State sales tax is supposed to pay for public services, but according to a report released this week by the Washington, D.C.-based economic policy group Good Jobs First, a little-known state tax policy allows retailers to keep a cut of the sales tax they collect. Nationwide over a billion dollars in state tax revenue is lost to “retailer compensation” each year, the report says. Last year the state of Michigan paid retailers $16 million to collect sales tax. Wal-Mart made $240,000.

During a Tuesday conference call with reporters, report co-author Philip Mattera described retailer compensation as “legalized skimming” and recommended re-examination of the practice, which was developed in the ’30s — before computerized bookkeeping and super-sized retailers like Wal-Mart.

Michigan is among 26 states that compensate retailers for collecting sales tax, and of the 13 that place ceilings on the amount a retailer can receive, Michigan’s limit at $240,000 per year is far and away the highest, according to the report. Florida allows retailers to keep $360 per year; New York, $800.