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By this time we should all be aware of the controversies surrounding credit companies - in addition to increasingly complex and confusing options for credit applicants, credit card issuers have been raising interest rates and fees for many current borrowers, many of whom were in complete compliance with their card holders’ agreements when their rates were raised. This is a major reason behind the call for continuing credit card reform.

What many people might not be aware of is the struggle between credit companies and the retailers at which their cards are used. As Bloomberg explains, this could end in a giant Visa vs. Wal-Mart rumble:

Lawmakers are promising new rules to bring down the interchange fee, a charge on purchases sometimes topping 3 percent that’s split by the two banks serving the customer and merchant. Supporters of the legislation include the biggest retail chains, restaurants and small businesses, which say the fees erode profit and inflate prices...Interchange is the second-biggest cost after payroll, Target said, and merchants want to negotiate lower payments collectively without running afoul of antitrust law.

The issue has become such a hot topic, the Government Accountability Office has been ordered to study the effect interchange fees have on both consumers and merchants. The “interchange fee” is the fraction of every credit card transaction that the card’s issuer retains. When combined with additional smaller fees levied by a retailer’s own bank (to which the retailer first submits the transaction), interchange fees can cut into retailer revenue - especially important for those retailers with slim profit margins.

Interchange fees have risen over time - interesting, since technological advances would suggest the cost of such transactions should go down - and the result is a growing battle between retailers and card issuers. Wikipedia provides a surprisingly simple example of how the fees work:

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Image above from the Center on Budget and Policy Priorities

When Wal-Mart’s use of an intricate web of subsidiaries to avoid state taxes was discovered, the N.C. Secretary of Revenue famously sent tax lawyers and auditors after the world’s biggest retailer. With state economies strapped for cash, North Carolina is now looking to halt such shenanigans before they can start.

A proposed “combined-reporting” law would require companies with multiple subsidiaries operating in several states to file tax returns as a single business. Opponents of this legislation have given lawmakers the shivers...But in the face of the state’s biggest budget crisis since the Great Depression, combined reporting took a first step Tuesday toward becoming law. After a contentious House Finance Committee meeting, the Democrat-led committee voted along party lines to approve a larger tax package that includes combined reporting.

Combined reporting basically treats a parent company and its subsidiaries as one entity for tax purposes. A driving force behind the move was the public realization of just how much money North Carolina has been losing through loopholes in its tax laws.

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To the right is Millswood eighth-grader Samantha Titus. She lives in California, and this week she had the chance to flex her arguing muscles in a debate competition at the Lodi Boys and Girls Club. The topic? If you guessed Wal-Mart - and this IS the Wal-Mart Watch blog - then commence patting yourself on the back.

Titus was one of about 25 middle school students to participate in the debate tackling whether the city of Lodi needs a proposed Wal-Mart Supercenter - a battle that has frequently found its way onto our Battlemart Blog, as you can here, here, here and here.

Personally, I think this is a great story, and not just because those students arguing against the development so TOTALLY kicked butt. (Actually, all sides gave well-presented arguments, with those for offering job creation and convenience while opponents pointed out negative environmental impacts, poor wages and the effect on local business.) The real winners were all the students involved, who learned how to research an issue in depth while picking up a little thing called self confidence in the process:

Jeisen Elemen has noticed that the team of three boys and two girls that he coaches are less nervous with public speaking..."They were very quiet,” Elemen said. “Now, they are coming up and speaking out in front of a live audience,” he said.

And how did the students feel about the experience? Take us home, Samantha Titus:

“We’re teenagers. We like to fight with people,” said Titus. “We fight with our parents, so we should use our ability to debate.”

Local students debate Wal-Mart issue [Lodi News-Sentinel]

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The Columbus Dispatch is reporting that Walmart’s decision to close its South Side optical lab - laying off 650 workers in the process - has state officials considering ways to recoup a $1.8 million job-creation tax credit the company received back in 2002.

The 650 worker layoff is apparently the largest mass layoff in the region since the economy began to flounder in mid-2008.

The Ohio Department of Development awarded Walmart the tax credit when it opened the lab in 2002, on the condition that the company create and maintain jobs there for a certain number of years, department spokeswoman Kelly Schlissberg said. State officials are reviewing the agreement to determine whether Walmart held up its end of the bargain, she said. If Walmart is found to have broken its agreement, Schlissberg said, the state could go after the company to recoup its money.

