Wal-mart pays itself rent -- and cuts its taxes

Wal-mart pays itself rent -- and cuts its taxes

Posted Feb 1st 2007 11:34AM by Brian White
Filed under: Law, Competitive strategy, Wal-Mart (WMT)

Svelte tax strategies are the focus of many an accounting office in large corporations these days. Saving millions (or hundreds of millions) of dollars in taxes makes a team of tax attorneys a very wise investment for most companies.

So, it comes as no surprise that the world's biggest retailer -- Wal-Mart Stores Inc.(NYSE:WMT) --- has one of the more clever tax strategies I've seen in a while for a company that has thousands of outlets and locations across the U.S. Wal-Mart pays billions of dollars a year in rent for its stores, which are peppered throughout almost every state in the U.S.

But in a rather deft tax strategy, the company has been paying most of that rent -- we're talking about billions here -- to itself, and then it deducts that amount from its state taxes in the 25 states that allow the deduction.

Bottom line? This strategy has saved Wal-Mart from paying several hundred million dollars in taxes. Second bottom line? Wal-Mart is far from alone here. It's too bad state tax laws aren't very efficient at catching and sealing loopholes like this.

http://www.bloggingstocks.com/2007/02/01/wal-mart-pays-itself-rent-and-cuts-its-taxes/

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Wal-Mart Cuts Taxes By Paying Rent to Itself
By Jesse Drucker
Word Count: 2,751 | Companies Featured in This Article: Wal-Mart Stores, Regions Financial, AutoZone, Bank of America
As the world's biggest retailer, Wal-Mart Stores Inc. pays billions of dollars a year in rent for its stores. Luckily for Wal-Mart, in about 25 states it has been paying most of that rent to itself -- and then deducting that amount from its state taxes.

The strategy is complex, but the bottom line is simple: It has saved Wal-Mart from paying several hundred million dollars in taxes, according to court records and a person familiar with the matter. And Wal-Mart is far from alone.

The arrangement takes advantage of a tax loophole that the federal government plugged decades ago, ...

The above is from the Wall Street Journal- you have to be a subscriber to read the whole article.
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I fucking hate Wal Mart!

for the most part that htey are avoiding. 25 states according to the article.

cheating on its taxes? How much money is enough for these people?!!

In their eyes, taxes are theft, so avoiding them is protecting themselves from theft.

get built? Good corporate citizens :eyes:

They would argue that all infrastructure should be private. Roads, street signs, etc. should be built by private companies. So, businesses looking to build foot or car traffic to their stores should create the roads to their shops.

The more people have. The harder they will work to attain more. Hence, progress.

Where their logic fails is that they never take the imbalances between actors in the economy into question. The people who have the most, have the least to gain from more progress, and so they will use their power to inhibit progress.

There are tons of examples. For instance, in the early days of cable, the broadcast industry used their considerable economic and political power to force cable franchises to carry their broadcast channels. Bill Gates tried to use M$'s power to take out Netscape, etc.

They never consider that markets have power imbalances, and without regulation and taxation, the powerful would over take the weak.

and you pointed out a few reasons why they are wrong.

Basically, to me, the fact is that those who work the most get the least, and those who work the least get the most. The people who actually produce things get little. Exploitation is the way to success in capitalism. The machine of capitalism is oiled with the blood, sweat and tears of the workers.

That's just one out of many problems with the sadistic capitalist mindset.

but wouldn't Wal-Mart Land Holding Co. (or whatever its called) have to pay state taxes?

It seems the real advantage is from a legal (rather than tax) standpoint, as it insulates the parent company from some liability.

So even though there taxes paid to the Feds, they are avoiding state taxes, and as some noted down thread, they aren't the only business exploiting this loophole.

and I'll say this again...
Who needs tax breaks when there are loopholes within loopholes for the SUPERRICH!!!

citizen and given to those slugs under eminent domain? I know that there was a hell of a fight against a Wal-Mart being built on 72nd Street here in Omaha. They want to (are going to) tear down the Ranch Bowl (aka Raunch Bowl) to build it. They used to get some damn good kick ass bands there. That's where I saw Dave Mason (and that made me sad).

Wal-Mart won. We have those frigging things all over town now. They have us surrounded. It's like they're a circle of evil bad guys killing off the Mom and Pop store that they've got surrounded and down on their knees.

whether the "rent" has been jacked up over what an arm's length deal between two non-affiliates would be.

In a lease between affiliates, the rent can be whatever the parties stipulate. They should not be able to deduct an inflated rent.

Also if they were given property by the city/county/state, or given tax concessions or other valuables, the "rent" should reflect that lower cost basis for the propert being rented. Otherwise WalMart is getting a double dip on its tax benefits.

Heck, my former employer even did this.. His family owned the buildings--and his family owned company and subsidiaries paid to lease the buildings from his family.

.....can I? I have rental properties and apartments. Why can't I list my home as rental property and rent it to myself? That way I could write off repairs and depreciate the property.
Hmmmm......worth checking into.

edit:The only way we will ever get these people to close the loophole is for us all to use it!

However, if you have a mortgage, there is often a restriction in the mortgage agreement about renting the home you are mortgaging.

There are also tax laws that limit the amount of rental income on a primary residence.

And, other laws that I'm sure I don't know about...(our subdivision where we live currently has a restriction about using the home as a rental property)

If you created a corporate entity that owned all your rental properties, including the house you live in. And of course, if you have a home office you really can depreciate that portion of your house.

I'm guessing most businesses that have more than 1 office and/or operate in more than 1 state do something similar.

should be tax exempt. :sarcasm:

Show all the good things that we're taking away from good people.

Christian nation my ass.

do you think my hubby and I, who dedicate an entire two rooms and half a garage of our home to our business, can pay rent, to itself too? I mean, if we dedicate those rooms to the company, claim it on our taxes, then pay rent to our company whose sole exclusive use for IRS purposes is that space....damn I am confusing my own self.

S-corp designation....I have a meeting with our accountant for 2006 taxes...I should Email him that article....see what he can do for us.

Could I do this?

Hey, paid-operatives -- you better get in here and start defending your company, or you might just find your position replaced by somebody in India or China willing to work it for 50 cents/hour.

to me, but then I'm not one to sit around and try to figure out how to get out of paying my taxes.

Guess what bill was paid first each month. During some of the lean times of St. Ronnie and Poppie's fiascos, we went through several wage freezes and paycuts. But damned if that rent wasn't paid in full each month. There were times of cash flow problems, but the rent money always flowed on time. In a way it reminds me of the way Dick and the neocons are extracting money from the US....

Have I got that straight?

We need to close this loophole fast and fine them billions if it turns out to be evasion.

easy to understand for everyone, no loopholes, and the politicians can't manipulate it to their personal benefit.