Large retailers are pushing ‘dark store theory’ to manipulate property valuations, shortchanging town budgets and leaving other taxpayers holding the bill
AUGUSTA, Maine — Large retail chains are testing Maine’s property valuation system with a tax avoidance scheme known as “dark store theory, a strategy that has already won them huge tax cuts across the country at the expense of local services.
A new report published today by the Maine Center for Economic Policy outlines the scale and scope of dark store theory’s damage, and how big-box stores such as Walmart and Lowe’s are beginning to use it in Maine.
“Across the country, the large retailers that own big-box stores have used this dubious legal theory to challenge local assessments, arguing they should be taxed as if their properties were shuttered and vacant ‘dark stores’ — even while they’re open for business and raking in revenue,” said Sarah Austin, MECEP policy analyst and the report’s author. “It’s an effort by major corporations to manipulate the tax code so they pay less, leaving towns and other property taxpayers holding the bill.”
Dark store theory was first used in a handful of Midwestern states, where large retailers successfully challenged their assessments and slashed valuations by hundreds of millions of dollars. In Michigan, for example, valuation appeals based on dark store theory cost local budgets $100 million between 2013 and 2017.
If successful in Maine, dark store theory could lead to huge revenue losses for communities, where local budgets have already been stretched thin by a decade of underfunding from the state.
MECEP’s report includes findings from a survey of big-box valuation appeals in Maine. The survey included all appeals by Walmart — the most frequent valuation challenger in the state among large retailers — and others in the 25 towns and cities with the highest retail sales over the past four years.
Key findings include:
- Despite limited initial success, large retailer are ramping up their challenges of local assessments in an effort to secure tax cuts.
- Six large retailers (Walmart, Lowe’s, Walgreens, Sam’s Club, Best Buy, and BJ’s) have requested $184 million in valuation reductions since 2015.
- On average, those corporations have filed challenges that would have dramatically reduced valuations, cutting their property taxes by 34 percent.
- Bangor is the most fertile ground for these appeals; Half of the appeals there were settled at least partially in favor of the big-box store, resulting in a $6.8 million reduction in valuations over four years.