Walmart suing Routt County, 31 other Colorado counties, for allegedly overvaluing personal property
If successful, Walmart could set precedent for future valuation
STEAMBOAT SPRINGS — Retail giant Walmart Inc. has claimed in a series of pending lawsuits that Routt County, along with 31 other Colorado counties, has overvalued its personal property tax for local stores. It’s a move the retailer hopes will greatly decrease its latest tax bills — and potentially set a legal precedent.
A lawsuit recently filed in Routt County District Court on behalf of Walmart alleges the Routt County Assessor’s Office overvalued its personal property tax in 2019 for the store at 1805 Central Park Drive in Steamboat Springs. It’s part of a larger series of suits against half of Colorado’s 64 counties concerning 95 of its retail stores.
Before filing individual lawsuits, Walmart contested its Adams County personal property valuation for the 2018 tax year as sort of a test case through the state’s Board of Assessment Appeals, which was denied in July. Walmart then filed to appeal that decision with the Colorado Court of Appeals in Denver. An appeal of Routt County’s 2018 personal property tax assessment is on hold pending the outcome of that appeal.
Walmart’s basic complaint asserts that county assessors have been overvaluing personal property at the company’s retail locations in the state, which has resulted in higher tax bills.
For the 2018 tax year, Walmart was billed $21,606 in personal property taxes on an actual value of about $1.5 million for its Steamboat store. In 2019, the estimated personal property tax is $18,470 on an estimated value of about $1.3 million, according to the Routt County Assessor’s Office.
Walmart is seeking to cut the latter bill by nearly half through its lawsuit in district court.
In its suit against Routt County, Walmart’s legal counsel offered two main factors that they believe the assessor’s office didn’t fully consider when calculating a valuation.
The assessor’s office uses what is called value-in-use to figure personal property value, which is how much an item is worth when it’s installed, operational and contributing to revenue generation. According to Routt County Assessor Gary Peterson, however Walmart is citing the valuation method of value-in-exchange, which is how much an item is worth when it’s obsolete or retired and being sold.
The personal property at the Steamboat retail store — items such as cash registers, refrigeration units, food preparation equipment, automotive repair, warehouse equipment, shelving and light fixtures — collects pennies on the dollar once they’re sold, according to the company.
“And that’s true, but that’s value-in-exchange,” Peterson explained. “They want that to be used as demonstration of the market approach to value on this personal property. The argument from the assessment offices is that that’s value-in-exchange.”
Value-in-use is what assessors are instructed to value, per state regulatory agencies.
Peterson said that claim, of greater functional obsolescence, goes hand-in-hand with what’s called the “dark-store theory.”
The dark-store theory, according to an article printed in the October 2019 trade publication of the International Association of Assessment Officers, says an occupied, big-box store in a vibrant location is worth no more than a big-box building gone dark. That is one tactic employed to obtain lower taxes.
Along those same lines, big-box retailers, like Walmart, are now using what’s called the “e-sales theory” when challenging assessments, according to the publication.
The theory, which has been brewing in Florida and North Carolina courts, suggests that “one can accurately appraise installed, operating, tangible personal property based upon the value garnered from used comparable tangible personal property either sold or for sale through online sales sites like eBay.”
The publication called this theory frivolous, when reviewed by the tax assessment community, but that it could seem credible to the layperson.
Walmart uses that theory to further assert that its stores’ personal property has greater depreciation.
But the assessor’s office utilizes depreciation tables implemented by the state of Colorado, which Peterson said take into account normal, typical depreciation and functional obsolescence. The tables are derived by the Division of Property Taxation, which conducts large-scale studies on equipment and related depreciation.
“(Walmart’s) arguments are falling flat for the most part,” Peterson said. “And have been for a number of years.”
In 2017, Walmart first challenged its Steamboat store’s personal property assessment with the state Board of Assessment, but that was ultimately withdrawn.
In its current lawsuit, Walmart is challenging the Division of Property Taxation’s depreciation tables and adding on top of that a claim for economic obsolescence, which is the company’s claim that their stores are being further depreciated by external competition such as other online retailers and big-box stores.
Though, “they’ve never been able to demonstrate any actual evidence of economic obsolescence,” Peterson said.
Peterson offered an example of economic obsolescence in relation to a coal mine. Economic obsolescence is applied to a coal mine’s personal property valuation by measuring its years of average peak production and weighing that against the last several years of actual production. In an appraisal, that is a way to demonstrate economic obsolescence of coal production.
That’s also applied to its mining equipment. “Who wants to buy coal mining equipment? Nobody, really,” Peterson said. “So it’s obvious that there’s an economic obsolescence there. Then you look at Walmart.”
Walmart’s equipment, according to Peterson, is typically all-new and replaced when needed.
“Walmart is not suffering economic difficulties, particularly in this economy,” Peterson said, “but they are making the claim that their equipment is suffering economic obsolescence because of the competition they’re getting.”
The multi-billion dollar company, headquartered in Bentonville, Arkansas, posts some of the largest profits of any U.S. company. In its 2019 fiscal year, the company saw total revenue of $514.4 billion, with a net profit of $32.635 billion. According to the company, its first quarter earnings for the 2020 fiscal year were $123.9 billion, growing 3.4% over the first quarter of 2019. Its e-commerce platform, walmart.com, saw sales growth in the United States of 37% in the first quarter.
“We believe in fair and equitable property taxation and that every property owner has the right to challenge their property tax assessment if there is evidence of over-assessment,” Tiffany Wilson, director of communications for Walmart, said in a statement regarding the Colorado lawsuits. “We are simply seeking a fair market value for the taxation of our property, just as any other taxpayer should expect under state laws.”
Routt County Manager Tom Sullivan could not comment on the issue as the lawsuit is pending.
Similar lawsuits regarding personal property valuation have been filed in the past, but none have been successful in Routt County, according to Peterson.
Safeway, with a location at 37500 E. U.S. Highway 40 in Steamboat, had argued four to five years ago that it was being out-competed by larger, national chains like Walmart and Target, which had been adding full-size grocery departments at its locations. That argument fell short in Routt County, however, and the case was withdrawn.
“It’s fine down on the Front Range where a Safeway does compete with a SuperTarget and Walmart,” Peterson said. “You don’t have that up here.”
While it won’t mean much to individual taxpayers, if Walmart’s suit does succeed it could set a legal precedent in terms of having all personal property looked at as a value-in-exchange manner and the use of these liquidated sales of their used equipment as the determination of taxable value on the current equipment being used, according to Peterson. “I suppose it would then become a larger issue for some counties,” he added.
Personal property, however, represents a small “piece of the pie” for most counties, but there are some exceptions. For Routt County, personal property taxes only amount to 2.2% of the county’s total assessment, a large chunk of which comes from Twentymile Coal Mine.
The county collected nearly $66 million in property taxes for all taxing authorities in 2019. Walmart’s appeal puts maybe $10,000 at risk, Peterson said.
To reach Bryce Martin, call 970-871-4206 or email bmartin@SteamboatPilot.com.
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