Whistleblower Notified Authorities
New York State Attorney General Letitia James has filed a lawsuit against B&H Photo Video alleging that the NY retailer has operated a scheme to avoid paying the State of New York millions of dollars in taxes on money earned from manufacturer reimbursements. The State says B&H violated New York Tax Law, New York Executive Law, and the New York False Claims Act, and for this reason is asking the court for treble damages that are potentially in the tens of millions of dollars.
See more on the NY AG vs. B&H Photo Video…
Attorney General James says that B&H – the nation’s largest non-chain photo and video equipment retailer – “knowingly failed to pay sales tax due 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 State began its investigation upon receipt of a “qui tam” lawsuit filed under seal by a whistleblower.
Under New York’s False Claims Act, whistleblowers who have information on fraudulent conduct that deprives the State of taxes it is due through failure to pay can bring an action on behalf of the government. And of course, the whistleblowers identity is shielded from disclosure for protection from possible retaliation.
‘Instant Rebates’ Land B&H in Hot Water
“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. 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, and will do so against any company that tries to skirt its responsibilities by illegally trying to tilt the playing field.”
Letitia James, Attorney General of the State of New York
The “instant rebates” that are the subject of this dispute, involve reimbursements that B&H receives from manufacturers as rebates to the company for specific items sold. B&H likes to say that they pass those on to customers by reducing the price of the item by the same amount. However, the State maintains that the manufacturer’s reimbursement means that B&H is made whole on those items, and therefore, like all other retailers, they owe sales tax on the full amount.
NY AG: B&H Knowingly Flouted Tax Laws
In a statement announcing the action, Attorney General James says that B&H was well aware they were flouting New York State tax laws. “While these arrangements are subject to New York State sales tax, B&H never paid that tax, despite its repeated and explicit acknowledgments – internally, to outside vendors, and externally, to a competitor – that under New York tax law, it owed sales tax on these reimbursements.” Prosecutors tend to call statements like that evidence of knowledge (or consciousness) of guilt.
The State has calculated a tax payment shortfall of “at least” $7 million. If the court agrees on the full penalty with treble damages, this amount could be tripled to at least $21 million.
B&H: NY AG is ‘Flat Wrong’; Wants New Yorkers to ‘Pay More’
According to information from the AG’s office, B&H had revenues of $3 billion in 2018 and received at least $67 million in instant rebate reimbursements in the period of 2006-2017.
B&H has released a statement denying any wrongdoing and in fact claims that the AG’s office is just “flat wrong.” It also claims that the State 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.”
Jeff Gerstel, B&H spokesperson
Not the First Time B&H Fought the Government
This is not the first time B&H has run afoul of various governmental authorities. Strata-gee reported on a Federal lawsuit brought against the company in 2016 for discriminatory employment and management practices related to minority employees at the company. In that story, we noted that the action followed another one against the company back in 2009. Eventually, the 2016 suit was settled with the company paying a fine of millions of dollars.
B&H sells locally out of its retail location in Manhattan near Penn Station, and internationally over the internet. Even though it started as a specialty photo store, it has expanded into in a wide array of product categories, including consumer electronics, and does business with a huge laundry list of brands – including many, if not most, of the brands Strata-gee readers know well.
Learn more about B&H Photo Video by visiting: bhphotovideo.com.
Though I am not in the know on the details, this strikes me as an unfair money grab by the NY AG. To levy sales tax on the full price, when the customer paid a discounted price, is unfair and dangerous for our industry, and for the retail business in general. Best wishes to B&H as they fight this.
FYI, Monster Cable seems to have finished croaking if you haven’t heard.
https://www.psaudio.com/pauls-posts/death-of-a-monster/
As for B&H, I certainly won’t be the only one to speculate about a minority attorney general bringing this suit against a company that has previously been in trouble for discriminating against minorities. It’s one of those things that make you go hmmmmmm. Maybe they’re just finally being held accountable after getting preferential treatment for decades, maybe we’ll find out in time.