Many states have allowed big-box retailers to contest their property tax bills systematically. Walmart, Lowe’s, and other large chain retailers have paid lawyers to implement a dubious “dark store theory” of value, challenging the valuations of thousands of their stores in multiple states on the basis that their properties would be nearly worthless if they were empty. Using this strategy, these large chains have managed to sharply cut their tax bills — leading directly to funding cuts for local schools, libraries, and other essential municipal services.
In Sault Ste. Marie, Mich., for example, Walmart disputed its property taxes using this approach. The corporation not only succeeded in cutting its property tax bill from $5.7 million to $2.9 million, but the town was forced to repay the tax revenue already collected on the so-called “overassessment.” Michigan lawmakers report that the dark store tax loophole has cost the state’s municipalities $2 billion in lost tax revenue.
Walmart and other big-box chains have used this tactic in dozens of states, with most states failing to intervene. As a result, these chains slash their local tax bills while local businesses are left to pick up the slack — paying more and struggling to stay competitive. Unlike the chains, independent businesses lack the resources to dream up novel tax strategies or fight costly court battles to lower their valuations. They also face a different calculus: when school budgets are cut, it’s their own kids who feel it. The big chains, by contrast, bear no such consequences from shortchanging the communities they operate in.
High courts in several states have reviewed challenges to the dark store theory with mixed outcomes. In 2024, a Michigan appeals court sided with Walmart, endorsing the claim that a store’s property taxes should be based on the assumption that it’s vacant. But courts in Kansas and Wisconsin have dealt a blow to the tactic. In 2023, the Wisconsin Supreme Court ruled in favor of the city of Delavan in a case brought by Lowe’s over its tax assessment, effectively ending the use of the tactic in the state,
A growing number of states are considering legislation to limit corporate dark store strategies. Only one so far — Maine, in 2022 — has enacted a law that disallows the dark store argument. Maine’s law mandates that “property must be valued based on its highest and best use.”
States nationwide can adopt legislation clarifying how tax assessors determine the property value of big-box stores. Specifically, they should clarify that modern retail buildings must be valued based on their current operations and not on a theoretical future in which they have been left in disrepair.
Under what has become known as the “dark store” method, big-box retailers are declaring their busy stores to be functionally obsolescent and therefore nearly worthless...
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