Water goes to the bottom of the tank. Spread a small amount of paste on a yard stick, your tank stick, or anything light so it cannot damage the tank and is long enough to reach the bottom. Then lower it into the tank all the way to the bottom. Let it rest there for about a minute. Where the paste contacts water it will turn red.
It is not abnormal to find a very small bit of red on the bottom of the stick. However, if red color rises up more than 1/8 inch on the stick, you may want to consider having the water removed. Water can damage the fuel injection pump. This makes for an expensive repair.
Tanks located directly under the generator are referred to as base tanks. It is unlikely that these tanks will develop water unless there is a hole in the tank, a rusted out spot, or someone has left the fill cap off.
Underground tanks often develop water when ground water enters the tank through a small hole, or if the fuel drain in the fill basin (under the man hole cover) is misunderstood and improperly used.
If your tank is intact and you find water, it likely came from the supplier. That is why I recommend checking before and after fuel deliveries. When brought to the attention of a fuel supplier after a delivery, they normally come out and remove the water for you.
Keep good records! Check for water quarterly and before and after deliveries.
I have also seen folks use contaminated gas cans to transport fuel to the generator tank. I even had one city introduce herbicide into the fuel by repurposing used Roundup cans to carry fuel. Engines do not run well on Roundup!
Our test checks for suspended water using ASTM method D2709. But, you do not have to wait for that. You can find water immediately using water finding past. This may help you avoid an expensive repair.