How to buy a gas station (and what to check underground)
Short answer
A gas station is two businesses on one property: fuel, which brings high revenue at a thin margin per gallon, and the convenience store, which usually earns most of the gross profit. When buying one, verify gallons sold and margin per gallon from fuel supplier invoices and pump data, inside sales and margins from the POS, and read the fuel supply agreement (branded or unbranded, term, volume commitments, rebate clawbacks). Then the environmental side: underground storage tanks, their age and compliance, leak history, and a Phase I environmental assessment.
Gas stations show big revenue numbers that mean little on their own. The profit is in the store, the risk is in the ground, and the fuel contract decides your flexibility.
Gross profit by source
Illustrative example, not a real station
A station sells 1,000,000 gallons a year at an average margin of $0.25 a gallon: $250,000 of fuel gross profit on maybe $3 million or more of fuel revenue. Inside sales of $900,000 at a 30% blended margin produce $270,000 of gross profit. Lottery commissions and other income add a little. The store, with under a third of the revenue, produces over half the gross profit.
Worked example: gallons from three independent records
Fuel is the one product you can check three ways without trusting the seller's books: delivery invoices from the supplier, pump totalizer readings and tank level readings. Over a year, gallons delivered should equal gallons sold plus or minus the change in tank inventory, with a small allowance for temperature and measurement.
Illustrative example, not a real station
Supplier invoices show 1,012,000 gallons delivered over twelve months. Tanks held 18,000 gallons at the start and 24,000 at the end, so 6,000 more gallons are sitting in the ground. Gallons sold should be 1,012,000 − 6,000 = 1,006,000. Pump records show 1,004,500 gallons, a gap of 1,500 gallons, about 0.15%. That's within the range you'd expect from measurement. If the gap were 20,000 gallons, you'd want the release detection records and a tank tester before going any further. Then multiply verified gallons by the margin per gallon from invoices (selling price less delivered cost, after card fees) to check fuel gross profit.
Environmental checks
- Tank registrations, ages, materials, and upgrade history.
- Leak detection records, inspections and any violations.
- Past releases, cleanups and closure letters.
- Financial responsibility (insurance or state fund coverage) for tanks.
- Phase I environmental site assessment; Phase II if recommended.
See EPA's UST program resources; state agencies usually administer tank rules.
Contracts and other checks
- Fuel supply agreement: brand, term, minimum volumes, incentives and clawbacks, assignability.
- Pump data and fuel delivery invoices matched to reported gallons.
- POS data, card processor statements (note fuel card fees), deposits.
- Tobacco, lottery and alcohol licences.
- Canopy, pumps, dispensers and compliance upgrades.
For the store side in more detail, see buying a convenience store.
Tanks: the liability under the asset
Underground storage tank systems are regulated under EPA's technical standards in 40 CFR Part 280, generally administered by state agencies. The rules cover release detection, spill and overfill prevention, corrosion protection, periodic testing and inspections, operator training and financial responsibility: owners must show they can pay for cleanup and third-party damage, through insurance or a state fund where available. Ask for the registration of every tank, its install date and construction, the last several years of release detection and test results, inspection reports, any violations, and the financial responsibility documents. A prior release with a closure letter is common and manageable; an open release, or no closure documentation, is a reason to stop and get specialist advice. Lenders will usually require a Phase I environmental site assessment, and a Phase II with soil or groundwater sampling if the Phase I recommends it.
Store licences that don't transfer
The convenience store side brings its own permits. SNAP (EBT) authorization is issued to the owners named on the store's permit, so a new owner applies for its own authorization before accepting EBT; ask the seller whether the store has ever had a SNAP violation or penalty, because those can complicate a sale. Tobacco, alcohol and lottery licences are also usually tied to the owner and need new applications or approvals. Plan the timeline so the store isn't trading for weeks without them. Our convenience store guide covers inside sales in more detail.
Red flags specific to gas stations
- Fuel margin claims that don't match invoices. Rebuild margin per gallon from delivery invoices and posted prices, after card fees.
- Old single-wall tanks or piping, or upgrade deadlines the seller hasn't met.
- Release detection records with gaps, or monthly reconciliations showing unexplained losses.
- A supply agreement with large unamortized incentives that you'd have to repay if you rebrand or the deal ends early.
