Gas Station and Fuel Retail Accounting in California

Because nothing on a standard P&L confirms that the gallons agree — it records fuel purchases in dollars and fuel sales in dollars. Your fuel cost is only real once three gallon counts match: delivered per the delivery tickets, pumped per the dispenser counters, and on hand per the tank gauge. Until then the margin is a guess, usually distorted by deliveries booked in the wrong month, prepaid sales tax buried in fuel cost, or card fees subtracted from fuel sales.

Three: the state excise tax, prepaid sales tax collected by your fuel supplier, and the underground storage tank fee. For July 2026 through June 2027, the excise tax is $0.634 per gallon on gasoline and $0.482 on undyed diesel; the prepaid sales tax is $0.080 per gallon on gasoline and $0.425 on diesel, and you claim that prepaid amount back as a credit on your sales tax return; the tank fee is $0.02 per gallon dropped into your underground tanks. Sales tax is then calculated on a price that already includes the excise taxes — 13 percent on diesel, 2.25 percent plus district taxes on gasoline — so you are paying tax on tax (CDTFA Regulation 1598). Every one of these rates resets on July 1, and we re-check them each cycle.

It works backward from your purchases: the auditor totals your supplier invoices and the prepaid sales tax credits you claimed, adjusts for what is in the tanks, and rebuilds what you should have sold. If the rebuilt figure beats what you reported, the difference is assessed — and the burden of disproving it falls on you. Unexplained tank variance is the auditor's fastest lever, which is why a monthly gallon reconciliation matters long before an audit letter arrives. The full process is on our CDTFA sales tax audit defense page.

Often, yes — federal law makes a qualifying retail motor fuels outlet 15-year property instead of 39 (IRC 168(e)(3)(E)(iii)). Your building qualifies if it passes any one of three tests: 50 percent or more of the revenue generated from the property comes from fuel sales, 50 percent or more of the floor space serves fuel sales, or the building is 1,400 square feet or smaller. Pumps and registers depreciate even faster as equipment, and canopies, paving and tanks count as land improvements rather than part of the building.

Not necessarily — but the restaurant's sales count against you on the revenue test. Rev. Rul. 97-29 says you must count every business operating in the building: if you rent part of your building to a taco shop, its sales count toward the 50 percent test too, even though you do not run it. The other two tests still stand on their own — 50 percent of floor space serving fuel sales, or a building of 1,400 square feet or less — and passing any one of the three qualifies the building. Run all three and keep the measurements you relied on.

Because the card fee is a percentage of the sale, and a fuel sale is large while its profit is thin. On a big fill-up the processor's cut can eat a real share of your pennies-per-gallon margin — and when street prices spike, the fee grows while the margin does not. Two bookkeeping rules follow: card fees belong in expenses, not subtracted from fuel sales, and card settlement statements must be matched to register sales, because deposits, chargebacks and fleet card programs never land the same day the fuel was sold.

It is the required split of your purchase price across land, building, equipment and goodwill — and it locks in your depreciation for decades. Buyer and seller must report the same split to the IRS on Form 8594, so negotiate it into the purchase agreement before closing rather than calculating it after. The building may qualify for the 15-year fuel outlet treatment, land gets no depreciation at all, and goodwill writes off over 15 years. One more closing step: get a tax clearance certificate from CDTFA before the money is released, or you can inherit the seller's unpaid sales tax.