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2008-11-19
Mesa, AZ. States Give Millions In Sales Taxes Back To Wal-Mart And Other Retailers

The city of Mesa, Arizona has 20 Wal-Marts within a 10 mile radius. Half of those stores are supercenters. Although Wal-Mart is doing much better financially than the city of Mesa, the city is giving Wal-Mart corporate welfare. "With record home foreclosures, restrictions in the credit market, and increasing gasoline and food costs," the city's website notes, "all Arizonans are impacted by the economy right now." Yet Wal-Mart is getting a taxpayer subsidy for building superstores. According to a new report from Good Jobs First, in 2007, Mesa, Arizona gave Wal-Mart a super-sized sales tax rebate of $11.7 million to help build infrastructure for a superstore. Between 1998 and 2008, the giant retailer was given $73 million in sales tax refunds or rebates by cities and towns. In Branson, Missouri, Wal-Mart grabbed more than $12.1 million in sales tax incremental financing -- at taxpayer's expense. Over the past decade Wal-Mart projects have received a total of $130 million (or an average of $13 million a year) from sales tax-based subsidies. These corporate welfare deals divert money from use in schools, public safety, and other pressing local needs. According to the new study, "Skimming the Sales Tax," Wal-Mart and other retailers have not only been given outright tax-supported grants to pay for items like roads, water and sewer lines -- but these corporations have also been paid for collecting sales taxes by state and local governments. These so-called "vendor discounts" or "collection allowances" pay retailers for collecting sales tax on behalf of governments. There are currently 26 states which pay retailers to collect sales taxes, and Good Jobs First estimates that Wal-Mart alone receives a total of approximately $60 million in retailer compensation, and retailers generally scoop off $1 billion a year for being a sales tax collector. This payment is basically a service fee to compensate retailers for the time and trouble of recording sales tax collections and sending them to revenue agencies. Vendor compensation is typically calculated as a percentage of the sales tax collected by the retailer. The percentages range from 5% in New York to less than 1% in eight of the states. Some percentages drop as the collection amount rises. In some states there is a cap on how much sales tax is subject to a fee, and in other states there is no limit. "At a time when state and local governments are facing a fiscal crunch, policymakers should take a hard look at retailer compensation practices," said Good Jobs First Executive Director Greg LeRoy. There are 19 states which do not provide retailer compensation, and 5 states which do not have a state sales tax. Philip Mattera, Good Jobs First Research Director and principal author of the report, notes that half of the 26 states which pay retailers a collection fee have no cap on sales subject to the fee. "This creates a windfall for giant retailers such as Wal-Mart," Mattera says. States without a ceiling end up giving away substantial amounts of sales tax revenue. The report finds that Illinois leads the nation with an annual revenue loss of $126 million. Texas is second at $89 million, followed by Pennsylvania at $72 million and Colorado at $68 million. The 26 states which give sales tax fees to retailers are: Illinois, Ohio, Indiana, New York, Kentucky, Georgia, Louisiana, Maryland, Missouri, Michigan, Louisiana, Mississippi, Utah, Nebraska, Alabama, Nevada, South Carolina, Arizona, North Dakota, Wisconsin, Arkansas, Pennsylvania, Nebraska, Oklahoma, Colorado, and Texas.

What you can do: All states may have to provide retailer compensation in the future if they participate in a new streamlined sales tax system for interstate online and mail-order transactions. Proposed federal legislation to enable states to collect sales tax on remote transactions would also require them to provide "reasonable" compensation to retailers for collecting tax on all their sales, but it would be left to each state to decide what is reasonable. "Even if you accept the idea that retailers deserve some compensation," Mattera said, "it is difficult to justify an open-ended amount. The main expenses that retailers incur with regard to sales taxes -- especially software programs to track them -- are fixed costs that do not rise in tandem with growth in receipts. States should keep that in mind when determining their definition of reasonable." The Good Jobs First report concludes with policy options, including suggestions that states without ceilings on retailer compensation consider adopting them, and that localities consider avoiding the use of subsidies for retail projects except in those limited cases in which they are truly necessary to bring basic retail necessities such as groceries and drugstores to communities that are demonstrably underserved. "In the vast majority of the country," the report concludes, "the problem is not one of too few stores, but rather retail overbuilding, so using taxpayer
dollars to subsidize more retail development makes no sense. When faced with 'site fight' opposition, proponents of retail projects typically point to the projected sales tax revenue as a public benefit. However, giving away a significant portion of sales tax, either to compensate retailers or to incentivize them, undermines that benefit." The shoppers in Mesa, Arizona have no way of knowing that some of their sales taxes, because of a rebate agreement, are staying in the pocket of Wal-Mart -- pockets that are owned by some of the richest people in the world. Paying retailers to submit sales taxes is like paying IRS tax filers for filling out their 1040 forms. To see the full report, go to www.goodjobsfirst.org.










 
 
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