Shigenori Kudo and Motomi Kudo, et al. - Page 75

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          gross profit is the "purchase markup".  He indicated that in                
          California restaurants markups range from 125 percent to 225                
          percent, depending upon the quality of the restaurant, with                 
          higher grade restaurants having higher percentage markups.                  
          According to Shimmon, for a sales tax audit the California State            
          Board of Equalization uses a yardstick of a 100-percent markup on           
          food purchases to test the accuracy of total reported sales.  On            
          the basis of data from the income tax returns of Toraya and the             
          Takaos, Shimmon calculated the following purchase markups for               
          Toraya's restaurants and the Takaos' Fillmore Street restaurant             
          to be as follows:                                                           
                Purchases Markup                                                      
          Year               Toraya          Fillmore St.                             
          1988                171%               186%                                 
          1989                179                178                                  
          1990                194                186                                  
          1991                219                173                                  
               Additionally, Shimmon stated that according to the Golden              
          Gate Restaurant Association, normal cash sales reported are only            
          30 percent of total sales.  For the restaurants in issue, Shimmon           
          calculated that their reported cash sales equaled the following             
          percentages of total reported sales:                                        
          Year              Percentage                                                
          1988                  60%                                                   
          1989                  64                                                    
          1990                  61                                                    
          1991                  61                                                    
               Shimmon concluded that the restaurants' ratio of gross                 
          profit to cost of sales and the restaurants' ratio of cash sales            




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