New York State AG Sues B&H for Tax Fraud

New York State AG Sues B&H for Tax Fraud

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New York, NY—New York Attorney General Letitia James filed a lawsuit against B&H Foto & Electronics Corp. for violations of New York’s Tax Law, the New York False Claims Act and New York’s Executive Law.

The suit claims B&H knowingly failed to pay sales tax 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 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,” said Attorney General James.

“B&H deliberately chose not to pay the sales tax it knew was due to New York State in order to gain a competitive edge over companies that chose to follow the rules. No company is above the law, which is why my office filed this lawsuit. We will do so against any company that tries to skirt its responsibilities by illegally trying to tilt the playing field.”

The “instant rebates” in question are point-of-sale discounts the retailer offers its customers, for which it receives reimbursement from manufacturers. While these discounts are subject to New York State sales tax, AG James said B&H never paid the tax. And this was “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.”

Moreover, the lawsuit claims B&H violated the New York False Claims Act. As a result, AG James is seeking treble damages, penalties and interest to redress the violations.

B&H Responds to New York State AG

In the company’s response, B&H CEO Menashe Horowitz stated: “The attorney general is flat wrong and is trying to create a tax on discounts in order to make New Yorkers pay more. B&H is not a big-box store or a faceless chain; we are a New York institution, having operated here for nearly 50 years with a stellar reputation. The tax department has done countless audits and never once—not a single time—mentioned this widespread industry practice. “B&H has done nothing wrong; it is outrageous that the AG has decided to sue a New York company that employs thousands of New Yorkers while leaving the national online and retail behemoths unchallenged,” Horowitz added. “The attorney general wants to charge New Yorkers a tax on money they never spent. It’s wrong and we won’t be bullied.

“We regularly offer customers instant savings discounts. This is an industry-wide practice. On a camera that regularly sells for $1,000 that has an instant-savings offer of $200, the net selling price is $800; we collect and remit sales tax on the $800. The attorney general is claiming we should collect tax based on the $1,000 and thus have underpaid sales tax for 13 years. Common sense, legal precedent and years of sales tax audits approving our practice say we have done everything right.”

The AG’s investigation and lawsuit arose from a qui tam lawsuit filed under seal by a whistleblower. The New York False Claims Act permits whistleblowers who know of information concerning false or fraudulent conduct that victimizes the state through the failure to pay taxes to bring an action on behalf of the government.

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