- Inside sales that depend on tobacco, which brings regulatory and demand risk.
- Card fees ignored. Fuel is often paid by card, and fees per gallon can be a large share of the fuel margin.
- Canopy, dispensers and payment terminals overdue for replacement or compliance upgrades.
What moves the value of a gas station
We don't value deals or publish multiples we can't verify. These are the factors appraisers and lenders weigh:
| Factor | Supports a higher value | Pulls it lower |
|---|---|---|
| Gross profit mix | Strong inside sales and margins | Mostly fuel |
| Tanks | Newer, compliant, clean records | Old systems, past releases without closure |
| Supply agreement | Flexible, assignable, reasonable volumes | Heavy commitments and clawbacks |
| Site | Corner, good access, owned | Poor access, short lease |
| Competition | Stable | New large stations nearby |
What an SBA lender will check
Gas stations are often financed with the real estate included, under SBA 7(a) or the SBA 504 program for the property. Expect an appraisal of the real estate, an environmental review, verification of tax returns against IRS transcripts, and a close look at the fuel supply agreement. Lenders treat fuel revenue as low quality and look at gross profit, so present the deal that way.
The first 90 days after you buy
Tanks first: confirm release detection and monthly reconciliations continue without a gap, that the financial responsibility coverage is in your name, and that a trained operator is designated as the rules require. Then the store: licences, SNAP authorization and lottery contract in your name, and staff trained on age checks. Reconcile fuel deliveries, pump readings and tank levels every month, and track inside sales by category weekly. Fuel prices will move on their own; inside margin is where your management shows.
Questions to ask the seller
- Can I see twelve months of fuel invoices, pump readings and tank level records?
- How old is each tank and its piping, and when were they last tested?
- Has the site ever had a release, and is there a closure letter?
- When does the fuel supply agreement end, and what incentives would have to be repaid?
- What are inside sales and gross margin by category?
- Any SNAP, tobacco, alcohol or lottery violations?
Frequently asked questions
Where does a gas station make its money?
Often more from inside sales (snacks, drinks, tobacco, lottery commissions) than fuel, because fuel margins per gallon are thin and volatile. Check gross profit by source, not just revenue.
What environmental checks are needed?
Underground storage tank records, compliance and inspection history, leak detection, any past releases and cleanups, and usually a Phase I environmental site assessment, which lenders commonly require.
What's a branded supply agreement?
A contract with a fuel brand or distributor to sell their fuel under their brand, often with minimum volumes, image requirements and incentives that may have to be repaid if the agreement ends early. Check whether it transfers and the terms.
What is wetstock reconciliation?
Comparing fuel deliveries, fuel sold through the pumps and tank level readings over time. Over a month the numbers should balance within a small tolerance. Persistent losses can mean a leak, meter problems or theft; persistent gains can mean meter calibration issues. UST rules require release detection, and these records are one of the best independent checks on gallons sold.
Can a fuel brand end the supply agreement when the station is sold?
Branded supply relationships are often franchises under the federal Petroleum Marketing Practices Act, which limits when a refiner or distributor can terminate or not renew, and the agreement itself sets assignment conditions. Have an attorney who knows fuel agreements read it before the LOI.
How do I check a gas station's inside sales?
POS reports by category, card processor statements and bank deposits, plus purchase invoices from the store's main wholesaler and beverage distributors. Purchases by category, divided by one minus the margin the POS shows, should roughly reproduce sales. Lottery and tobacco can be checked against the lottery commission statements and tax stamp or distributor records.
Sources
- EPA: Underground storage tanks (UST)
- SBA: 504 loans
- SBA SOP 50 10 8.1 (real estate and collateral requirements)
- eCFR 40 CFR Part 280 (UST technical standards and financial responsibility)
- Petroleum Marketing Practices Act, 15 U.S.C. Chapter 55
- ASTM E1527-21 (Phase I environmental site assessment)
- USDA SNAP: Apply to accept SNAP (new owners need their own authorization)
Related guides
General information, not legal, tax, financial or investment advice. Rules and lender practices change; check the linked sources and talk to your attorney, CPA and lender about your deal. Examples with named numbers are illustrations, not real businesses. OKtoBuy's Deal Check does not value businesses or give price opinions.