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Update: (November 20, 2019): We have added more details regarding the entity Mr. Gerstel claims is an ‘anonymous’ accuser and have added more context on the taxation and rebate process.

B&H Photo spokesperson Jeff Gerstel has released a statement rejecting the New York Attorney General’s lawsuit that claims that B&H allegedly failed to report and pay for additional sales tax when customers received discounts on certain purchases.

In an email sent to DPReview, Gerstel says ‘the [New York] Attorney General is trying to create a new tax on discounts [and] wants consumers to pay sales tax for what they actually pay plus an additional tax on discounts they receive.’ Gerstel adds ’this makes no sense and there is no law that requires consumers to pay this tax on discounts.’

Gerstel goes on to say that ‘these claims are without merit’ and claims ‘the entire consumer electronics retail industry takes the identical approach to what we do’ — an assertion Gerstel later backs up in his email using pricing examples from other electronic retailers. Gerstel adds:

‘B&H has done nothing wrong and it is outrageous that the Attorney General is attacking 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. We will fight these allegations aggressively. 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 New York State Department of Taxation and Finance has done countless audits and never once – not a single time – mentioned any issue with this widespread retail industry practice.’

To highlight how much additional sales tax consumers could pay on items, Gerstel provided the following chart with example prices using popular items from B&H Photo’s inventory:

Under a headline titled ‘Pay Tax on What You Pay, Not on What You Save,’ Gerstel writes:

‘Consumers pay sales tax based on what they actually pay. If you buy a $ 150 item on sale for $ 100, you pay $ 100 and pay tax on $ 100. If the Attorney General’s office has their way, customers could have to pay sales tax on the $ 100 actual sale price, plus an additional tax on the $ 50 discount that they received. Common sense, and the law, says that this new tax on discounts makes no sense. That’s why virtually the entire consumer electronics industry takes the same approach to sales tax collection that B&H does.’

Gerstel provides context and precedent for his claims by showing how the same Canon EOS Rebel T7 camera kit, which retails for $ 650 and is currently on promotion for $ 499, is priced and taxed by six other (unnamed) retailers, as well as B&H Photo:

The formatting was done in tables via email, so it’s a bit messy, but you can view the full-resolution image to see the details from each of the unnamed retailers.

Following the above graphic, Gerstel explains that ‘retailers who sell consumer electronics collect New York sales tax in the identical manner as B&H, following the rule of both the law and common sense.’ He also notes that it’s not B&H Photo’s responsibility to ‘charge’ tax, but instead to collect and remit it accordingly. Therefore, he says, ‘any increase in the sales tax that retailers are obligated to collect will result in a charge that would be passed through to customers.’

It’s worth noting that just because other retailers charge the same sales tax at checkout doesn’t necessarily mean they’re not appropriately paying taxes on the rebates they’ve received from the manufacturers — income that, according to the lawsuit, B&H hasn’t paid taxes on to the tune of millions.

According to his statement, Gerstel is claiming the full tax price would be passed on to customers. However, as noted in the examples he provided, the customer is only required to pay the sales tax on the amount they’re paying for the discounted product. B&H Photo, on the other hand, would be responsible for paying the remaining difference between the discounted price and the full price, which is refunded to them through the manufacturer. Gerstel himself notes that it’s their job to ‘collect and remit’ sales tax collected from the customer, but what he fails to mention is the tax on the remaining money B&H receives from the manufacturer to make up the full cost of the products.

The email wraps up by noting B&H Photo’s ‘crystal clear’ tax history wherein B&H Photo ‘has been audited by the New York State Department of Taxation and Finance regularly’ without the Department of Taxation ever once raising this issue with B&H Photo in the past. He goes so far as to call these allegations an ‘unfair smear campaign.’

Gerstel concludes with two questions of his own for the New York Attorney General. Under the headline ‘Where is the State Tax Department?,’ he writes:

‘The New York State Department of Taxation and Finance – the agency responsible for sales tax – is not part of this case. Why not? The tax department has audited B&H for years and has approved our tax reporting for many years.’

Under the headline ‘Strange Contingency Structure,’ Gerstel says:

‘In the most bizarre twist of this suit, there is an anonymous LLC accuser that could receive 25 percent of any funds recovered by the Attorney General. It is surprising that the Attorney General is trying to create a new tax on discounts, which would enrich an anonymous entity. We believe the Attorney General should disclose who stands to gain financially from this action.’

Gerstel’s assertion appears to be that B&H Photo is playing by the rules every other electronics retailer adheres to when collecting sales tax on items with discounts in the form of instant rebates, and for unknown reasons B&H Photo is being singled out.

In regards to the ‘anonymous’ LLC Gerstel mentions, the lawsuit notes the entity is RD Litigation Associates, LLC, a domestic limited liability company registered in Monroe County, New York. No registered agent is given, but the entity’s address is listed as 1600 Bausch & Lomb Place in Rochester, New York (Google Maps).

The lawsuit specifically labels RD Litigation Associates, LLC as a ‘whistleblower’ in the lawsuit. New York takes part in the SEC Whistleblower Awards, which can distribute between 10-30% of the money collected if the lawsuit is successful and fits a number of critical guidelines. Thus, Mr. Gerstel’s claims that the noted LLC is ‘anonymous’ is a bit of a stretch and the 25% the LLC gains to stand falls within the 10-30% as laid out in the SEC guidelines. Yes, B&H might not know the alleged whistleblower, who appears to be represented by RD Litigation Associates, LLC (if it’s not RD Litigation Associates itself who filed the complaint), but the LLC itself is rather well documented as required by law.

We contacted the New York Attorney General’s office for comment and were directed to the press release the New York Attorney General’s office published last week regarding the alleged sales tax fraud and told ‘[the New York Attorney General does] not have any further comments beyond what is mentioned in our release.’

Articles: Digital Photography Review (dpreview.com)