Are sales taxes collected from customers included in the Gross Sales calculation for a Body20 franchise?
Body20 Franchise · 2025 FDDAnswer from 2025 FDD Document
(b) Gross Sales. "Gross Sales" means all revenue that you receive or otherwise derive from operating the Studio, whether from cash, check, credit or debit card, gift card or gift certificate, or other credit transactions, and regardless of collection or when you actually provide the products or services in exchange for the revenue.
If you receive any proceeds from any business interruption insurance applicable to loss of revenue at the Studio, there shall be added to Gross Sales an amount equal to the imputed Gross Sales that the insurer used to calculate those proceeds.
Gross Sales includes promotional allowances or rebates paid to you in connection with your purchase of products or supplies or your referral of customers.
Gross Sales does not include (i) any bona fide returns and credits that are actually provided to customers and (ii) any sales or other taxes that you collect from customers and pay directly to the appropriate taxing authority.
You may not deduct payment provider fees (i.e., bank or credit card company fees and gift card vendor fees) from your Gross Sales calculation.
Source: Item 23 — RECEIPT (FDD pages 74–251)
What This Means (2025 FDD)
According to Body20's 2025 Franchise Disclosure Document, Gross Sales for the purpose of calculating royalty fees do not include sales or other taxes that a franchisee collects from customers and then remits directly to the appropriate taxing authority. Gross Sales do include all revenue received from operating the studio, regardless of the form of payment (cash, credit, etc.) or when the products or services are provided.
This means that Body20 franchisees will not pay royalty fees on the portion of their revenue that represents sales tax collected on behalf of the government. This is a common practice in franchising, as franchisees are essentially acting as collection agents for these taxes.
However, franchisees must accurately track and report their Gross Sales, as Body20 retains the right to audit these figures. Underreporting Gross Sales by 2% or more can result in the franchisee being charged for the cost of the audit, in addition to paying the underpaid royalties and fees, plus interest. Franchisees are responsible for all taxes, assessments, and government charges levied or assessed on them in connection with their business activities under the Franchise Agreement.