Gasoline Sales

[Guest djsimonetti]

501©(3) hospital located in remote area purchase gas and stores in tanks. It allows employees to purchase gas at cost + 10% because alternative sources of gas in the area are scarce and close early. The hospital does not make a profit on the sales because the related expenses easily exceed the gross margin.

The price to the employees is sometimes a little higher and sometimes a little lower than "market". Can any discount be excluded as a working condition fringe, de minimis benefit or otherwise?

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[Guest Harry O]

Obviously can't use the qualified employee discount rules (hospital not in business of selling gasoline) or the working condition fringe rules (hard to see how the purchase of gas primarily for personal reasons -- e.g., commuting, driving on weekends, etc. -- would meet the section 162 deduction rules). Your best bet is the deminimis rules, but you may have problems there depending on the frequency of purchases, the dollar amounts involved, etc.

Why not simply charge a price roughly equal to the FMV of gasoline in the geographic area? There is no imputed income as long as the employee is paying fair value (the employer's cost is *not* relevant to determine FMV). This shouldn't be too burdensome for employees and the ability to gas-up at the worksite round-the-clock may be sufficiently beneficial to keep employees happy n/w/s the FMV cost.