We welcome New York Supreme Court Justice James E. d’Auguste’s dismissal of a lawsuit brought by New York Attorney General Letitia James in November 2019 against B&H Photo. The suit had charged the fabled Chassidic-owned B&H with fraudulently failing to pay sales tax on $7.3 in reimbursements it received from manufacturers covering “instant rebate” discounts it gave to customers. We believe the outcome to this point to be a just one and hope this is the end of a rather disappointing effort mounted by the attorney general.
But there are some lingering, disturbing aspects to this episode, including what we see as the unfair targeting and singling out of an employer that employs countless Orthodox Jews who would otherwise face difficulties because of their Sabbath observance.
For one thing, the case did not involve the typical sales tax situation where the retailer collects sales tax from the consumer and is then required to remit it to the state. Rather, at issue is whether the retailer must remit a sales tax amount reflecting the full pre-discounted price. The retailer in such a situation does not collect the sales tax for the pre-discounted price – only for the discounted price. And as it appears that the industry-wide practice is to treat the reimbursement as a non-sales taxable event pursuant to the common understanding of the sales tax laws.
So the allegation that B&H committed “fraud” seems way beyond the pale and unnecessarily inflammatory. At worst, B&H – and others in the same business – acted out of a particular interpretation of the applicable laws. But fraud? Hardly.
And it is especially noteworthy that the same legal case could be made out against national online and retail behemoths who also don’t collect sales tax on discounts. So why was B&H the only company singled out for legal action – a distinction it still enjoys?
Further, despite having been audited regularly over a period of 47 years, B&H was never told there was a problem with its discount sales policy. Where was the fraud?
We were also particularly concerned with some of the language in a press statement issued by Attorney General James which has special resonance in today’s climate of rising anti-Semitism: “B&H proudly claims that it puts principles over profits …but the company actually chose profits over principles….”
Similarly, the statement recites: “B&H deliberately chose not to pay the sales tax it knew was due to gain a competitive edge over companies that chose to follow the rules. No company is above the law.
This kind of insensitivity was certainly not to be expected from Ms. James.