How does Chesters handle sales tax collected from customers in its revenue recognition?

According to Chesters's 2025 Franchise Disclosure Document, sales tax collected from customers is not included in Chesters's revenue. Instead, Chesters records it as a liability that is due to the respective taxing authorities. This means that when Chesters sells products or services and collects sales tax, the sales tax amount is not considered part of the company's income.

For a prospective Chesters franchisee, this accounting practice means that the revenue figures reported in Chesters's financial statements do not include sales tax. Franchisees should understand that the sales tax they collect from customers will need to be remitted to the appropriate government agencies. This is a standard accounting practice, as sales tax is collected on behalf of the government and is not the company's revenue.

This approach ensures that Chesters's revenue accurately reflects the income it earns from its operations, without inflating it by including amounts that are ultimately passed through to taxing authorities. Franchisees should maintain accurate records of sales tax collected and remitted to comply with tax regulations.