Retail giants like Walmart, Walgreens, Target, and Lowe’s are fighting to pay less property taxes. This concept is also being picked up by national fast food giants. When they win, municipal and county governments, as well as schools, lose revenue needed to fund services.
In what is often described as a tax loophole, these retailers utilize a legal argument dubbed the “dark store theory” to decrease their annual property taxes. They say that their taxes should be calculated as if their stores were vacant or “dark,” rather than when they are utilized at full capacity. Property taxes for retailers are most commonly assessed looking at the “best and highest use” of the store, so a fully functional store would be taxed higher than a vacant store. These retailers want the fully functional stores taxed at the same rate as the “dark” or empty stores. Property taxes finance much of municipal, county, and school district budgets. The local impact of a retailer winning a legal dispute under the dark store theory is significant.
Local governments object to the theory because it decreases revenue to the cities, counties and schools while also increasing the burden of increased taxes on residential and other property owners. Schools, roads, police, fire and other public services still need funding.
Some state governments have attempted to pass legislation against using the dark store theory, according to The National Law Review. A bipartisan effort to close the so-called “dark store loophole,” was introduced in June of 2017, but Wisconsin Manufacturers & Commerce opposed the measure and Republican leadership did not bring it to the floor of the Assembly or Senate for a vote. Democrats proposed an amendment to a separate bill, forcing the Senate to take a vote on the issue. Senate President Roger Roth, R-Appleton, ruled the amendment wasn’t germane to the bill and all Republicans agreed.
Before the vote, Senate Majority Leader Scott Fitzgerald, R-Juneau, announced that there would be a Legislative Council study on the dark store issue. With so much on the line for both retailers and local and state governments, the issue isn’t going away soon.
The City of Merrill is asking residents to vote “yes” to pass an advisory referendum asking the state legislature to pass legislation to close this tax loophole. The question on the ballot reads:
“Should the state legislature enact legislation that closes certain “Dark Store” commercial property tax loopholes, which currently shift tax burdens to residential property owners by significantly reducing the assessed valuation for commercial properties through ‘Dark Store’ comparisons?”