Needless to say, the State of Ohio isn’t pleased with the layoffs, especially when just a couple months ago workers were told “the facility wasn’t going to close and jobs weren’t going to be cut.” Now, it’s to the unemployment line for 650 new jobless Walmart employees.

The company has said that laid off employees will be eligible for positions at nearby Walmart and Sam’s Club stores - little consolation for the optical lab employees who would face pay cuts and part-time status as regular Walmart associates.

Walmart shuts 650-job lab: State to check if company reneged on 2002 tax-credit deal [Columbus Dispatch]

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Surrounded by the enemy, with a story vaguely reminiscent of Frodo’s trek into Mordor (that’s for you Lord of the Rings fans - you know who you are), Target is wading into Benton County, Arkansas, home of America’s retail behemoth. A new store is scheduled to open tomorrow right in Wal-Mart’s backyard, with seven Wal-Mart supercenters, five Neighborhood Market grocery stores and two Sam’s Club outlets located within a 25-mile radius.

Like Wal-Mart, Target has steadily slowed its store growth, a trend that may continue depending on economic conditions. Ironically enough, the demographics in Benton County appear to be a good match to the template of Target’s average customer:

“Those demographics there [in Benton County], people have slightly more income on average, discretionary, and will tend to trade up from pure discounters...” And Target “is known very well for their housewares and apparel.” The typical Target “guest,” as the company calls its customers, has a median age of 42 with a median household annual income of $60,000, said Katie Benscoter, a spokesman at Target headquarters. A third of them have children at home and just over half have a college degree.

The store could have an ace in the hole - its new manager, Chuck Simmons, started his retail career at Wal-Mart and is familiar with the area. Still, to put things in perspective, Wal-Mart currently has five supercenters and 12 discount stores within 25 miles of Target’s home office in Minneapolis. And despite prices that are within 1-2% of Wal-Mart’s markdowns, Target continues to battle the perception that it is the more expensive of the two discount retailers.

Target set to open store in Wal-Mart’s backyard [Arkansas Democrat Gazette]

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According to USA Today, state governments struggling to find new ways to raise revenue are running into stiff opposition to one idea — the expansion of wine sales into grocery stores.

One such state is New York, where embattled Governor David Paterson’s proposed 2009-10 fiscal budget includes a provision to allow such expansion, a move that if approved he believes could yield $105 million in licensing and franchise fees from stores during the new fiscal year. New York currently is currently facing a rather daunting $14 billion budget gap.

“This legislation would provide greater choice and convenience for New Yorkers and provide an even greater market for New York wines,” said Matt Anderson, a spokesman for the state Budget Division.

Not everyone in the Empire State is happy with the provision, however. In fact, there is a relatively large coalition of small business owners and independent wine sellers opposing the change, basically calling it a gift to big box chains and grocery stores. The argument is that the proposal will not create any new jobs - in fact, all it will do is divert liquor-buying traffic from independently-owned shops and liquor stores to larger chains and big box stores like Wal-Mart. And while it could result in $105 million in licensing fees from the Wal-Marts of the world, it wouldn’t really increase the alcohol market as a whole - so while New York gets its money and Wal-Mart gets its booze, small business owners will see less costumers and eventually a good portion of them could see unemployment.

“This misguided plan would benefit big-box stores like Wal-Mart without creating even one new job, while imperiling Main Street businesses across the state and the thousands of jobs they provide,” said Jeff Saunders of the Retailers Alliance Foundation, a New York state retailers’ lobbying group that helped form the Last Store coalition. If the legislation passes, Saunders predicts roughly 1,000 liquor stores will close, costing 4,000 to 5,000 jobs.

Job loss means more people on unemployment and more people people on state health roles, and that equals more cost to New York taxpayers. Some might call this “thinning of the heard,” but the prospect of losing 4,000 jobs that will not be replaced seems questionable at best. Already this year a similar idea has been killed in Kentucky, and the proposal in New York and another in Tennessee both face stiff opposition.

