Following up on our post last week regarding the New York State Attorney General’s lawsuit against B&H Foto & Electronics Corp. accusing B&H of knowingly failing to pay New York sales tax due on at least $67 million of “instant rebates” that B&H received from electronics manufacturers and passed along to its customers, we bring you news of B&H’s response.

In a statement issued November 21, 2019, B&H countered that the “Attorney General is trying to create a new tax on discounts to make New Yorkers pay more” and “wants consumers to pay sales tax for what they actually pay plus an additional tax on discounts they receive,” adding that “this makes no sense and there is no law that requires consumers to pay this tax on discounts.” B&H’s counsel is also quoted as saying that “New York law is clear that B&H’s treatment of ‘instant savings’ is correct” and that “[e]ven if the Attorney General is correct, the consumer is the one bearing this cost as they will be paying sales tax on an amount more than the price paid.” In its statement, B&H provided a number of examples illustrating the amounts of additional taxes that consumers would pay “with the Attorney General’s new tax on discounts” and additional examples purporting to demonstrate that other retailers who sell consumer electronics collect New York sales tax in the same manner as B&H.

As we noted in our post last week, the outcome of the B&H case may hinge on the proper characterization of the amounts it received from manufacturers in connection with the “instant rebate” promotions. B&H seems to have characterized these amounts as reductions of the cost charged by the manufacturers to B&H. The Attorney General, on the other hand, has characterized these amounts as reimbursements of manufacturer discounts. If the Attorney General is right, B&H should have remitted to the New York Tax Department additional sales tax based on the amounts of such reimbursements. The other retailer examples cited by B&H in its statement are interesting in their presentation of the sales tax amounts charged to customers, but they do not indicate whether such other retailers remitted additional sales taxes attributable to the “instant rebate” amounts.

This will be an interesting case to watch.