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Updated: B&H Photo responds to New York State Attorney General allegations

Updated information below this section:

In response to last week’s report of the New York Attorney General Letitia James investigating B&H Photo for allegedly failing to pay taxes on rebates, the Manhattan-based retail giant shared the following statement with The Dead Pixels Society:

“The Attorney General is flat wrong – and is trying to create a tax on discounts in order to make New Yorkers pay more,” states Jeff Gerstel, spokesperson, B&H Photo. “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.

    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.


Gerstel released and additional statement and information contesting the New York Attorney General’s allegation B&H Photo dodged taxes by asserting the AG will “burden consumers with a new tax on discounts”:

“The Attorney General is trying to create a new tax on discounts to make New Yorkers pay more. The Attorney General wants consumers to pay sales tax for what they actually pay plus an additional tax on discounts they receive. This makes no sense and there is no law that requires consumers to pay this tax on discounts.

“These claims are without merit; the entire consumer electronics retail industry takes the identical approach that we do.

“B&H has done nothing wrong and it is outrageous that the Attorney General is attacking 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.  We will fight these allegations aggressively.

“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 New York State Department of Taxation and Finance has done countless audits and never once – not a single time – mentioned any issue with this widespread retail industry practice.”

B&H is represented by Baker & McKenzie LLP.  Scott Brandman, the New York Managing Partner at Baker McKenzie stated, “We are disappointed with the Attorney General’s decision to file this lawsuit, which is trying to effectively raise the sales tax rate through litigation.  New York law is clear that B&H’s treatment of ‘instant savings’ is correct.  Even if the Attorney General is successful, the consumer is the one bearing this cost as they will be paying sales tax on an amount more than the price paid.”

Below are examples of how much additional sales tax consumers could pay on popular items with the Attorney General’s new tax on discounts:

Item Regular
Price
Discount Selling Price* Sales Tax Additional
Attorney General Tax
Nikon AF-S $2,797 $650 $2,147 $190.55 $57.69
Apple iMac $2,299 $700 $1,599 $141.91 $62.12
Canon XF100 $1,999 $500 $1,499 $133.04 $44.38
Sony a9 $3,998 $500 $3,498 $310.44 $44.38
Bose L1 $2,699 $405 $2,294 $203.59 $35.94
LG C9PUA $2,497 $1,000 $1,497 $132.86 $88.75

*Price information based on BandH.com on 11/18/19

The Attorney General’s new tax on discounts could also affect many household purchases:

Item Regular Price Discount Selling Price* Sales Tax Additional Attorney General Tax
Mattress $1,699 $452 $1,248 $110.78 $40.12
Sofa $1,350 $721 $629 $55.82 $63.99
Refrigerator $1,799 $501 $1,298 $115.20 $44.46

*Price information based from leading online retail websites on 11/19/19 (assumes discounts are funded by manufacturers)

Pay Tax on What You Pay, Not on What You Save

Consumers pay sales tax based on what they actually pay.  If you buy a $150 item on sale for $100, you pay $100 and pay tax on $100.  If the Attorney General’s office has their way, customers could have to pay sales tax on the $100 actual sale price, plus an additional tax on the $50 discount that they received.  Common sense, and the law, says that this new tax on discounts makes no sense.  That’s why virtually the entire consumer electronics industry takes the same approach to sales tax collection that B&H does. 

*All information from retailer websites as of 11/18/19

Gerstel also questioned the fact The New York State Department of Taxation and Finance – the agency responsible for sales tax – is not part of this case.  “Why not?” he said.  “The tax department has audited B&H for years and has approved our tax reporting for many years.”

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