Spirited debate over state wine laws [USA Today]

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**********UPDATE**********
******February 10, 2009******

The North Dakota House Industry, Business and Labor Committee voted 8-5 yesterday to recommend that the full House defeat legislation to repeal the restrictions.

Proponents of the repeal argue that competition will lower drug prices throughout the state, especially with Wal-Mart’s $4 drugs. But opponents say repealing the law would endanger the future of rural pharmacies in small-town North Dakota.

Our original post is below - for more on the update, check out today’s stories in Forbes and the Bismarck Tribune.

***************************

North Dakota legislators have elected to go with the safe answer when asked about a bill that would change pharmacy ownership rules: we have no idea.

That may be oversimplifying, of course, but since little has changed since we first mentioned this piece of legislation last week, I’m satisfied being overly simple. The bill would pave the way for large retailers like Wal-Mart to get into the pharmacy business, a market that has to this point been served by locally-owned businesses.

For more public opinion on the matter, check out this, and this, and this, and this.

Legislators say they haven’t decided to support pharmacy bill [Jamestown Sun]

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Colorado’s state legislature has decided that it really, REALLY doesn’t want Wal-Mart to even remotely have the opportunity to use a certain state corporate income tax avoidance scheme. The scheme in question is the now oft-talked about captive REIT, or captive real estate investment trust. If captive REIT sounds familiar, that would of course be because the Wall Street Journal broke the news in early 2007 that Wal-Mart was in effect paying rent to itself on its own store properties, and then deducting that rent from its state income taxes. For more of our own coverage, you can check this out. It should be noted that Wal-Mart lost the original lawsuit in North Carolina that sparked debate on the whole REIT issues earlier this month.

Anywho, back to Colorado - our beautiful 38th state and birthplace of the mouth-watering rocky mountain oyster phenomenon. Yesterday, the Colorado House Finance Committee supported a bill that would prevent businesses from taking advantage of the REIT scheme. Rep. Claire Levy, D-Boulder, introduced the legislation, citing the previously mentioned WSJ piece to drive home why the bill was necessary.

What has Levy so upset is that even though the money stayed within the corporation, Colorado could potentially lose millions of dollars in tax revenue. While Levy has been unable to yet find examples of the practice taking place in Colorado, she said House Bill 1093 protects the state from lost revenues if a business were to implement the strategy.

You know what else would help keep businesses from using tax schemes like this? Becoming a state that uses combined reporting, which essentially treats a parent company and its subsidiaries as one company for state income tax purposes. Why did Rep. Levy choose to push this legislation instead of combined reporting? Well, you see, because Colorado already is a combined reporting state. Better to be safe than sorry is as good a saying as any to follow, however, and from glancing over Colorado’s combined reporting requirements, it would appear that filing a combined report wouldn’t necessarily be mandatory. So cheers to Colorado for covering all the bases...if only all statehouses were so thorough.

Closing tax loopholes [Denver Daily News]

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Slowly but surely, states are beginning to realize that corporate income tax can do a lot more good for their citizens if its actually remaining in the state, and not being funnelled through some loophole or tax-avoidance scheme. Montana is the next on the list to attack the problem, after state Sen. Ron Erickson introduced Senate Bill 36 yesterday, which “is aimed at stopping efforts by large corporations that have found complex ways by setting up foreign offices to avoid or lower the amount of taxes they pay in this country.”

How did this legislation come about? Why, Wal-Mart, of course. In fact, Erickson passed out copies of a 2007 Wall Street Journal article to the Senate Taxation Committee, an article that detailed how Wal-Mart had opened an office in Florence, Italy, specifically for the purpose of evading taxes. According to the Journal, Wal-Mart’s office in Italy was its only operating unit of a real estate subsidiary that controls billions of dollars of its property in U.S. states and was able to avoid U.S. taxes.

Erickson said he shops at a market in Missoula on southwest Higgins Avenue owned by a man named Jim Edwards, whose store competes against Wal-Mart. “Jim Edwards does not have a back pocket in Florence, Italy,” Erickson said. “If we want to be fair to the Jim Edwardses of Missoula, we have to make sure everyone’s paying their fair share.”

