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At a time when gasoline prices averaged $1.65 per gallon in June, according to the Energy Information Agency (EIA), the IRS quietly revised its field investigative methods so its auditors could look for increased sources of unreported income at gasoline stations and convenience stores.
According to a 43-page IRS document obtained by NetCompliance.com, the IRS claimed that gas station operations were cash businesses plagued with "disorganized" records. The agency instructed auditors to take a variety of steps to catch dishonest retailers such as:
* Search "Order Cash Transactions Reports" and "Information Returns Processing" plus Social Security Numbers and Taxpayer ID numbers (TIN) to determine unreported income.
* Look for sources of additional income, where taxes may not have been paid, such as cigarette and beverage sales, vending machines, towing services -- even cars for sale on store property.
* Search real estate sales records at county courthouses because "the taxpayer has sold either the gas station or other properties and the capital gain has not been reported."
* Check gasoline sales records for both full and self-service because full-service prices are 30 to 50 cents more per gallon.
*Check the parts markup on service bay parts used as well as markups on batteries and oil.
* Check whether the owner uses "blending," or mixing one type of gas with a different fuel to stretch sales per gallon.
Interestingly, even though this IRS document is dated in June 2001, NetCompliance did not find it in the IRS files until a few weeks ago. "With the regulatory landscape changing because of increased information reporting requirements, more companies should prepare to use the Web as the medium of choice to collect, store and publish regulatory compliance knowledge and adhere to government rules online," said NetCompliance CEO, Krish Krishnan.
Calls to the IRS by Convenience Store News were not immediately returned.