Letitia James’ $7.3M Tax Whistleblower Lawsuit Against B&H Photo Thrown Out of Court

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. Photo Credit: AP

Edited by: TJVNews.com

A New York State Supreme Court judge dismissed a bogus $7.3 million tax whistleblower lawsuit brought against Manhattan-based retailer B&H Photo by the Attorney General Letitia James.  The Hon. James E. D’Auguste found the photography retailer’s “instant savings” program transactions aren’t manufacturer coupons subject to sales tax, as was reported by Yeshiva World News.

In November of 2019, James’ office said the suit against B&H was filed for violations of New York’s Tax Law, the New York False Claims Act, and New York’s Executive Law. She and her legal team accused the nation’s largest non-chain photo and video equipment retailer of failing to pay sales tax due on $67 million dollars it received from electronics manufacturers to reimburse the company for “instant rebate” manufacturer discounts that B&H passed along to its customers.  These reimbursements were for the period of 2006-2017.

In a press release put out by her office in November of 2019, AG James said: “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.”

A B&H spokesman at the time denied the claims and said it wouldn’t “be bullied.” In a November 2019 statement, spokesman Jeff Gerstel said the state’s lawsuit against B&H was without merit. “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, “ Gerstel said.

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. HaModia reported that B&H presented expert opinion by Professor Richard Pomp, the Alva P. Loiselle Professor of Law at the University of Connecticut School of law, who explained that in the case of a manufacturer’s coupon, the customer presented full value for the sale, albeit part was in cash and part in a coupon. In the case of an “Instant Savings” program, the customer only presented the lower price because the seller discounted it in advance. The fact that the manufacturer reimbursed the seller for the discount does not make the sale price higher retroactively. It merely is an agreement between the manufacturer and the seller, which the seller can then use to lower prices to attract customers into their store.

YWN reported that 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.