How does Benjamin Franklin Plumbing handle taxes collected from customers in relation to revenue recognition?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue is recognized net of any taxes collected from customers which are subsequently remitted to taxing authorities. These taxes are recorded as a liability when the amounts are billed to franchisees and the liability is relieved when payments are made to the respective taxing authority.
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to Benjamin Franklin Plumbing's 2025 Franchise Disclosure Document, revenue is recognized net of any taxes collected from customers, which are then remitted to taxing authorities. This means that when Benjamin Franklin Plumbing franchisees bill customers, they collect sales taxes or other similar taxes on behalf of the government. These collected taxes are not considered part of the company's revenue.
Instead, Benjamin Franklin Plumbing records these taxes as a liability when they are billed to franchisees. This liability represents the company's obligation to pass those funds on to the appropriate taxing authority. When the company makes the payments to the taxing authority, the liability is then reduced or "relieved."
This accounting practice ensures that Benjamin Franklin Plumbing's reported revenue accurately reflects the income the company earns from its services and products, rather than including amounts it merely collects as an intermediary for the government. This is a standard accounting practice for businesses that collect sales taxes or similar taxes.