What sales taxes are excluded from the Gross Revenue calculation for a Cilantro Taco Grill franchise?
Cilantro_Taco_Grill Franchise · 2024 FDDAnswer from 2024 FDD Document
"Gross Revenue" includes all sales of every kind and nature at or from your Franchised Business location or made pursuant to the rights granted to you by the Franchise Agreement, without deduction for delivery costs or other write-offs. "Gross Revenue" does not include (i) any sales tax or similar taxes collected from customers and turned over to the governmental authority imposing the tax, (ii) properly documented refunds to customers, (iii) properly documented promotional discounts (i.e. coupons) and (iv) properly documented employee discounts (limited to 3% of Gross Revenue). Gross Revenue does not include gift card purchases, at the time of purchase, but Gross Revenue does include the redemption amount of purchases made by gift card. If you do not report revenues for any week, then we will collect 120% of the last Royalty Fee collected and settle the balance the next period in which you report revenue. You are required to set up authorization at your bank to allow us to electronically transfer funds from your bank account to our bank account. Interest and late fees will apply to any late payments or electronic funds transfer requests denied due to insufficient funds.
Source: Item 6 — OTHER FEES (FDD pages 12–18)
What This Means (2024 FDD)
According to Cilantro Taco Grill's 2024 Franchise Disclosure Document, the calculation of Gross Revenue excludes any sales tax or similar taxes collected from customers that are then turned over to the appropriate governmental authority.
This means that when calculating the revenue on which Cilantro Taco Grill bases royalty fees and other payments, franchisees do not include the amount of sales tax they collect on behalf of the government. This is a standard practice in franchising, as the franchisee is simply acting as a collection agent for these taxes, and they are not considered part of the business's actual income.
In addition to sales taxes, Gross Revenue also excludes properly documented refunds to customers, properly documented promotional discounts (i.e., coupons), and properly documented employee discounts (limited to 3% of Gross Revenue). Gift card purchases are not included at the time of purchase, but the redemption amount of purchases made by gift card is included in Gross Revenue.