

5. U.S. Census Bureau. 2007 Economic Census, Release Date: 11/24/2009, Sector 42: 

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