We’ve documented Wal-Mart’s state tax avoidance attempts before, and closing the loophole in Montana appears would save the state about $2.5 million per year. It doesn’t sound like a huge sum, but then again Montana’s budget isn’t going to compare to California or Illinois or New York anyway. As the Wall Street Journal noted then:

The Illinois Department of Revenue objected to the Italian tax maneuver, demanding $26.4 million in back taxes, interest and penalties. Wal-Mart paid the amount in dispute and then sued the state for a refund, according to a complaint filed in May in Illinois Circuit Court in Springfield.

The Illinois case is ongoing.

Missoula senator seeks to raise corporate taxes by closing loopholes [Missoulian]

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We’ve covered Wal-Mart’s wage and hour (and overtime) issues many times over, culminating with last week’s $54 million settlement in Minnesota. We all get that Wal-Mart would prefer its employees work through breaks. And we certainly know that when it comes to paying employees for overtime, well, Wal-Mart would prefer that be optional.

California wage laws are, not surprisingly, fairly strict. And now, with that state facing a financial shortfall, the LA Times is reporting that business groups and GOP lawmakers are using wage and hour law as a bargaining chip in negotiations over how to fix a $14.8-billion hole in the state budget. The argument is that state laws like those in California - the ones mandating breaks for workers working at least 6 hours in succession, and requiring an employer to pay time-and-a-half once a worker has worked more than 8 hours in day - are expensive for employers to follow and force them to flee the state for friendlier confines. Places where breaks are voluntary [for the employer] and overtime exists only in a fantasy dreamland.

Not surprisingly, California Democrats and labor officials in the state disagree.

Employers’ latest efforts to tie both the meal break and overtime issue to contentious budget negotiations are aimed at reversing basic worker rights, said Art Pulaski, executive secretary-treasurer of the California Labor Federation.

“It’s about trying to help Wal-Mart and other big corporations get away from the long-established understanding that people should get a meal break at work” or be paid extra for extra hours, Pulasksi said.

“This has nothing to do with the budget or stimulating the economy,” said Barry Broad, a lobbyist for the International Brotherhood of Teamsters and other labor unions. “It doesn’t help the economy to lower 20 million people’s wages during a recession.”

It has been suggested that if state lawmakers can’t come to a consensus and close out these budget negotiations, a state government shutdown in the spring is a distinct possibility.

Overtime pay, rest breaks become bargaining chips in state budget crisis [LA Times]

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Falling sales-tax revenues. An onslaught of vacant storefronts. When your state economy is based on growth, and the national economy goes in the tank, these are the dangers. According to yesterday’s Arizona Republic:

By late next year, more than 75 stores are expected to close, resulting in a loss of nearly 2,000 Arizona retail jobs. The turnover likely will offer shoppers bargains at various going-out-of-business sales and could eventually inspire an influx of newer, trendier stores. But the closures also have city officials scrambling to cover revenue shortfalls and deter commercial blight.

While Wal-Mart may be able to absorb the cost of closed stores and their leases, cities and towns are left dealing with empty buildings that can lead to a rise in crime and vandalism, the lowering of property values, and depressed sales for neighboring retailers when the closed store is the anchor for a strip mall. And for states like Arizona, a drop in sales tax revenue. The Institute for Local Self-Reliance has pointed out that some cities, such as Oakdale, California, or Wauwatosa, Wisconsin, require retail developers set aside money that can be used by the city to either demolish or maintain the site should the store or shopping center become vacant.

Some cities, like Mesa, Arizona, aren’t so lucky.

The shell of a former Walmart sits 2 miles from a Kmart that will close in January. A Mervyn’s and Circuit City will soon depart the area. Such losses this year contributed to Mesa’s $62 million budget shortfall. The city announced 315 layoffs last month.

Cities try to cope with shortfalls in sales taxes, blight left by shut stores [Arizona Republic]

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Check out this week’s issue of the Wal-Mart Watch Weekly Update for Elected Officials – a compilation of Wal-Mart news from across the country and beyond.

This week’s issue begins with a new study from the group Good Jobs First, which reveals that cash-strapped states are forgoing a total of roughly $1 billion annually in tax revenue because of little-noticed laws that permit retailers to keep a slice of the sales taxes they collect for the government. In fact, the study finds thirteen states do not cap the amount that a retailer can receive as vendor compensation for collecting sales tax, resulting in millions of lost tax dollars.

