Under what circumstances is a City Publications franchisee NOT required to pay taxes to the franchisor?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
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- 2"Gross Sales" means the aggregate of all revenue accrued from the sale of all direct mail advertising and from goods and services and products from all sources in connection with the Franchised Business, whether for check, cash, credit or otherwise, including all proceeds from any business interruption insurance, but excluding all refunds made in good faith, promotional and coupon discounts, and any sales and equivalent taxes which are collected by
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 Franchise Disclosure Document, franchisees are not required to pay sales and equivalent taxes to City Publications when they collect these taxes on behalf of a governmental taxing authority. This means that franchisees act as intermediaries, collecting taxes from customers and remitting them directly to the appropriate government agencies instead of paying those taxes to City Publications.
This arrangement is standard in franchising and retail businesses, where franchisees or business owners are responsible for collecting sales tax and other similar taxes from customers as mandated by state and local laws. The definition of "Gross Sales" clarifies that these taxes are excluded from the revenue on which royalties or other fees payable to City Publications are calculated.
For a prospective City Publications franchisee, this means they need to understand and comply with local tax laws, accurately collect sales taxes, and remit them to the correct authorities. Failure to properly handle sales tax can result in legal and financial penalties, so it's crucial for franchisees to maintain accurate records and stay informed about applicable tax regulations. This also affects the franchisee's accounting practices, as they must track collected taxes separately from their revenue to ensure accurate financial reporting and royalty calculations.