Can a Cinch I.T. franchisee deduct documented refunds from Gross Sales?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
- (2) The term "Gross Sales" will mean and include the total of all revenue and income from the sale of services and products to clients of the Franchised Business or any other source, whether or not sold or performed at or from the Franchised Business and whether received in cash, in services in kind, from barter and/or exchange, on credit (whether or not payment is received), or otherwise. You will deduct from your Gross Sales (but only if they have been included) the amount of all sales tax receipts or similar tax receipts which, by law, are chargeable to clients, if the taxes are separately stated when the client is charged and if the taxes are paid to the appropriate taxing authority. You will also deduct from your Gross Sales the amount of any documented refunds, charge backs, credits and allowances which you give in good faith to clients. All barter and/or exchange transactions to which Franchised Business furnishes services and/or products in exchange for goods or services to be provided to Franchised Business by a
Source: Item 6 — OTHER FEES (FDD pages 14–20)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, franchisees can deduct documented refunds from their gross sales under specific conditions. The FDD defines "Gross Sales" as the total revenue and income from the sale of services and products to clients, regardless of whether the revenue is received in cash, services, credit, or other forms.
However, the franchisee can deduct certain items from Gross Sales, specifically the amount of all sales tax receipts or similar tax receipts which, by law, are chargeable to clients, if the taxes are separately stated when the client is charged and if the taxes are paid to the appropriate taxing authority. Additionally, the franchisee can deduct the amount of any documented refunds, charge backs, credits, and allowances which are given in good faith to clients.
This means that if a Cinch I.T. franchisee provides a refund to a client, and that refund is properly documented, the franchisee can subtract the refund amount from their gross sales when calculating royalties and other fees. This is a common practice in franchising, as it ensures that franchisees are not paying royalties on revenue they did not ultimately retain due to refunds or credits.