Excluding Online Sales from Store's Gross Sales

March 19, 2012
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Q: I recently created a new Web site for my store. I’ve decided to allow shoppers to buy merchandise online from the Web site and then pick it up from my store in the mall. If I allow shoppers to pick up and pay for merchandise in this manner, can I exclude these sales from store’s gross sales for purposes of calculating percentage rent?

A: Probably not. Check whether the “gross sales” definition in your lease specifically excludes Internet sales or whether these sales—including those made through a Web site but fulfilled at your space—are included in gross sales. Although newer leases often have language that says Internet sales are included in gross sales, older leases and their definition of gross sales may not address Internet sales.

Typically, to maximize the amount of percentage rent it collects, a mall owner will want all sales that have any “nexus—that is, connection—to a tenant’s space to be included in the tenant’s gross sales. If the owner or property manager suspects that you’re improperly excluding Internet order/in-store pickup sales from your gross sales, it will probably check whether your Web site permits in-store pickup of merchandise bought online—or simply ask a salesperson about it.

If your lease requires such sales to be included in your gross sales and you’re not doing so, you’re violating your lease. And if the owner suspects as much—or that you’re underreporting such sales, it’s likely to audit you.