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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.
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Reader Comments (Page 1 of 1)
2-01-2007 @ 1:50PM
john said...
You say, "Too bad state laws aren't very efficient at catching and sealing loopholes like this." Why do you think it is "Too bad." I think it is wonderful whenever someone can avoid the highwayman. What kind of irresponsible corporation would not try to avoid the statehouse cleptomaniacs!
2-01-2007 @ 1:35PM
Robert Cunningham said...
When such features are available to me i would be derelict if I did not utilize them - so would Wal-Mart
2-01-2007 @ 3:37PM
Robert Cunningham said...
If I didn't utilize all ligitimatae tax advantages available I would be derelict to myself. Just because Wal-Mart is large is no reason they should not take any tax advantages available.
2-01-2007 @ 5:22PM
J.J. Jackson said...
Psst. Big secret here ... there is not such thing as a corporation that pays taxes. They are only collectors of taxes for the government. Every dollar that they have to pay in taxes and that eats into their bottom line is made up for in higher prices to consumers.
When governments tax corporations all it is is a stealthy way of increasing taxes on the public. The politicians know it and they love it!
2-01-2007 @ 8:06PM
Derek Hart said...
What is wrong with trying to legally minimize your tax liability?
One point that wasn't mentioned, was this method decreases state taxes, but increases federal taxes since generally state taxes are deductible. The IRS actually approves of this and several other methods designed to lower state taxes.
Actually, the states are aware of this and many are denying such deductions for intangibles, etc. Until they do, it is a valid tax deduction and businesses shouldn't be condemned for taking it.
You would if you fell into the same position.