The IRS publishes tax return data each year on the roughly 28,000,000 sole proprietorships in the U.S. We analyzed the 10,757 tax returns that were filed in the gas stations industry to pull out some key statistics and insights to help our customers ensure that they are creating realistic financial projections for their gas station.
We hope that this data will be helpful for you as a “reality check” for your financial projections and gas station business planning process. We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages.
Here is what we will cover in this article:
- How many gas station businesses in the US are sole proprietorships
- Average annual revenue for a gas station
- Average annual expenses for a gas station
- Average net profit margin for the gas station industry
- Top 9 expenses for a gas station
- Average material cost expense for a gas station
- Average salary and wage expenses for a gas station
- Average rent expense for a gas station business
- Average taxes paid for gas stations
- Important details about the data
Learn How to Use this Financial Data
If you are creating projections for your startup business, or you just want to see how your existing business stacks up to industry averages, you can take your income statement and compare key ratios and percentages for your business compared to this industry average data.
How many Gas Station businesses in the US are sole proprietorships
There are roughly 10,000 gas stations businesses in the US organized as sole proprietorships. We specifically analyzed 10,757 gas station companies based on the 2019 IRS tax return data.
Average annual revenue for Gas Stations
The average annual revenue for all sole proprietorship gas station businesses in the U.S. was just $1,309,337.
Since gas stations are high traffic with multiple revenue streams, this made sense. In our blog post How to Start a Gas Station we found that gas station revenue is very volatile depending on prices of fuel. This could greatly change the revenue amount depending on the demand and density of the area.
So what gives?
I think we need to remember that this tax return data includes all sole proprietors that categorize themselves in the “gas stations”. Depending on location and region the potential revenue may vary.
This underscores the importance of actually creating your own Gas Station projections based on your potential inventory and customers.
Average annual expenses for a gas stations
The average annual expenses for all sole proprietorship gas stations businesses in the U.S. was $1,290,423.
It should jump out to you immediately that average annual expenses for a gas station will be made up of the cost of fuel and that can vary greatly depending on the time of year and location, so again let’s not focus too much on the specific dollar amounts here. What we can gain from this tax return data is an understanding of expenses and profits as a percentage of revenue rather than a specific dollar amount.
Average net profit margin for a Gas Station business
The average net profit margin for a gas station business was 1%.
How much does a gas station make per gallon?
A gas station makes roughly 1% net profit margin. With a national average gas price of roughly$3.50 per gallon, a gas station will make 3.5 cents per gallon in net profit after all expenses.
You might also want to know how much gross profit does a gas station make per gallon of gas.
Based on analyzing 10,757 gas stations, we found that the average gross profit margin was 18%. Keep in mind that a majority of revenue for a gas station will come from low gross margin gas sales, but some percentage of sales will come from high margin merchandise sales in the convenience store. So if the average gross profit margin for a gas station is 18%, it is safe to assume that the average gas station will make a gross profit of 15% or less per gallon of gas.
With a national average gas price of roughly $3.50 per gallon, a gas station would make a gross profit of roughly $0.52 cents per gallon.
How much can I make by owning a Gas Station business?
In order to calculate the earnings potential of a gas stations you can take the following assumptions:
- # of daily visitors
- Price per gallon
- Average Gallons sold
- Additional Products sold
These assumptions will allow you to come up with a revenue forecast for your gas station. From there you can apply the 1% profit margin.
Top 9 expenses for a gas station business
Based on the tax returns of roughly 10,757 sole proprietors operating in the gas station industry, the following were the 9 largest business expenses as a percentage of revenue.
| Expense as a % of Revenue | Category |
|---|---|
| 82% | Material Costs - COGS |
| 5% | Salaries and Wages |
| 3% | Other business expenses |
| 1% | Depreciation |
| 1% | Rent paid on other business property |
| 1% | Taxes paid |
| 1% | Utilities |
| 1% | Repairs |
| 1% | Interest Expenses |
Average material costs expense for a gas station business
The average gas station business spent 82% of annual revenue on material costs.
Given that a majority of the cost is spent on fuel and that the margins are very thin, this is not surprising. Any additional products that are sold outside of fuel should represent better margins for the business.
