A commission is pay based on performance, such as a percentage of sales revenue or the number of units a salesman moves. A bonus is extra pay given for exceptional performance. As far as the Internal Revenue Service is concerned, there's not much tax difference between them.

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The Tax Differences Between a Bonus and a Commission by Michael Marz ; Updated February 08, 2018 Whether your employer pays you a bonus for meeting certain goals or offers a commission for each client you bring in the door or for every sale you make, both types of compensation are taxable.

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Bonus Plan or Commission Plan? By Andris A. Zoltners, Prabhakant Sinha, Sally Lorimer and Stephen Redden, ZS Associates. Both bonus and commission plans are common sales incentive compensation approaches to attract, motivate and retain salespeople, but how should firms decide which is the most suitable?

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A commission is a form of payment that is usually a percent of the business’ profit. For example, in a retail store the worker might receive 10 percent of each sale made or may be paid an hourly rate plus 5 percent commission for every sale made.

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The biggest differences between commission and bonus plans are the payment structure and how much sales reps earn. Commissions: In commission plans, the total compensation amount will vary based on individual sales rep performance.

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