For The Standardx franchise, what are 'Transaction Taxes' and who is responsible for paying them?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
"Transaction Taxes" means federal, state, local or foreign (a) sales, use, excise, privilege, occupation or any other transactional taxes, and (b) other taxes or similar exactions, no matter how designated, that are imposed on Hyatt or that Hyatt is required to withhold in connection with the receipt or accrual of amounts payable by Franchisee to Hyatt under this Agreement, excluding only taxes imposed on Hyatt for the privilege of conducting business and calculated with respect to Hyatt's net income (including Royalty Fee income), capital, net worth, gross receipts, or some other basis or combination thereof, but not excluding any gross receipts taxes imposed on Hyatt or its Affiliates for Franchisee's payments intended to reimburse Hyatt or its Affiliates for expenditures incurred for the benefit and on behalf of Franchisee.
In addition to any sales, use and other taxes that applicable law requires or permits Hyatt to collect from Franchisee for providing goods or services under this Agreement, Franchisee shall pay to Hyatt all Transaction Taxes in an amount necessary to provide Hyatt with after-tax receipts (taking into account any additional payments required hereunder) equal to the same amounts that Hyatt would have received under this Agreement if such Transaction Taxes had not been imposed.
Source: Item 18 — OTHER INCOME (LOSS), NET (FDD pages 187–399)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, 'Transaction Taxes' encompass a range of federal, state, local, or foreign taxes related to transactions between the franchisee and franchisor. These include sales, use, excise, privilege, occupation, and other transactional taxes. Additionally, they cover other taxes or similar exactions imposed on The Standardx or that The Standardx is required to withhold in connection with payments from the franchisee.
The only taxes excluded from the definition of 'Transaction Taxes' are those imposed on The Standardx for the privilege of conducting business, calculated based on The Standardx's net income, capital, net worth, gross receipts, or a combination thereof. However, this exclusion does not extend to gross receipts taxes imposed on The Standardx or its affiliates for franchisee payments intended to reimburse The Standardx or its affiliates for expenditures incurred for the benefit and on behalf of the franchisee.
The Standardx franchise agreement stipulates that the franchisee is responsible for paying these 'Transaction Taxes.' Specifically, the franchisee must pay The Standardx an amount necessary to ensure that The Standardx receives after-tax receipts equal to the amounts it would have received if the Transaction Taxes had not been imposed. This arrangement ensures that the tax burden does not reduce the franchisor's expected revenue from the franchise agreement.