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]
Posted by Corey Himrod | Permalink
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.
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Posted by Corey Himrod | Permalink
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]
Posted by Corey Himrod | Permalink
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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Posted by Corey Himrod | Permalink
Oct21
That’s taxalicious!
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
Posted by Corey Himrod | Permalink
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]
Posted by Corey Himrod | Permalink
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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Posted by Corey Himrod | Permalink
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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Posted by Tony Calero | Permalink
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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Posted by Corey Himrod | Permalink
Earlier this week, Wisconsin Public Radio hosted a discussion on state budget shortfalls, tax avoidance, and ways for states to make up lost revenue:
With the recent Wisconsin budget shortfall, lawmakers are examining ways to increase revenue. After nine, John Munson and his guests discuss the impact of corporate tax loopholes and how stopping them could help fix the state budget. Guests:
- Russ Decker, Wisconsin Senator (D-Schofield).
- Michael Mazerov, Senior Fellow, State Fiscal Project, Center on Budget and Policy Priorities, Washington, DC.
Check out the podcast. Wisconsin is currently one of the states that has gone after companies like Wal-Mart for avoiding corporate income tax, so the discussion is especially relevant there.
Posted by Corey Himrod | Permalink
Similar to other suits filed since 2006 against big employers (think Boeing, John Deere and General Dynamics), the 401(k) suit against Wal-Mart—Braden v. Wal-Mart was filed in March and is currently seeking class-action status—claims that the company breached its duties as a fiduciary by allowing its 401(k) plan participants to be charged “unreasonably expensive” fees. In its answer, Wal-Mart said disclosures about such things as “how investments options were selected” or “revenue sharing arrangements” are “demonstrably immaterial to any investment decision faced by participants.”
In addition, Wal-Mart accused the suit of disregarding the relation of the fees to the overall costs of administering the plan and ignoring “the economics of participant directed individual account plans.” The company pointed out that the Employee Retirement Income Security Act (ERISA) does not call for plan fiduciaries to consider only price when selecting investment options or select the least expensive options.
The case was filed on March 27, 2008, against Wal-Mart on behalf of the Wal-Mart Profit Sharing and 401(k) Plan under the Employee Retirement Income Security Act of 1974, or ERISA. Braden v. Wal-Mart Stores, Inc., alleges that Wal-Mart and others, as fiduciaries of Wal-Mart’s retirement plan, failed to act solely in the interests of the participants and beneficiaries of the Plan, and failed to exercise the required skill, care, prudence, and diligence in administering the Plan’s assets from January 31, 2002, through the present.
The complaint claims Wal-Mart selected and offered to Plan participants unreasonably expensive retail funds, despite the ready availability of reasonably priced high-quality investment options. As a result, the plan squandered tens of millions of dollars of participants’ retirement savings in order to pay for overpriced mutual funds, which, on top of everything, significantly underperformed their benchmarks. This resulted in larger fees being spent on inferior products.
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Posted by Corey Himrod | Permalink
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