Does Baya Bar have the right to collect sales tax on royalty fees?

According to Baya Bar's 2024 Franchise Disclosure Document, Baya Bar has the right to collect sales or other taxes on royalty fees from franchisees if any state imposes such a tax. This means that if a franchisee's Baya Bar location is in a state that taxes royalty fees, the franchisee will be responsible for paying that tax to Baya Bar, who will then remit it to the appropriate taxing authority.

This is a fairly standard practice in franchising. Sales tax laws vary by state, and some states do apply sales tax to royalty payments. The franchisee should be aware of the potential for this additional cost when projecting their expenses. It is important to note that the obligation to collect and remit sales tax ultimately falls on the franchisee, even though Baya Bar is collecting it on behalf of the state.

Prospective Baya Bar franchisees should investigate the sales tax laws in their state to determine if royalty fees are taxable. They should also confirm with Baya Bar whether they currently collect sales tax on royalties in any states and what their procedures are for doing so. This will help the franchisee accurately forecast their operating costs and avoid any surprises.