A large focus this week is also on Wal-Mart’s announcement that Lee Scott will step down as CEO in February 2009, to be replaced by Michael Duke, Wal-Mart’s Vice Chairman of its International Division. In addition to the CEO change, you’ll find stories on the battle over the Employee Free Choice Act, how Wal-Mart will deal with the Obama Administration from a labor perspective, and related news on Wal-Mart’s labor battles in Canada.

And finally, check out our “Stateside” and “Wal-Mart International” sections to find out what’s going on with Wal-Mart around the country and across the globe. Wal-Mart has founded a new consumer group in New England geared towards fighting Wal-Mart opponents, and has purchased its own wind-energy supply based out of Odessa, Texas

Wal-Mart Watch Weekly Update for Elected Officials [November 21, 2008]

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According to Good Jobs First and The Wall Street Journal, a large chunk of sales tax revenue gets redirected to retailers like Wal-Mart, a company that pockets an estimated $70 million a year in sales tax revenues.

At least that is the finding of a report released today by Good Jobs First, a nonprofit research group here in Washington:

Most of us don’t realize that in a majority of states with a sales tax, a portion of the money actually goes into the pocket of the retailer under programs set up by state and local governments. In this first-ever comprehensive national analysis of the subject, Good Jobs First finds that the public sector is losing more than $1 billion a year through these sales-tax diversions. A large share of revenue gets redirected to giant retailers such as Wal-Mart, a company we estimate pockets more than $70 million a year in sales tax revenues.

The state laws discussed in the report allow retailers to keep a portion of sales-tax revenue to offset the cost of collecting the funds in the first place, a reasonable enough excuse (especially since state governments are so flush with cash at the present). But does anyone really, and I mean REALLY, believe that Wal-Mart spends $60 million a year collecting sales tax? In this age of computer everything and electronic money transfers, I have a hard time believing it costs more than a fraction of that.

As it stands, many states have calculated a vendor compensation rate, which can be applied to a percentage of sales tax revenue to determine how much a retailer gets to keep for its trouble. As the WSJ reports, Good Jobs First has identified 13 states that impose no ceiling on the total amount retailers can keep. In states such as Illinois, Texas, Pennsylvania and Colorado that vendor compensation rate can be applied to the full amount of sales tax a company collects, resulting in substantial returns for companies like Wal-Mart. Good Jobs First has estimated the givebacks in these states - Illinois ($126 million), Texas ($90 million), Pennsylvania ($72 million), and Colorado ($69 million). Jesse Drucker at the WSJ kindly puts some perspective on those numbers - for example, the $90 million Texas gives away by not capping vendor compensation would cover the $82 million price-tag needed to fund that state’s primary pre-kindergarten program.

For what its worth, the Illinois Revenue Department was quoted as saying the state has tried to cap the compensation program, but relentless lobbying by the retail industry has so far kept legislators from making changes.

Skimming the Sales Tax: How Wal-Mart and Other Big Retailers (Legally) Keep a Cut of the Taxes We Pay on Everyday Purchases [Good Jobs First, November 2008]

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George Gombossy and the Hartford Courant continue to follow this issue, which has taken a turn in favor of the consumer. Numerous complaints made to the Courant caused both Governor Rell and Attorney General Blumenthal to take notice. The complaints were from consumers charging that major retailers have been violating state law by charging a second sales tax when merchandise paid for with cash is exchanged. Governor Rell ordered the state revenue department investigate the practice, and now AG Blumenthal has sent a letter to Wal-Mart telling the company’s general counsel in an oh-so-kindly way to please knock it off with the double taxation.

“Wal-Mart should refund any consumer who was denied a refund of sales tax on returned goods or charged a sales tax on even exchanges,” Blumenthal wrote to Sam Reeves, Wal-Mart’s division general counsel.

My favorite part of this story so far though has come from our good friend, Wal-Mart spokesman Dan Fogelman, who defended Wal-Mart’s policy.

Spokesman Dan Fogleman said Monday evening that although he has no idea what Connecticut sales tax law is, his company is following it.

That’s right - despite his cluelessness to the law and the company’s refusal to discuss why the accusations of so many customers are wrong, Fogelman can guarantee Wal-Mart is following state tax law to the tee. I love blanket statements with nothing to back them up.

