A famous photo, video and electronics store that is well-known as a Manhattan institution, B&H Foto & Electronics Corp, is now facing a lawsuit filed by the New York state Attorney General. The suit alleges that the store has been evading sales tax for years and owes the state’s treasury over $7 million. The case illustrates how complicated sales tax civil litigation can, as the business and the government have two very different opinions about the case.
For its part, the business pointed to the fact that it has repeatedly undergone audits of its sales tax receipts and has never been significantly out-of-compliance, even though it has been using the same accounting practices over its decades in business. The government, on the other hand, suggested that the case shows the business is not nearly as devoted to ethical business practices as it claims in its promotional materials.
At issue are popular manufacturer’s rebates. B&H deducts these rebates from the price at the time it sells products to customers. The government suggests that these rebates were sales revenue, to the tune of $67 million, and thus subject to taxation. On the other hand, B&H says that it calculated its total revenue according to standard industry practice, a practice which, B&H says, its larger national competitors also employ.
With the suit freshly filed, it is difficult to know what its ultimate outcome will be. However, the allegations B&H now faces are quite serious, and they could lead to the imposition of penalties above and beyond the $7 million the state says B&H owes in sales tax. If anything, the story shows how important it is for businesses in the area in and around New York City to have the help of knowledgeable and experienced tax attorneys.