Wal-Mart Part of $1 Billion Skim-Scam Flimflam

Wal-Mart Part of $1 Billion Skim-Scam Flimflam

by Mike Hall, Nov 18, 2008

Big-box retail chains like Wal-Mart are skimming some $1 billion a year in local and state tax revenues and pocketing the cash, according to a new report by the non-profit research center Good Jobs First.

Skimming the Sales Tax: How Wal-Mart and other Big Retailers (Legally) Keep a Cut of the Taxes We Pay on Everyday Purchases says the biggest losses to local and state tax coffers come from programs—known by names such as “vendor discount” or “collection allowance”—that pay retailers for collecting sales tax on behalf of governments.

Says Good Jobs First Executive Director Greg LeRoy:

At a time when state and local governments are facing a fiscal crunch, policymakers should take a hard look at retailer compensation practices. This legal skimming is depriving governments of desperately needed revenue.

According to the report, these “vendor discounts” originally were established decades ago when store owners kept records by hand, as a service fee for compensating owners for their time in calculating and then remitting sales taxes to local and state agencies. But these legal tax kickbacks remain in place in the age of electronic cash registers and computers when it simply takes a push of a button, compared to what it used to take store owners hours to figure out.