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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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We blogged about this yesterday, what with the double taxation in Connecticut and the various state officials telling Wal-Mart to stop. Well, the Hartford Courant obtained a copy of CT AG Blumenthal’s letter to Wal-Mart, and here it is. A sampling:

Please review with your Connecticut stores whether they are complying with Connecticut law, and report back to me your findings. If they are not complying, please report to me how you intend to refund customers for sales tax erroneously charged, and how you intend to ensure that your store and employees comply with Connecticut law in the future.

I return, yet again, to my favorite quote from yesterday‘s article:

[Wal-Mart] spokesman Dan Fogelman said Monday evening that although he has no idea what Connecticut state tax law is, his company is following it.

Dan and Wal-Mart better do their homework…

Connecticut Attorney General letter to Wal-Mart

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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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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 news of Wal-Mart’s closing of a Quebec Tire and Lube Express, just two months after workers there won a precedent-setting collective bargaining agreement. The move has been wildly denounced, although Wal-Mart officials maintain that Wal-Mart is not anti-union. Following up on that, BloggingStocks.com asks whether it’s wise that the retailer would rather see an operation shut down entirely than have employees with any kind of power.

In addition, the Hartford Courant has been following an issue in Connecticut - it seems the CT Consumer Protection Department will review Wal-Mart’s double tax policy to see if it violates state tax law. And on the International side, read more about Wal-Mart’s new green store in Beijing, China, and how the retailer is claiming it will toughen standards on its Chinese suppliers.

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 Watch Weekly Update for Elected Officials [October 22, 2008]

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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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Since the issue of Wal-Mart has been surprisingly muted this campaign season (Wal-Mart Moms?), the retailer has decided to inject itself into the campaign ad fray. Both Obama and McCain have videos running on Wal-Mart’s corporate website. You can find them both here.

Here’s a little summary of the main points of each of the campaign messages you can find on walmartstores.com:

Obama:

Our economy is in crisis, we have two wars, and the American dream is slipping away (starting out on a positive note...nice)
We’re going to fix it by giving a $1,000 tax break to the middle class (YAY!!!! More money to spend at Wal-Mart!!!)
We’re going to allow workers to organize, for better wages, health care, benefits (Organize, YAY...wait, what?!)

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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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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 centers on a new website launched by Wal-Mart Watch which details the retailer’s political contributions, positions on specific legislation, and spending on lobbyists and industry trade groups. The website, Walton Influence, also includes similar information on the Walton family and the family’s related enterprises.

In addition, you’ll read about a number of legal issues, the most important of which could be affecting the health of millions of Americans. Bloomberg News and the San Francisco Chronicle, among others, are reporting on how tests of several of the best-selling brands of bottled water (including Wal-Mart and Sam’s Club private label brands) have been found to contain mixtures of at least 38 different pollutants, including bacteria, fertilizer, and industrial chemicals. These findings could result in a lawsuit against the retail giant.

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. You’ll read about how Maryland’s closing of certain corporate tax loopholes has resulted in millions of dollars in increased state funds, and why employees in Illinois are protesting Wal-Mart’s electioneering activities.

Wal-Mart Watch Weekly Update for Elected Officials [October 16, 2008]

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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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An article this week in the Wall Street Journal reports that state legislatures across the country are facing painful budget shortfalls. Reporting from the National Conference of State Legislatures, the article’s author notes that budget deficits are growing as the economy weakens, and legislators don’t know what to do.

We’ve long documented Wal-Mart’s failure to pay its fair share of state taxes - whether it’s by elaborate schemes to avoid property taxes or by forcing a disproportionate number of its employees on to state-sponsored medical plans. Wal-Mart isn’t mentioned in this article from the WSJ, but it certainly deserves to be. The company makes promises to communities it wants to build in, and in exchange townships wind up footing the bill for store construction and forgiving Wal-Mart the tax money it owes. While this certainly isn’t a solution to nationwide community budget shortfalls, it’s one piece of the puzzle local officials need to bear in mind.

States Slammed by Tax Shortfalls [Wall Street Journal]

The stumbling U.S. economy is forcing states to slash spending and cut jobs in order to close a projected $40 billion shortfall in the current fiscal year.

That gap—identified Wednesday in a survey by the National Conference of State Legislatures—is more than triple the size of the previous year’s. It is the result of broad economic weakness at the state and local levels that could cause pain throughout this year and into 2010. Sales-tax collections, for example, have been hurt by the housing slump and high gasoline prices, which are prompting cutbacks in consumer spending. Personal income-tax collections have been hit by rising unemployment, while corporate income-tax collections have been eroded by falling profits.

“We expect it to get worse before it gets better,” said Corina Eckl, fiscal-program director of the National Conference of State Legislatures. The conference’s new report describes the shortfalls states face in their budgeting process for the current fiscal year, which began in July.

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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.