How does Gold Star handle sales tax collected from customers in its accounting policy?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
Sales by Company-operated restaurants were recognized when food and beverage items were sold and were reported, net of sales taxes collected from guest that are remitted to the appropriate taxing authorities.
Presentation of Sales Tax
Various states impose a sales tax on the Company's sales to nonexempt customers. The Company collects that sales tax from customers and remits the entire amount to the state. The Company's accounting policy is to exclude the tax collected and remitted to the state from revenues and cost of sales.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the company's accounting policy is to exclude sales tax collected from customers and remitted to the state from revenues and cost of sales. This means that when Gold Star restaurants, whether company-operated or franchised, sell food and beverage items, they collect sales tax from customers as required by various state laws. However, Gold Star does not consider this collected sales tax as part of its revenue or cost of sales.
Instead, Gold Star acts as a collection agent for the state, collecting the sales tax from customers and then remitting the entire amount to the appropriate taxing authorities. This is a common practice in the restaurant and retail industries, as the sales tax is not considered income for the business but rather a pass-through payment to the government.
For a prospective Gold Star franchisee, this accounting policy means that the sales figures reported for royalty and advertising fee calculations will be net of sales taxes. The franchisee is responsible for properly collecting and remitting sales taxes to the relevant state authorities, but these amounts do not affect the franchisee's revenue or royalty obligations to Gold Star. This ensures that franchisees are not paying royalties on funds collected for the state government.