Jan. 5 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, may appeal a state court decision dismissing its $33.5 million dispute with North Carolina's tax authorities over a deduction for rent it paid itself.

The retailer contends it's entitled to a refund of taxes and penalties it paid after authorities said it couldn't deduct store rents it paid to Wal-Mart real estate units.

The decision threatens tax deductions that Bentonville, Arkansas-based Wal-Mart and other companies can get by paying rent to real-estate investment trust units that transfer tax-free income to their owners. The Wall Street Journal reported that Wal-Mart may have saved $230 million in state taxes across the U.S. over four years through similar arrangements.

``The ruling could have implications far beyond the facts of our case,'' Wal-Mart spokesman John Simley said in an e-mail. Taxpayers ``who have reported their income in accordance with the statutes'' may have to pay more taxes, he said.

Simley declined to comment on the details of the decision because of the possibility the company might appeal. The ruling applies only in North Carolina.

Wal-Mart ``hasn't yet decided how we might proceed,'' Simley said. ``However, all taxpayers should have the right to rely on clearly defined tax laws that are reasonably and fairly enforced.''

The case was dismissed by Clarence Horton, an emergency special judge of North Carolina's superior court, on Dec. 31, the Wall Street Journal reported yesterday. Three other states are challenging Wal-Mart's tax strategy, and six have passed laws in an attempt to stop the practice, the newspaper said.

Fraction of Profit

The refund Wal-Mart is seeking would amount to about a quarter of 1 percent of the retailer's annual profit. Wal-Mart's net income increased 7.9 percent to $2.86 billion in the third quarter. The company had about $6.4 billion in tax expenses in the year through Jan. 31, 2007.

A call made outside of regular business hours to Kimberly Brooks, a spokeswoman at North Carolina's Department of Revenue, wasn't immediately returned. As of October, the company had 93 supercenters, which include grocery stores, 29 discount stores and 22 Sam's Clubs wholesale locations in the state. Wal-Mart paid $47.8 million in state and local taxes in North Carolina in its last fiscal year, according the to company's Web site.

Wal-Mart declined 66 cents yesterday to $45.72 New York Stock Exchange composite trading. The shares gained 2.9 percent in 2007.

The case is Wal-Mart v. Hinton, 06-CVS-3928, Superior Court of Wake County, North Carolina (Raleigh).

To contact the reporter on this story: Michael Nol in New York at mnol@bloomberg.net; Ryan Flinn in San Francisco at rflinn@bloomberg.net

Last Updated: January 5, 2008 18:03 EST