How does 360 Painting handle taxes imposed on payments to them?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
e less than $10,000) pay us $10,000. | | Taxes | Amount required to reimburse us for certain taxes imposed on payments to us | Upon demand | If any payments to us are taxed (not income tax), the Royalty will be increased so that the net payment to us is the same as without the tax. | | Lost Profits | An amount equal to the royalties, marketing fund payments and other fees that you would have paid to us had you operated the Business for the full duration of the term of the Franchise Agreement. | Upon demand | We are entitled to our lost profits if you are terminated for cause or otherwise fail to operate the business for the entire term of the Franchise Agreement. | | Type of Fee | Amount | Due Date | Remarks | |------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Annual Convention | Attendance fee varies (Currently, $1,000). $2,000 if you do not attend, but we may modify the fees on notice to you based on our then current allocated costs. | Upon demand | Attendance fee varies depending on convention location. | | Cost of Enforcement | All costs and expenses, including attorneys' fees | Upon demand | You must reimburse us for all costs and expenses incurred as a result of your default. | | Indemnification | All damages and costs including attorneys' fees | Upon demand | You must defend lawsuits at your cost and hold us harmless against lawsuits arising from your operation of the Business. | | Warranty Service after Transfer | Our cost, plus 15% | After transfer, upon demand | If you transfer the Business and are unable or fail to perform service on warranties you issued as a Franchisee, you must reimburse us our cost to perform the work, plus an administrative charge of 15%. | | Warranty Assurance | $10,000 | On termination or expiration | To ensure that any customer warranties you issued during the term are honored, you must post a bond in an amount equal to 0.5% of your Gross Sales for the 24 months before termination or expiration or (if the amount of the bond would be less than $10,000) pay us $10,000. | | Taxes | Amount required to reimburse us for certain taxes imposed on payments to us | Upon demand | If any payments to us are taxed (not income tax), the Royalty will be increased so that the net payment to us is the same as without the tax. | | Lost Profits | An amount equal to the royalties, marketing fund payments and other fees that you would have paid to us had you operated the Business for the full duration of the term of the Franchise Agreement. | Upon demand | We are entitled to our lost profits if you are terminated for cause or otherwise fail to operate the business for the entire term of the Franchise Agreement. |
NOTES
- Gross Sales.
Source: Item 6 — OTHER FEES (FDD pages 18–21)
What This Means (2025 FDD)
According to 360 Painting's 2025 Franchise Disclosure Document, if any payments to 360 Painting are subject to taxes (excluding income tax), the royalty fee will be adjusted to ensure that 360 Painting receives the same net payment as if the tax did not exist. This means that the franchisee is responsible for covering the cost of these taxes, which are then added to the royalty payments. The amount will be what is required to reimburse 360 Painting for the taxes imposed on the payments to them. This amount is due upon demand.
This arrangement ensures that 360 Painting receives the full amount of its royalty and other fees, regardless of any taxes imposed on those payments. For a franchisee, this means that their royalty expenses could increase depending on the tax laws in their specific location. It is important to note that the franchisee is responsible for these taxes, not 360 Painting.
In addition, the 2025 FDD specifies what is included and excluded from gross sales. Gross sales does not include (i) promotional allowances or rebates paid to Franchisee in connection with its purchase of products or supplies; (ii) sales, use, merchants' or other taxes measured on the basis of the gross revenues of the Business imposed by governmental authorities directly on sales or use and collected from customers, if the taxes are added to the selling price of your goods and services and are in fact paid by you to the appropriate governmental authorities; or (iii) the value of any coupons duly issued and approved by you, or any bona fide discounts or customer refunds approved by us.
Prospective franchisees should consider this potential tax liability when evaluating the overall cost of the 360 Painting franchise. It would be prudent to consult with a tax advisor to understand the specific tax implications in their area and how this policy might affect their profitability.