The largest non-chain photo and video equipment retailer in America, Chelsea's B&H Photo Video, has been slapped with a lawsuit from NY State Attorney General Letitia James, who accuses the company of dodging millions in sales taxes. The company, which has been in business in NYC since the '70s, failed to pay taxes "on tens of millions of dollars it received from electronics manufacturers to reimburse the company for 'instant rebate' manufacturer discounts B&H passed along to its customers," the AG's office said in a statement announcing the legal action.
According to James, B&H knowingly failed to pay over $7 million owed in taxes from the instant rebates, which are point-of-sale discounts offered to customers, for which the company is reimbursed by manufacturers.
"While these arrangements are subject to New York State sales tax, B&H never paid that tax, despite its repeated and explicit acknowledgements — internally, to outside vendors, and externally, to a competitor — that under New York tax law, it owed sales tax on these reimbursements," the AG's announcement claims.
James's office was made aware of the alleged tax fraud by a whistleblower complaint filed in 2016. The lawsuit points out that B&H has its own in-house tax department, and the company allegedly developed "an accounting methodology that effectively hid the instant savings reimbursements from State sales tax auditors." The lawsuit further alleges:
Despite its size, long experience with New York State sales tax, and its dedicated tax professionals, when instant rebate programs first became common in 2006, B&H took no steps―not one―to ensure that it was applying appropriate sales tax treatment to the millions of dollars of instant rebate reimbursements that it began receiving annually... B&H acted in its economic self-interest, both to avoid paying taxes out of its own pockets and to gain and maintain a competitive advantage by not charging taxes to its customers.
“B&H proudly claims that it puts principles over profits, but for 13 years, the company actually chose profits over principles by defrauding New York taxpayers out of millions of dollars owed to the state,” James said today.
In a statement obtained by the Verge, a B&H spokesperson said the company was merely engaged in “widespread industry practice.”
“B&H has done nothing wrong and it is outrageous that the AG has decided to attack a New York company that employs thousands of New Yorkers while leaving the national online and retail behemoths unchallenged,” the spokesperson said. “The Attorney General wants to charge New Yorkers a tax on money they never spent. It’s wrong and we won’t be bullied.”
The Attorney General's lawsuit, filed in state Supreme Court, seeks treble damages, penalties, and interest.