Dark store theory refers to the concept of converting retail spaces, such as grocery stores, into local fulfillment centers for online orders. This model allows retailers to optimize their supply chain and delivery processes by reducing the time and costs associated with transporting goods from centralized warehouses to customers. Dark stores are typically not open to the public and are solely dedicated to fulfilling online orders. Walmart, as one of the largest retailers in the United States, is using the dark store thing to its favor to pay less real estate property taxes.
The City of Houghton, located in Michigan’s Upper Peninsula, is facing a major property tax appeal from Walmart. The retail giant is using the legal tactic we’ve just explained to try to lower its property valuation and, subsequently, its tax burden. Simply, Walmart wants to pay less real estate property taxes. Walmart’s appeal was first filed in 2018 but has been delayed due to a number of events, including the Father’s Day flood and the COVID-19 pandemic. The company has rejected settlement overtures from the city and is now requesting the case go to trial this summer.
Walmart Is Seeking to Pay Less Property Taxes, and This Could Impact the County
If Walmart is successful in its appeal, it could receive a six-year retroactive refund of $1.2 million and a reduction in future property taxes. This would result in significant budget cuts for critical public services in the city, including K-12 schools, veterans’ services, medical care facilities, the local library, and more. In addition to the potential impact on the city’s budget, Walmart’s appeal also violates a development agreement it made with the city. The city provided Walmart with land and infrastructure to support the expansion of its local store, and in return, Walmart agreed to increase the store’s assessed value to cover ongoing expenses.
The breach of this development agreement makes the case unique and serves as a warning to other local units that have provided financial benefits to Walmart. The City of Houghton has filed a federal lawsuit against Walmart, since the authorities don’t want the company to avoid the payment of the taxes that correspond.
The Impact of Walmart’s Claim in the Community
During a meeting to discuss the implications of Walmart’s appeal and the breach of the development agreement, Houghton City Manager Eric Waara explained that the company’s tax avoidance strategy is a major concern for the community. “Walmart is important to our community, but this doesn’t exempt them from property tax responsibilities,” said Waara. “It’s disheartening that they’re not willing to negotiate a solution to avoid negatively impacting public budgets and services for their customers and employees.”
Walmart is currently the world’s largest corporation by revenue, with over $543 billion in revenue. However, the company’s use of the dark store theory to lower its property valuation and taxes has become a controversial issue in many communities across the United States.