I am Indian too, with a father that owned and ran a gas station. (My dad's shop was among the top gas-volume stations in America during his time, I forget exactly how much, but he had a few trophies from the company for it).
They preferred cash during his time because the 2-3% charge was a significant dent in margins. When credit cards started becoming popular, dealers still did not want to take it. So the company encouraged dealers to accept it by promising to refund the charges for a time.
I don't dispute that cheating like what you described happens. I dispute the implication that cheating the IRS is why most businesses prefer cash instead of credit.
What’s your basis for this?
Logically, it seems to fit that the reason cash is preferred is for the illegal aspect of tax dodging/money laundering. Because the numbers don’t add up otherwise.
It’s great that your family is honorable and did the right thing, but it’s just an anecdote, like OP’s. But it doesn’t explain why so many businesses would be able to stay in business doing so.
What's the basis for the converse?
What numbers don't add up?
There doesn’t seem a reasonable reason to be cash only since, even though credit has a 3% hit or whatever, people spend more with credit.
There’s a need for money laundering and that is much easier with cash only businesses.
I do not know about this. Every single gas station that is cash-only, they also allow debit cards which you cannot be used for tax evasion. The main reason is station owner doesn't want to pay processing fees for credit card transactions since margins are so thin.
But if they have a store they will enable CC, Apple Pay, Android Pay, and all other things. This is where the money is. This is my anecdotal experience (from talking with an owner) and this article confirms that.
Why is this relevant?
>The reason gas stations run aggressively on cash [...]
they do? Most of the gas stations I see are pay at the pump, and inside the convenience store I'd say most people are paying with credit/debit.
ATMs, etc...
60% of the 130K-ish gas stations in the USA are Indian owned, but we only make up <1% of the population. (old metrics)
What counts as "heavy"? 5%? 15? 50%? Based on my observations it doesn't look like it's happening at a significant enough scale for it to meaningfully make a dent on gas station profitability numbers.
>ATMs, etc...
Why would someone use an ATM to pay for stuff? I don't think I ever saw a gas station that didn't accept debit. If anything gas stations offer a free "ATM" in the form of "cash back" transactions.
Owning a gas station is on the ... Truck Driver -- Gas Station -- Motel .. spectrum for blue collar immigrants from the subcontinent.
As far as I’m aware neither is gas station business model knowledge hereditary nor is it taught in Indian school textbooks or part of Indian cultural learning.
I don't try to stereotype, but i've heard that the culture in India encourages getting free stuff or paying as little as possible to get the most stuff.
https://www.sundayguardianlive.com/business/indias-culture-f...
The linked article has nothing to do with the discussion here. You are just projecting something else here.
Yes, gas stations make low margin on gasoline.
Also, gas station owners in the < 15 location category are cheating taxes to get there.
Think of them as Mini-Bezoses. :)
I worked at a service station in the early 90s, the owner was honest but going broke. We made $0.10/gallon on average, the sales of cigarettes, chips, and soda kept that station going. We had service bays but as more cars became proprietary and needed dealer service we had less service business. When the US invaded Iraq it really removed any profit that small station owners made from gas.
That station no longer exists, it was removed and in the space is now a small medical office.
If this random HN guy knows this, you can bet the IRS and a variety of state agencies would also know this and target them very effectively.
The reality is that in a business where gross profit margins are around 2% at best, you don’t need to go to tax evasion to understand why they would choose to encourage a payment method that does not incur a 2.6% + 30c cost on every transaction.
The brand name wanted the station to close the service bays and turn that space into a junk food store. The station owner believed in the service bays but really couldn't pull in the business. Had it become a junk food store it would probably still be there.
I do wish the article would cover some of the nefarious aspects of small business sectors in the USA.
This is why I get annoyed when I hear people say "the 'rich' aren't paying their taxes." In fact it's the "poor" -- or rather the people who purport to be poor -- who aren't paying their taxes. Every dime I earn the Government knows about.
But every time I have to do business with a someone who will only accept cash, I see much evidence of shady bookkeeping.
The idea that the IRS (actually state tax agencies since a lot of gas and sales taxes go to states) don’t know about and aggressively target small businesses is fiction.
In fact, the likes of small gas stations falls squarely in the tax evasion targeting sweet spot because they are large enough to draw enough money from in a tax evasion case, but not large enough that they will use up government resources in never ending lawsuits.
This guy 100% misses the boat and is clueless on how the real world works. Such naivete it's painful to read.....
The reason gas stations run aggressively on cash is because they're running two different sets of books a majority of the time.
Same for laundromats, motels, etc...
Now guess which group of people runs these businesses?
I used to ask my father why we didn't go get a "Brown" loan from a group of Indians and then go open a small business.
My father replied "We don't break the law."
He sat me at a Denny's across from a gas station, he told me to watch the people going into the store and count the items they walked out with. He explained to me that there are Indians who don't pay the tax man and pocket the cash and asked me to never be one of those.
To this day, if I want to get a low or zero interest crowdsourced loan from a squad of Indians to go open a gas station or small convenience store, I should have no trouble doing so. I've never bothered.
Years later, after sitting down with my father, I got access to cell phone movement data overlaid on gas stations. It was very revealing when combined with CC transaction data that was also purchased.
2 different sets of books and the author of this doesn't even bother mentioning it.