Blumenthal Targets Wal-Mart on Sales Tax [Hartford Courant]

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The Hartford Courant has been following this story, and apparently the complaints against Wal-Mart have been increasing. Consumers have increasingly suggested that Wal-Mart has to be violating some state law by requiring them to pay tax again on exchanges made without receipts. Actually, according to the Connecticut Revenue Department, additional sales tax cannot be charged if a store has an even exchange policy. In his blog, the Courant’s George Gombossy came to the following determination:

My conclusion is that not only is Wal-Mart violating state laws by charging tax again without receipts, but is letting its employees falsely blame the state.

Gombossy points out that on its website, Wal-Mart says: “You can replace, exchange, or get credit for an item immediately in a store, pending product availability.”

The issue is now with the state’s Consumer Protection Department.

Consumer Protection reviewing Wal-Mart’s double tax policy [Hartford Courant]

Despite complaints from customers of its stores throughout Connecticut, Wal-Mart insists that it’s following state tax laws by requiring them to pay tax again on exchanges made without receipts.

My conclusion is that not only is Wal-Mart violating state laws by charging tax again without receipts, but is letting its employees falsely blame the state. But you be the judge.

The law seems clear:

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This comes courtesty of Writing on the Wal. We’ve issued reports on Wal-Mart’s use of various tax schemes, including captive REITs, 80/20 companies, and captive employee leasing companies. All of these strategies have been used in the name of avoiding paying state corporate income tax. Now, one website has gone ahead and documented some additional tax issues, these of the unpaid variety.

Below are examples of tax liens placed on Wal-Mart, ranging from $104 to, well, a whole lot more. Liens are granted after notices have been sent to a debtor but the owed taxes remain unpaid. Its nice to know that, in addition to not paying taxes, Wal-Mart forces states to spend MORE money just to collect these debts. YAY!

EXAMPLE ONE:

Debtor Information
Name: WAL MART STORES INC
Tax ID: 710415188
Address: 702 SW 8TH ST
BENTONVILLE, AR 72716-6209
BENTON COUNTY

Creditor Information
Name: SC DEPT OF REVENUE

Filing Information
Filing State: SOUTH CAROLINA
Original Filing Date: 1/17/2003
Amount: $2,463,114
Release Date: 1/28/2003

Filing 1
Filing Number: 50458809
Filing Court: GREENVILLE COUNTY RECORDER
Filing County: GREENVILLE

EXAMPLE TWO:

Debtor Information
Name: WAL MART STORES INCORPORATED
Tax ID: 710415188
Address: 702 SW 8TH ST
BENTONVILLE, AR 72716-6209
BENTON COUNTY

Creditor Information
Name: STATE OF INDIANA

Filing Information
Filing State: INDIANA
Original Filing Date: 4/15/2008
Amount: $1,600,933
Release Date: 6/13/2008

Filing 1
Filing Number: 06819151
Filing Type: STATE TAX WARRANT
Filing Court: MARION COUNTY CIRCUIT COURT
Filing County: MARION

Read on for more!
Wal-Mart: Examine the history of the tax liens in the millions

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Connecticut Governor M. Jodi Rell is ordering the state revenue department to revue possible tax law violations by major retail chains within the state.

According to the Hartford Courant:

Gov. M. Jodi Rell appears to doubt the state revenue services department’s assertion that it is “on top of” complaints from consumers that major retailers in Connecticut are violating state laws by charging a second sales tax when merchandise paid for with cash is exchanged.

This practice has apparently been the subject of many complaints in the Constitution State, where sales tax cannot be charged on an exchange item if a retailer has a policy of permitting exchanges on identical items purchased with cash and without a receipt.

The Courant’s “CT Watchdog” column has been stirring the issue up for a few weeks now - dozens of people have written in to the paper to share their story of double taxation. There seems to be a couple of things going on here. The first question is whether retailers are acting illegally by charging sales tax on identical exchanges where sales tax was paid at the initial point of purchase - this becomes a bigger deal the more expensive the item being exchanged becomes. The second question is where the additional sales tax has been going...has the state revenue department been quick to address complaints related to this practice?

The Governor’s office apparently thinks it has not, so we’ll just have to keep watching to see if penalties end up being levied.

