Wal-Mart’s Tax Status Change Hurts Mass. Municipalities

A recent change in Wal-Mart's corporate status in Massachusetts has resulted in a big tax hit to host communities. Within the past year, Wal-Mart, which operates more than two dozen stores in the Bay state changed the way it is authorized to do business in the state – moving from a limited liability company, to full corporate status — a perfectly legal move, according to the state's department of revenue. Under the state tax code, LLC's must pay what's called the personal property tax to municipalities — but corporations do not.

"Things like the freezers they might have in their grocery section, some of the inventory that qualifies, some of their heating system is considered personal property."

Pittsfield mayor Daniel Bianchi says that Wal-mart keeps millions of dollars of that kind of property at its local store – and its removal from the tax rolls means a $180,000 hit to the city's revenue stream.

"When you think of it this way it represents three police officers. Actually a little more than three police officers."

Other towns contacted tell similar stories. In North Adams, Wal-Mart's changed status means the city will have to make up a $140,000  revenue loss — adding significantly to a tax hike there this year. In Northampton, it's a $65,000 dollar problem — equivalent to at least one policeman's salary, the mayor there says.

Wal-Mart officials did not respond to requests for comment. Mayors are beginning to talk about seeking a change in the tax code from the Legislature. Geoff Beckwith, executive director of the Massachusetts municipal association says it's on his agenda.

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"I'm sure the tax lawyers for Wal-Mart will get a pretty bonus for coming up with this scheme to change the tax status."

Under the new corporate status. Wal-Mart will have to pay a state excise tax, but that may be little comfort to municipal officials. Beckwith says he expects to hear from many more cities and towns about the issue at the association's annual meeting next week.