A New York state court dismissed a $7.3 million tax whistleblower suit brought by the state attorney general against Manhattan-based B&H Foto, finding the photography retailer’s “instant savings” program transactions aren’t manufacturer coupons subject to sales tax.
James’ office accused the photo and video equipment retailer in 2019 of failing to pay at least $7.3 million in sales and use taxes on $67 million in so-called instant savings reimbursements from 2006 to July 2017.
In November 2019, James’ office said B&H “intentionally underpaid sales tax on millions of dollars in receipts from its sales of cameras” and other electronics since 2006 using an instant rebate program in which manufacturers reimbursed the retailer for sales — with B&H never paying tax on those reimbursements as it should have.
We've filed a lawsuit against B&H, the photo & electronics store, for allegedly failing to pay sales tax on tens of millions of dollars they received from manufacturers for "instant rebate" discounts to customers.
In New York, no company is above the law.
— NY AG James (@NewYorkStateAG) November 14, 2019
B&H tried to hide the reimbursements with its accounting methods, but investigators ultimately discovered the retailer had shortchanged the state, James’ office argued. A B&H spokesman at the time denied the claims and said it wouldn’t “be bullied.”
B&H attorneys in January 2020 told the court the attorney general’s office failed to understand how sales tax works when it came to instant savings programs. The group cited expert analysis by Richard Pomp, a tax professor at University of Connecticut School of Law, and state tax department opinions.
The court on Tuesday also rejected arguments that B&H made “reverse false claims” on its tax returns by calculating the instant savings disbursements into its cost-of-goods-sold rather than reporting them as receipts subject to sales tax. Any evidence of fraud needs to be coupled with an actual violation of statute, which didn’t occur, the court found.