Gov. Rell to order tax department to look into state tax law violations [Hartford Courant]

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The collection is from an undisclosed company - unnamed because of state tax confidentiality laws.

The REIT loophole issue, which focuses on the use of captive real estate investment trusts to avoid paying state corporate income taxes, has been in the national spotlight for going on two years now. In North Carolina, Wal-Mart saved millions of dollars in state tax bills by essentially transferring its properties to its own REIT and paying rent to itself, then writing it off as a tax deduction. These transactions were frequently followed by rather suspicious looking characters in black masks trudging back to Bentonville with big old gobs of money that could have gone to funding state programs.

North Carolina got wise to the scheme and assessed Wal-Mart for back taxes. Additional states have sought ways to close the loophole up, either through attacking it directly or by adopting combined reporting. Maryland is one of those states - last year Maryland Comptroller Peter Franchot announced that his state would no longer allow payments to captive REITs to be deducted from state tax returns. Now following its first publicized audit since then, Maryland will receive $10.8 million in back taxes for a 3-year period from the unnamed company.

We’ve chronicled again and again that Wal-Mart is one of the worst offenders in this area. Simply closing the loophole is one way to fix it. Adopting combined reporting is another. At least in Maryland’s case, the effort has already resulted in nearly $11 million coming back into the state treasury.

Maryland collects millions after closing tax loophole [Washington Post]

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WILDOMAR: “Fighting” for a Wal-Mart Supercenter [The Californian]

City officials and members of the business community are lobbying Wal-Mart to revive plans for building a supercenter near the Bundy Canyon Road/Interstate 15 interchange.

A supercenter features a full-service grocery store and all the products stocked at a regular Wal-Mart ---- clothing, tools, electronics, toiletries and more ---- under one roof.

Based in Bentonville, Ark., Wal-Mart owns about 25 acres of land near the southeastern corner of the interchange and the company was moving forward with the construction of a new supercenter there as recently as spring 2005.

Those plans were shelved, however, when the company decided in fall 2007 to scale back on building new stores, said Wal-Mart spokesman John Mendez.

Wildomar City Councilwoman Sheryl Ade said Monday that a new market-study matrix developed by Wal-Mart shows the area might not be able to support a supercenter. She said Wildomar missed the cutoff by a couple of percentage points.

The results of that new study haven’t stopped her, however, from pitching Wildomar directly to the company’s board of directors as a great spot for a new store.

Ade said she has sent a letter to the board, lobbying them to take into consideration how the new supercenter would affect financing for the city, which incorporated July 1 after voters approved it in February.

When county officials were looking at putting the question of incorporating on the ballot, a fiscal study was produced that approximated the budget for a then-hypothetical city of Wildomar.

Included in that study was $450,000 in sales tax revenue that was directly attributed to a new Wal-Mart.

City Councilwoman Bridgette Moore said the author of the fiscal study, Gary Thompson, produced an alternate version of the study that showed Wildomar’s budget would be OK without the $450,000.

“We don’t need Wal-Mart to succeed,” she said.

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In Portland, Oregon this week, U. S. District Judge Anna Brown held Wal-Mart must face claims by Adidas that footwear manufactured for Wal-Mart bearing two-stripe patterns violates the shoemaker’s three-stripe trademark.

In addition, as part of the copyright infringement lawsuit, Adidas has accused Wal-Mart of false advertising, claiming Wal-Mart mislead customers by marketing a pair of Adidas imitations as “running shoes.” Apparently, the shoes will burst into flames before disintigrating if you actually try and run in them - lawyers for Adidas, in explaining how Wal-Mart’s shoes failed numerous durability tests, have said the shoes are “dangerous” and “not fit to run in.” You can find out more on the false advertising claim here.

Beyond the claim of infringement by Wal-Mart’s two-stripe pattern, Judge Brown must still decide whether Wal-Mart must defend the five remaining claims:

Brown will issue a decision later on whether to keep or reject five other claims in the case before a jury trial begins Oct. 6. They include Wal-Mart’s use of four-stripe designs and a claim by the world’s second-largest sporting-goods maker that Bentonville, Ark.-based Wal-Mart uses false advertising.

Arkansas Democrat-Gazette News In Brief

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