NYC Electronics Staple B&H Photo Dodged $7M In Taxes, AG Says

NEW YORK, NY — New York Attorney General Letitia James is taking B&H photo to court, claiming that Hell's Kitchen photo and video staple dodged taxes on as much as $67 million in sales since 2006, James announced Thursday.

The state is accusing B&H, the largest non-chain electronics retailer in the country, of failing to pay taxes on "instant rebate" discounts offered to customers at the point of sale and then reimbursed by manufacturers, according to a lawsuit filed Thursday in New York State Supreme Court. James estimates that B&H — which was founded in the '70s and operates out of a Hell's Kitchen store on Ninth Avenue and West 34th Street — owes the state $7.3 million in taxes.

B&H began offering instant rebate discounts to customers in 2006 and has maintained the practice to the present day, according to the lawsuit. The attorney general's office claims that the B&H knew that these kinds of discounts were subject to New York sales taxes, but that the store "never paid that tax, despite its repeated and explicit acknowledgements — internally, to outside vendors, and externally, to a competitor — that under New York tax law, it owed sales tax on these reimbursements."

"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," Attorney General James said in a statement.

The retailer shot back at the AG's office Thursday, saying in a statement that New York's top lawyer is "flat wrong."

"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," B&H spokesman Jeff Gerstel said in a statement.

Gerstel added that the business has been audited by the tax department nearly every year in its 47 years of business and none of the audits have ever turned up any issues regarding instant rebates. The spokesman described B&H's policies toward the discounts as a "widespread industry practice. Instead of charging tax on the pre-discounted price, B&H and other retailers treat the instant rebate as a discount and instead charge tax on the sale price, a source familiar with the store's practices said.

"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," Gerstel said in a statement.

The New York Attorney General began investigating B&H after a whistleblower complaint was made against the business in a separate lawsuit, the office announced Thursday. The AG's lawsuit is demanding that B&H pay the state treble damages — triple the amount of the actual damages — and other penalties and interest.