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8TH CIRCUIT: I-80 TRUCK STOP TOO BIG TO JUST BE A GAS STATION

May 04, 2005

Sometimes bigger just isn't better. The owners of "the World's Largest Truckstop!" learned that the hard way today from the 8th Circuit.

Size matters in computing tax because of the way gas stations are depreciated under the tax law. A "retail motor fuels outlet" is allowed to write off its buildings over 15 years; other commercial buildings are depreciated over 39 years.

To qualify, the Walcott truck stop would have to have at least 50% of its 50,528 square feet of floor space devoted to petroleum marketing. The I-80 folks told the courts that they crossed the 25,264 ft. threshold as follows:

Chrome Shop / Trucker Store	10,136
First Floor Restrooms	         2,354
Video Game Room			   379
Counters for Gasoline Cashier	 1,313
Storage Area			   502
Trucker Store Offices		   292
Stairs				   158
Corridor			   311
Second Floor (showers, TV Lounge,	
movie theater, phone rooms,	
and office space)		11,573
				______
Total				27,018

They probably felt compelled to leave out the restaurant space for marketing reasons, but having gotten gas there myself, I feel they arguably could have included that, too.

No matter. The court said that the upstairs space didn't count, leaving them well short of the 50% mark:

Iowa 80's position is that the services provided at its building are aimed to attract the professional truck drivers to fuel at its facilities. As such, Iowa 80 contends that those services are used to market petroleum. Iowa 80 explains that because between 70% and 80% of its business is dependent on those services, the floor space those services occupy are "devoted" to the marketing of petroleum. The import of Iowa 80's argument would mean that any service provided at its facility that can be said to "attract truckers" is a service devoted to the marketing of petroleum as contemplated by Congress.

The proper inquiry, however, is a comparison of the services offered by Iowa 80 to the services provided at a traditional service station or other similar markets.

The I-80 Truck Stop at Walcott is quite a place. If you haven't been there, you should take their virtual tour. It has a food court, a retail area larger than many grocery stores, showers, a lounge - everything the over-the-road drivers need, in one place. They also sell gas and diesel. They are to a normal gas station what the Mall of America is to a strip mall.

The I-80 folks argued that the 50% requirement should be interpreted liberally to reflect the realities of their business. The court said that was up to Congress. As a result, they were too big to just be a gas station. Decision for IRS.

Cite: I-80 Group , Inc., and Subsidiaries v. Internal Revenue Service, No. 04-2826.

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