Ken Yazel has been known to tip over the apple cart. Now the Tulsa County assessor is at it again.
Yazel wants to know whether the Macy’s-Bloomingdale’s Fulfillment Center near Owasso is a retail business.
It’s an important question. The company chose to build its fulfillment center in Tulsa County in part because of the incentives it received. One of those, called a Tax Incentive District, exempts the company from paying property taxes from 2016 through 2020 on any of the improvements or personal property — such as inventory and furniture — it adds to the 74-acre tract on which the center was built.
This year, the exemption amounted to $2.7 million. The company’s estimated property tax bill is expected to be about $131.
That’s $2.7 million that other institutions and individuals who pay property taxes will be asked to pick up, Yazel said, because the amount of money recipients of property taxes — such as schools and libraries — are asking for is not decreasing.
“As far as I am concerned, a significant amount of that operation out there is a damn retail operation — they are dealing with the end user,” Yazel said. “They aren’t dealing with Macy’s stores and inventory and all that.”
In this case, however, Yazel’s opinion isn’t the one that matters. His office is not a party to the agreement with Macy’s. It’s simply being asked to help implement it by placing a value on the property and its contents. The Tax Incentive District agreement is between Macy’s Inc., the Board of County Commissioners and other taxing entities affected by the deal.
“Is a distribution and fulfillment center as described in the various agreements and documents related to the formation of Tax Incentive District Three a retail establishment not qualifying for the incentive or exemption under the statues (sic)?” the letter states.
During an interview, Yazel noted that Macy’s own advertising and public statements support his contention that the fulfillment center is a retail operation, though he provided no examples.
“When you are advertising that you are dealing with the consumer, then you are kind of cutting your own throat,” Yazel said.
In January 2014, Macy’s President and CEO Terry Lundgren said the following in a press release about the Tulsa County distribution and fulfillment center: “Customers today are shopping whenever, however and wherever they prefer — via stores, desktops and mobile devices — and we continue to invest to meet the customer demand.”
The company’s website, meanwhile, tout’s the fulfillment centers as “direct to consumer” facilities.
“Macy’s e-Commerce business continues to grow through our omnichannel strategy, allowing customers to shop whenever, wherever, and however they prefer: in stores, online, or their mobile devices,” the website states.
Yazel’s letter to the DA seeking clarification notes that state statutes define “retail,” or “retail purposes” as the “objectives of selling tangible personal property, other than art, on the physical premises of an establishment.”
The question, then, is whether packing up an order in a warehouse near Owasso, received from a customer online, and sending it to the person who ordered it is the same as that person walking into a Macy’s store and buying the same product there? And was that what lawmakers had in mind when they created the Tax Incentive District?
Then again, sorting out Macy’s tax situation may not be that simple. The Macy’s-Bloomingdale’s facility near Owasso does not just fill direct online customer orders, but also fills orders made by customers at Macy’s and Bloomingdale’s stores.
Yazel said that it is possible that only the orders shipped directly to online consumers will be designated as “retail,” meaning only that portion of the business would be subject to property taxes.
Such distinctions have been made in other Tax Incentive District agreements, including the TID being used to redevelop the Excalibur building downtown, Yazel said.
Kim Hall, head of the Civil Division of the DA’s Office, acknowledged Wednesday that her office has received Yazel’s letter.
“We will be responding to the request as soon as the research has been completed,” Hall said in an email to The Frontier
The Macy’s-Bloomingdale’s Fulfillment Center opened in the summer of 2015 on land east of U.S. 75 on 76th Street North. It is expected to employ 1,020 full-time equivalent and 367 full-time employees by the end of 2017, according to the Tax Incentive District agreement. The center is expected to employ another 1,000 seasonal employees.
The company has made at least 1,754 new hires since opening in the first quarter of 2015, according to figures provided by the Oklahoma Tax Commission. The numbers are presented as averages per quarter and do not distinguish between full-time and part-time employment, or temporary and permanent employment.
Andrea Schwartz, vice president of media relations for Macy’s north central region, said in an email that no retail sales occur at the fulfillment center.
“It strictly fulfills orders,” she said.
The fulfillment center serves the central part of the country, shipping apparel, home and cosmetic merchandise ordered online or at Macy’s and Bloomingdale’s stores, Schwartz said.
According to the Assessor’s Office, the fair market value of the fulfillment center property went from $4.1 million in 2015 — reflecting the purchase price of the land — to $169.1 million this year due to the construction on the property. The personal property on the site, which includes such things as inventory and furniture, has been valued at $64.9 million.
It was those figures the Assessor’s Office used to estimate that Macy’s-Bloomingdale’s property tax bill would have been approximately $2.7 million this year had it not received a property tax exemption.
Macy’s estimated actual property tax bill of $131 reflects the “agricultural use” value of the property prior to the company buying it, which was $10,900.