Car Wash Industry: IRS Audit Techniques Guide

The Boston District assigned six revenue agents to study the car wash industry and author this audit techniques guide. Each revenue agent examined car wash tax returns of varying types (Form 1120, 1120-S, 1065, and Schedule C) and located throughout the State of Massachusetts. According to the International Car Wash Association there are approximately 22,000 car washes in the United States and Canada, nearly 90%% are operated by the owners who are small business persons. Statistics show that there are approximately 350,000 car wash employees in the United States. It is also estimated that 65%% of these car washes dispense gasoline. The following is an overview of the car wash industry. It should be noted that this description is intended as an introduction and the reader should be aware that variations may exist. Also, agents should coordinate the case with their district counsel if they will be relying exclusively on an indirect method for an adjustment, particularly for cases that are likely to be tried.