Are sales taxes included in Itan's definition of Gross Sales?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
- "Gross Sales" means all gross sums you bill or collect from all goods and services sold, plus all other sums you collect from the operation of your Salon including advertising revenue, sponsorship fees and business interruption insurance proceeds. Gross Sales excludes: (a) sales or use taxes; (b) amounts refunded to customers; (c) revenue from the sale of furniture, fixtures and equipment in the ordinary course of business; and (d) tips paid to and retained by staff members as a gratuity. The Manual may include policies governing
the manner in which proceeds from the sale of gift cards are treated for purposes of calculating Gross Sales. The Manual may also provide details on the calculation of Gross Sales relating to membership fees and qualifying purchases and redemptions by members under a customer loyalty or membership program.
Source: Item 6 — OTHER FEES (FDD pages 11–15)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, Gross Sales are defined as all gross sums billed or collected from goods and services, plus any other sums collected from the salon's operation, including advertising revenue, sponsorship fees, and business interruption insurance proceeds. However, Itan's definition of Gross Sales specifically excludes sales or use taxes, meaning franchisees do not have to pay royalties on the portion of revenue collected to cover sales tax.
This is a favorable term for franchisees, as it reduces the base upon which royalties are calculated. Including sales tax in gross sales would increase the royalty payment, as the franchisee would be paying a percentage of money that is simply being passed through to the government.
In addition to sales taxes, Itan's definition of Gross Sales also excludes amounts refunded to customers, revenue from the sale of furniture, fixtures, and equipment in the ordinary course of business, and tips paid to and retained by staff members as a gratuity. The manual may include policies governing the manner in which proceeds from the sale of gift cards are treated for purposes of calculating Gross Sales, and may also provide details on the calculation of Gross Sales relating to membership fees and qualifying purchases and redemptions by members under a customer loyalty or membership program.