WalMart's aggressive tax strategy that has saved it hundreds of millions in state taxes in recent years by transferring its stores to REITs owned by Wal-Mart subsidiaries in Delaware and then deducting rental payments to the REITS, which were not taxed on the rental receipts in Delaware. The North Carolina Court of Appeals on Tuesday rejected the Wal-Mart tax strategy in Wal-Mart Stores East, Inc. v. Hinton, No. 08-450 (N.C. Ct. App. May 19, 2009), affirming the trial court's conclusion:
[Wal-Mart does] not deny the facts demonstrating the circular journey taken by the "rents" paid by these plaintiffs, but contend[s] that on each leg of the journey [Wal-Mart was] only taking advantage of a lawful deduction afforded them by then-existing tax law. Such a piecemeal approach exalts form over substance, however.
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