How does Closet Storage Concepts handle use taxes assessed on material purchases?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company's policy is to exclude from its sales all sales taxes assessed to its customers. Currently the Company does not provide goods or services which are subject to sales tax in any of its operational jurisdictions. The Company does pay sales and use taxes on material purchases, and those are presented net. Use taxes assessed on materials purchases are recorded as accrued liabilities on the balance sheet until remitted to the state agencies.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, the company's policy is to exclude sales taxes assessed to customers from its sales. The document states that Closet Storage Concepts does pay sales and use taxes on material purchases, and these are presented net. Furthermore, use taxes assessed on materials purchases are recorded as accrued liabilities on the balance sheet until they are remitted to the state agencies.
For a prospective Closet Storage Concepts franchisee, this means that the cost of materials will include sales and use taxes, but these taxes are accounted for as accrued liabilities until paid to the relevant state agencies. This accounting practice provides a clear record of tax obligations.
This approach is fairly standard, as businesses typically collect sales taxes from customers and remit them to the government, while also paying sales and use taxes on their own purchases. The key takeaway is that Closet Storage Concepts is responsible for managing and remitting these taxes, which impacts its financial reporting and obligations.