 A gross-up clause is also used when a payment that is made will be subject to taxes and the payer makes an additional payment to indemnify the recipient against the taxes – that payment will also be subject to tax.The sequence of additional payment, tax calculation, additional payment continues until the recipient receives the same amount, net of all the taxes, as would have been received had there been no taxes.The formula for calculating the total amount of a grossed-up payment is (the amount of the payment) divided by (1 minus the tax rate).