What is included in Petro Stopping Center's income tax expense?
Petro_Stopping_Center Franchise · 2025 FDDAnswer from 2025 FDD Document
3 | | Liabilities | 57 | 84 | 67 | | Net assets | 814 | 795 | 706 | | Cash used in operating activities | 107 | 85 | 86 | | Cash used in investing activities | 734 | 392 | 375 |
a Amount capitalized at December 31, 2024, December 31, 2023, and December 31, 2022 relates to assets in various regions. The largest of these is $0.4 billion capitalized in the Gulf of America, USA (2023 $0.5 billion capitalized in the Gulf of America, USA, 2022 $0.4 billion capitalized in the Gulf of America, USA).
7. Taxation
Tax on profit
| 2024 | 2023 | 2022 | |
|---|---|---|---|
| Current taxa | |||
| Charge for the year | 1,045 | 695 | 1,249 |
| Adjustment in respect of prior yearsb | (142) | 10 | (115) |
| 903 | 705 | 1,134 | |
| Deferred tax | |||
| Origination and reversal of temporary differences in the current year | (358) | 556 | 3,379 |
| Adjustment in respect of prior yearsb | 228 | (133) | 76 |
| (130) | 423 | 3,455 | |
| Tax charge (credit) on profit or loss | 773 | 1,128 | 4,589 |
Income tax obligations within the US are paid by the parent, BP America, and thus no outstanding US income tax receivable, payable or cash flows are presented within these financial statement
Source: Item 23 — RECEIPTS **RECEIPTS (FDD pages 87–131)
What This Means (2025 FDD)
According to Petro Stopping Center's 2025 Franchise Disclosure Document, income tax obligations within the U.S. are handled by its parent company, BP America. Therefore, the financial statements for Petro Stopping Center itself do not present any outstanding U.S. income tax receivables, payables, or cash flows.
The document also provides details on the reconciliation of the U.S. statutory corporate income tax rate to the company's effective tax rate on profit or loss before taxation. For instance, in 2024, the tax charge was $773 million, in 2023 it was $1,128 million, and in 2022 it was $4,589 million. The effective tax rates for these years were 19% for 2024 and 2023, and 31% for 2022. These rates are further affected by factors such as taxes on foreign operations, state income taxes, items not deductible for tax purposes, adjustments in respect of prior years, share-based compensation, non-controlling interests, valuation allowances, and other items.
Furthermore, the FDD notes that the computation of the company's income tax expense involves interpreting tax laws and regulations across various jurisdictions. This process requires judgment in determining whether provisions for income taxes are necessary and estimating the amounts payable. The resolution of tax positions can take years and is subject to negotiations or litigation with tax authorities, making it difficult to predict the ultimate outcome. The company also considers carry-forward tax losses and credits, recognizing deferred tax assets only when it is probable that future taxable profit will be available to utilize them, which requires management to estimate future taxable profits based on factors like oil and natural gas prices and decommissioning expenditure.
For a prospective franchisee, this means that understanding the complexities of income tax calculations and the potential impact of various factors on the effective tax rate is crucial. While the parent company handles U.S. income tax obligations, the franchisee should be aware of how these broader tax considerations can affect the overall financial performance and profitability of Petro Stopping Center.