Are sales taxes included in the Gross Sales calculation for Cinch I.T. franchisees?
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, gross sales include all revenue and income from the sale of services and products to clients, regardless of whether the payment is received in cash, services, credit, or other forms. This broad definition includes sales made at or from the franchised business. For Cinch I.T. franchisees, this means that all income sources related to the business are generally subject to royalty calculations.
However, the FDD specifies that franchisees can deduct certain items from their gross sales under specific conditions. Specifically, the amount of all sales tax receipts or similar tax receipts which, by law, are chargeable to clients can be deducted, but only if these taxes are separately stated when the client is charged and if the taxes are paid to the appropriate taxing authority. Additionally, franchisees can deduct the amount of any documented refunds, charge backs, credits, and allowances given in good faith to clients.
This means that Cinch I.T. franchisees are responsible for accurately tracking and reporting their gross sales, while also ensuring that any deductions for sales taxes or client refunds meet the criteria outlined in the Franchise Agreement. Accurate record-keeping is essential to avoid potential issues during audits, which could result in additional costs and interest on underpayments if any understatement of gross sales is discovered.