Update (November 18, 2019): B&H has issued a statement regarding the allegations. The statement has been shared in its entirety at the bottom of the article.


A newly filed lawsuit by the State of New York accuses electronics retailer B&H Foto & Electronics Corp of alleged tax fraud. The lawsuit, which was recently published on the New York Attorney General's website, claims that B&H 'intentionally underpaid sales tax on millions of dollars in receipts from its sales of cameras and other consumer electronics.'

The lawsuit claims that B&H failed to pay approximately $7 million in sales taxes on reimbursements it received from manufacturers on products sold with instant rebates to consumers. Specifically, the lawsuit alleges that when a customer would purchase an item with an instant rebate through B&H, and the manufacturer of the camera gear would subsequently reimburse B&H for the difference, B&H didn't pay taxes on that reimbursement money, which would be considered income. This 'arrangement,' the lawsuit alleges, took place for 13 years and was brought to the state's attention by a whistleblower.

The lawsuit likewise claims:

B&H knew that it should have been paying the tax. B&H has repeatedly and explicitly acknowledged—internally, to outside vendors, and to a competitor—that under New York tax law, it owed sales tax on these reimbursements ... And, even after B&H learned that the State was investigating it for failing to pay the sales taxes due on these reimbursements, B&H continued to underreport its sales taxes while simultaneously admitting to others that it knew the sales tax was, indeed, due.

The lawsuit goes into great detailed about alleged communications within B&H that reportedly prove the company knew that it was supposed to pay taxes on instant rebate reimbursements. In a statement to The Verge, however, B&H said that it 'has done nothing wrong,' and that the New York AG has 'decided to attack' a local company while 'leaving the national online and retail behemoths unchallenged.'

New York is seeking repayment of the back taxes, interest, penalties, and damages related to the alleged tax fraud.

B&H has issued the below statement regarding the allegations:

B&H Photo Response to New York State Attorney General

Jeff Gerstel, spokesperson for B&H Photo: “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 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 Attorney General wants to charge New Yorkers a tax on money they never spent. It’s wrong and we won’t be bullied.”

BACKGROUND

  1. CLEAN TAX HISTORY: B&H Photo has operated in New York State for 47 years and has been audited by the New York State Department of Taxation and Finance nearly annually. The Department of Taxation has never – not once – raised this issue.
  2. INDUSTRY STANDARD: This is an industry-wide practice. BH charges sales tax on the sale price, not on the pre-discounted price. Nearly all retailers treat "instant savings" the same: it is a discount, and they do not charge sales tax on the discount because that is New York law.
  3. TAX ON DISCOUNTS: Under the Attorney General’s tax on discounts, customers – not B&H – would have to pay tax on money they haven’t spent.

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