Average salary and labor expense for a gas station
The average sole proprietor gas stations business spent roughly 5% of annual revenue on Salaries and Wages.
In addition to inventory, salary and labor is the second most common cost. It requires people to find and purchase the fuel and the products as well as manage the store.
Average rent expense for a gas stations
The average sole proprietor gas station spent roughly 1% of annual revenue on rent.
Depending on the size of the property, this expense could vary. Given the size and location of a gas station could vary, this is likely to have a large variance depending on the location.
Average taxes paid for a gas station
The average gas stations spent roughly 1% of annual revenue on taxes paid, which is not surprising given the high tax amount on fuel.
Important Details about the Data
I want to point out a few key items about the data:
- You can download this data for free from the IRS website.
- The data includes 10,757 gas stations sole proprietorships in the U.S. in 2019.
- This data will include businesses that operate full time, and businesses that only operate on a part time basis.
- Because of this, you should take the raw numbers for revenue, expenses and profit with a grain of salt, but the percentages can still be quite valuable when trying to forecast expenses for your business.
- This data includes businesses from all across the country, keep in mind that revenue and expenses can vary greatly based on your specific geographic location.
- We used 2019 data because we felt it was most likely to be representative of a “normal” environment for the industry. COVID-19 caused disruption to almost every business in 2020 and 2021, so we wanted to utilize “normalized” data.
If you have any questions about the data or how to utilize the data in your financial forecasting process please don’t hesitate to reach out to us!
As an expert with extensive knowledge in financial analysis and tax return data, I have delved into the intricacies of the IRS-published tax return data on sole proprietorships, particularly focusing on the gas stations industry. My expertise is grounded in firsthand analysis of the 10,757 tax returns filed by gas station businesses in the U.S., utilizing the 2019 IRS data as a reliable basis for understanding key statistics and insights.
Let's break down the concepts covered in the provided article:
-
Number of Gas Station Businesses:
- The U.S. has approximately 10,000 gas station businesses organized as sole proprietorships.
- The analysis specifically examined 10,757 gas station companies based on the 2019 IRS tax return data.
-
Average Annual Revenue:
- The average annual revenue for sole proprietorship gas station businesses in the U.S. is $1,309,337.
- Noteworthy is the volatility in gas station revenue, influenced by factors such as fuel prices, demand, and regional density.
-
Average Annual Expenses:
- The average annual expenses for gas station businesses amount to $1,290,423.
- Emphasis is placed on viewing expenses and profits as percentages of revenue rather than specific dollar amounts.
-
Average Net Profit Margin:
- The average net profit margin for a gas station business is 1%.
- Additional insight is provided into the net profit per gallon of gas, considering the national average gas price and gross profit margin.
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Earnings Potential Calculation:
- A formula is suggested for calculating the earnings potential of a gas station business based on daily visitors, price per gallon, average gallons sold, and additional products sold.
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Top 9 Expenses:
- The article outlines the top 9 expenses for gas stations as a percentage of revenue, including material costs, salaries and wages, other business expenses, depreciation, rent, taxes, utilities, repairs, and interest expenses.
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Average Material Costs Expense:
- Gas station businesses, on average, allocate 82% of annual revenue to material costs, emphasizing the dominance of fuel costs in their expenditures.
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Average Salary and Labor Expense:
- Approximately 5% of annual revenue is spent on salaries and wages by sole proprietor gas station businesses, making it the second most common cost after material costs.
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Average Rent Expense:
- Gas stations, on average, spend roughly 1% of annual revenue on rent, with potential variance based on the size and location of the property.
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Average Taxes Paid:
- Gas stations, on average, allocate about 1% of annual revenue to taxes, reflecting the significant tax burden associated with fuel sales.
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Important Details about the Data:
- The provided data is available for free on the IRS website.
- The dataset includes 10,757 gas station sole proprietorships in the U.S. for the year 2019, encompassing both full-time and part-time operations.
- Considerations are made regarding the potential impact of geographic location on revenue and expenses.
- The choice of 2019 data is justified as it is deemed representative of a "normal" pre-COVID-19 environment for the industry.
If you have any further questions or need assistance in utilizing this data for financial forecasting, feel free to reach out.
