Are sales taxes included in the Gross Sales calculation for a 360 Painting franchise?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
Moreover, Gross Sales shall include all commissions, finder's fees, referral fees, construction management fees or other compensation received by Franchisee arising in any way from the operations of the Business. (For purposes of this paragraph, the term "Franchisee" includes its owners and officers as well as any business entity through which the Business is operated.) 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, provided that the taxes are added to the selling price of Franchisee's goods and services and are in fact paid by Franchisee to the appropriate governmental authorities; or (iii) the value of any coupons duly issued and approved by Franchisor, or any bona fide discounts or customer refunds approved by Franchisor.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to the 2025 FDD, Gross Sales for a 360 Painting franchise does not include 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. However, this exclusion applies only if the taxes are added to the selling price of the franchisee's goods and services and are in fact paid by the franchisee to the appropriate governmental authorities.
This means that a 360 Painting franchisee does not have to include these specific types of taxes when calculating their Gross Sales, which is beneficial because franchise fees and other payments to the franchisor are often based on a percentage of Gross Sales. By excluding these taxes, the franchisee pays fees on a smaller revenue base, reducing their overall costs.
However, it is critical that the franchisee properly collects and remits these taxes to the appropriate governmental authorities to qualify for the exclusion. Failure to do so could result in the taxes being included in the Gross Sales calculation, increasing the franchisee's financial obligations to 360 Painting. Additionally, the franchisee must ensure that the taxes are separately added to the selling price and clearly identified to customers.