NATSO urged members of the House Ways and Means Committee to recognize the severe economic consequences that could result from repealing or modifying the last-in, first-out (LIFO) accounting method and maintain it as an acceptable inventory accounting method.
Fuel retailers account for their fuel inventory using LIFO, making this an important accounting method for truckstops and travel plazas. However, as the Ways and Means Committee begins to consider comprehensive tax reform proposals, there is concern that the revenue saved by repealing LIFO will be an attractive revenue raiser.
In comments filed April 5 with the House Ways and Means Committee, NATSO said that repealing or modifying LIFO would result in substantial, unfunded tax liabilities for businesses and ultimately lead to an increased number of illiquidity events, job losses and business closures.
In general, businesses must track and account for inventory to determine the cost of goods sold and to determine taxable income. More than one-third of all U.S. businesses, including hundreds of thousands of small and mid-size businesses, utilize LIFO to create a consistent measure of the cost of goods sold and accurately determine their economic performance.
Disallowing its use as an acceptable accounting method would overstate a business’ profits and generate tax liabilities that would decrease the business owner’s ability to replace inventory or to reinvest in the company and create jobs.
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