New York State is suing the owners of iconic B&H Photo Video Electronics Store in Manhattan for allegedly failing to pay millions of dollars in sales taxes over a 13-year period.
According to the suit that state Attorney General Letitia James filed on Thursday, B&H (which operates under B&H Foto & Electronics Corp.) allegedly failed to submit taxes on tens of millions of dollars received from electronic manufacturers as reimbursement for instant rebates provided to customers.
“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,” said Attorney General James. “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.”
Jeff Gerstel, a spokesperson for B&H Photo, flatly denied the accusations in the state’s lawsuit.
“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,” he said in a statement. “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.”
Instant rebates, when offered, are given to customers at the point of sale; under state law, these arrangements are subject to state sales tax. James’ suit alleges that, since 2006, B&H offered the rebates and received compensation from various electronics manufacturers, but allegedly did not pay the sales taxes on them.
The lawsuit indicates that B&H “received at least $67 million in instant savings reimbursements between 2006 and July 2017,” all of which were to be taxed under the state sales tax law. Furthermore, the company allegedly “falsely understated its taxable sales on all” quarterly returns filed with the state Tax Department “from June 2006 through the first three quarters of 2019.”
It’s estimated that B&H allegedly deprived the state of $7.3 million in tax revenue as a result.
The Attorney General’s office launched an investigation into B&H based on claims made in a lawsuit filed under seal by an anonymous whistleblower. James’ lawsuit alleges that B&H violated New York’s Tax Law, False Claims Act and Executive Law.
The West 34th Street store has grown into one of the most renowned electronics dealers in the city, and has further grown its business online. In 2018, Consumer Reports named B&H as the leading online electronics retailer. Forbes magazine also recognized the store as one of the best mid-size employers in America.
According to a source familiar with B&H’s operations, the company has operated for 47 years and has been annually audited by the state Taxation Department, with no red flags raised during those reviews.
The source maintains that B&H charges sales tax on the sale price, not the pre-discounted price — a standard industry practice.
This story was updated at 2:10 p.m.