LIFO (Last-In First-Out) Accounting

Last Updated: March 31, 2022

The Issue

LIFO is an accounting method that is accepted under Generally Accepted Accounting Principles and has been in widespread use since at least the 1970s. Due to the volatile market price of fuel as well as the fact that convenience retailers sell many products that are subject to inflationary pressure, many convenience retailers use the LIFO accounting method as a way to calculate their tax burdens. This decades-old accounting practice helps these retailers track their tax burdens and avoid unnecessary and illegitimate tax bills. Unfortunately, some in Congress and the Obama Administration have sought to repeal the use of LIFO and impose a retroactive tax on what is known as the “LIFO reserve” that such companies must track in spite of the fact that the “reserve” only exists on paper.

Retail Impact

A repeal of LIFO could cost convenience retailers thousands of dollars a year in increased income taxes and reduced ability to reinvest in their operations. Even worse, the potential retroactive tax on the non-existent LIFO “reserve” would be extremely problematic as retailers forced would have to find a way to pay a huge, unexpected tax bill.

NACS Position

NACS is opposed to any attempt to repeal LIFO and impose an unfair retroactive tax on LIFO “reserves.”