How are excise taxes on cigarettes calculated and deducted from Gross Sales for an Aplus franchise?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
The following are not included in Gross Sales: (a) gasoline, diesel, and other fuel sales (if applicable, when operating a fueling station), (b) the amount of tax imposed by the United States or any city, county, state, or other governmental entity or agency or instrumentality thereof upon or with respect to retail sales of tangible personal property measured by a stated percentage of sales price or gross receipts, whether imposed upon you as a seller or upon the customer as a purchaser; (c) any deposits refunded to customers; (d) the sale price of returned merchandise by customers when the full sale price is refunded either in cash or credit, but this exclusion shall not apply in any instance when the customer, in order to obtain the refund, is required to purchase other property at a price equal to or greater than the amount charged for the property which is returned. For purposes of calculating Gross Sales, refund or credit of the entire amount shall be deemed to be given when the purchase price, less re-handling and restocking costs, is refunded or credited to the customer; (e) lottery and other commissions; (f) money orders (face value); (g) ATM income from fees, commissions, and rentals; (h) money order fees; (i) prepaid product sales and commissions on products from designated supplier; (j) federal, state and local excise taxes on cigarettes. For purposes of this excise tax exclusion, the calculation and deduction of the above taxes shall be calculated based on the tax rate that is in effect on the first day of the month, and is only applicable to cigarette products that are authorized as a part of the APLUS cigarette planograms; (k) car wash and automotive repairs; and (l) proprietary SUNOCO food service businesses and convenience store product offerings from which no royalty is collected in accordance with the terms of the applicable participation agreement.
Source: Item 6 — OTHER FEES (FDD pages 16–28)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, federal, state, and local excise taxes on cigarettes are not included in gross sales. For the purpose of excluding these taxes, the calculation and deduction are based on the tax rate in effect on the first day of the month. This exclusion applies only to cigarette products that are authorized as part of the Aplus cigarette planograms.
In simpler terms, when calculating the total sales for your Aplus franchise, you don't include the excise taxes on cigarettes if those cigarettes are part of the approved Aplus product list. The tax amount you deduct is based on the tax rate at the beginning of each month. This means that if the cigarette tax rate changes during the month, you still use the rate from the first day of that month for your calculations.
This benefits the franchisee by reducing the royalty fees owed to Aplus, as royalty fees are typically calculated as a percentage of gross sales. By excluding these taxes, the franchisee pays royalties on a smaller, more accurate sales figure. However, it's crucial to ensure that only authorized cigarette products under the Aplus planograms are considered for this tax exclusion. Franchisees should maintain accurate records of cigarette sales and tax rates to ensure compliance and accurate royalty payments.