Walmart has been making a case to try and reduce its property tax liability in Pulaski County by utilizing the dark-store theory. The company didn’t specifically reference the words, but two witnesses according to the Northwest Arkansas Democrat-Gazette said it was essentially the theory in practice.

“This case is not about accepting or rejecting one theory over another. It’s about finding the true market value — what Arkansas law requires.”

Ryan Wilson – A Walmart hired attorney

As this “dark store theory” pops up across the U.S., this is one of the first times it is being tested in Arkansas. This is especially interesting as Arkansas is home to the Sam Walton owned corporation. In Wisconsin, more than 230 dark store cases have been filed across 34 counties since 2015, many of them repeat appeals for the same properties. In Michigan, more than $75 million in tax value was lost from the tax rolls from appeals between 2013 and 2015. This is just a little bit of what has happened across the U.S. thus far and the map below shows an even further expansion of the fight.

Pulaski County Judge Barry Hyde is presiding over the property tax appeal from Walmart who objects to the property valuations issued by the county. The argument Walmart is making is that the real estate and business are separate units and that the assessment of the property takes into account the Walmart business value. Utilizing one of the three market value approaches (cost, sales, market), Walmart argues that with the decline of retail shopping, the sales comparables in the area show a much lower value for the store. Walmart’s argument is that there are a small number of big box stores still interested in having properties of this size, which depresses the overall market value.

“Ford [a private attorney hired by Walmart], in his appraisals, most heavily relied on a “sales comparison approach” when determining the values, he testified. To use this method, Ford drew from property sales of seven former big-box retail stores across the region. One, for instance, is now a warehouse for an online Mardi Gras store in Baton Rouge. At times the testimony went into granular detail — how capitalization rates, depreciation, economic obsolescence, corner lots, traffic counts, flood plains and even a sprinkler system affect a property’s value.

Northwest Arkansas Democrat-Gazette on the hearing

But the core argument advanced by Walmart is that the buildings on the land it owns are so customized to their own needs that they cannot fetch a price on the open market that is comparable to their valuation for tax purposes.

If this appeal is successful, Washington County Assessor Russell Hill projected a savings of roughly $100 million in local property taxes both from Walmart and other big-box retailers that will follow in their footsteps. Judge Barry Hyde has a little over a week and a half to make his ruling in the precedent-setting case for retailers.