B&H shares rebates with customers, gets a lawsuit in return

Nov 17, 2019

John Aldred

John Aldred is a photographer with over 20 years of experience in the portrait and commercial worlds. He is based in Scotland and has been an early adopter – and occasional beta tester – of almost every digital imaging technology in that time. As well as his creative visual work, John uses 3D printing, electronics and programming to create his own photography and filmmaking tools and consults for a number of brands across the industry.

B&H shares rebates with customers, gets a lawsuit in return

Nov 17, 2019

John Aldred

John Aldred is a photographer with over 20 years of experience in the portrait and commercial worlds. He is based in Scotland and has been an early adopter – and occasional beta tester – of almost every digital imaging technology in that time. As well as his creative visual work, John uses 3D printing, electronics and programming to create his own photography and filmmaking tools and consults for a number of brands across the industry.

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The Verge reports that the New York Attorney General believes retailer B&H has dodged over $7,000,000 in taxes in a lawsuit filed recently. It’s all to do with the “Instant Rebate” offers, which are common amongst online retailers these days. The suit claims that B&H has “cheated” the NY sales tax and that they “chose profits over principles”. The investigation and lawsuit come as a response to a whistleblower they say approached them in January 2016.

So, as I understand it, the problem seems to lie in the way B&H does Instant Rebates. This is essentially where the manufacturer is subsidising some of the cost. For the sake of simple maths, let’s say the rate of sales tax in New York is 10%. It’s actually anywhere between 4% and 8.875%, but again, for the sake of simple maths, let’s say it’s a flat 10% across the board.

So, with our hypothetical 10% tax rate, if you buy something for $1,000, you as the customer (where applicable) pay 10% sales tax on that item on top of the purchase price of the item. You pay $1,100 in total. B&H collects that sales tax on behalf of the tax office and then passes it along to them. Let’s say B&H is running a discounted sale item. That item is now priced at $800. 10% of $800 is $80. So, you pay $880. $800 goes to B&H and $80 goes to the tax people.

All easy and simple so far, right? But what about those instant rebates?  Well, let’s first take a look at regular old fashioned mail-in rebates. These are pretty simple. You pay full price at the retailer, including the full amount of tax. Then, when you receive your item, you contact the manufacturer to get some money back off the purchase price (but not the tax!). That’s the key thing here.

Instant rebates, the Attorney General argues are essentially the same as a mail-in rebate, as they’re still manufacturer-subsidised. B&H has to sell the item and then get that money back from the manufacturer, the same as the customer would in a more traditional mail-in rebate system. So, if an item is $1,000 with 10% tax and there’s a $200 instant rebate, you would basically pay full price for the item, $1,000, plus 10% sales tax of $100, and then you would have that $200 discounted from your tax-inclusive total. Bringing your final total paid to $900.

So, in the instant rebate example with $200 discount, you’d be paying $900 ($1000 plus 10% tax = $1,100, minus $200) rather than $880 with the regular old fashioned type of discounted “instant saving” price ($1,000 minus $200 = $800, plus 10% tax). But what B&H has been doing is quoting sales tax for the final discounted price of $800. This results in a $20 difference in sales tax compared to the method the Attorney General says they should be applying.

Over the past 13 years, these discrepancies in sales tax collected on instant rebate purchases, the Attorney General says, amounts to “at least an estimated $7.3 million” from at least $67 million in rebates. They claim that such a scale of discrepancies could not have been made by mistake and that B&H did this intentionally to try to get an edge over the competition at the expense of the tax department. If you can buy a $1,000 + tax product for $900 or $880 total, which would you purchase?

A B&H spokesperson said in a statement that…

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. The Attorney General wants to charge New Yorkers a tax on money they never spent. It’s wrong and we won’t be bullied.

It will be interesting to see how this one plays out. What B&H has done might be considered a bit naughty, and sure it probably has helped their sales. But it’s also helped their customers, too, who want to pay as little as possible for the gear that they buy. If the law does determine that B&H failed to collect sales tax, then perhaps it’s time to change that law?

You can read the complete lawsuit filed by the AG here.

[via The Verge / Lead Image Ajay Suresh CC-BY2.0]

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John Aldred

John Aldred

John Aldred is a photographer with over 20 years of experience in the portrait and commercial worlds. He is based in Scotland and has been an early adopter – and occasional beta tester – of almost every digital imaging technology in that time. As well as his creative visual work, John uses 3D printing, electronics and programming to create his own photography and filmmaking tools and consults for a number of brands across the industry.

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25 responses to “B&H shares rebates with customers, gets a lawsuit in return”

  1. John Wojciechowski Avatar
    John Wojciechowski

    Whether it’s $100.00 or $80.00, the state received money for doing nothing. The consumer will always be the loser. Why would anyone pay a sales tax who doesn’t live in that state and doesn’t use any of that state’s services? Maybe B&H should move their sales department offshore.

    1. John G Schickler Avatar
      John G Schickler

      John Wojciechowski Delaware.

    2. David Treadwell Avatar
      David Treadwell

      Oh come on, nothing? The state provided police services that keep B&H and your purchase safe. The state provided roads to allow B&H to ship stuff. The state provides fire services. The state educates the B&H workforce. Your comment is absurd.

      1. Gus Cantavero Avatar
        Gus Cantavero

        David, so by this logic the states without sales tax must be a total wreck? you can’t seriously believe that the citizens see any tangible benefit from the sales tax.

    3. John Wojciechowski Avatar
      John Wojciechowski

      David Treadwell, the police and fire services are not supplied by the state. They are local services and B&H pays local business taxes for that. I’ve been in NYC and haven’t seen police escorting B&H’s delivery trucks around the city.

    4. David Treadwell Avatar
      David Treadwell

      John Wojciechowski sales taxes go to both state and local governments. Your comment about police escorting trucks around the city is silly.

    5. John Wojciechowski Avatar
      John Wojciechowski

      David Treadwell, as was your statement, to which I made an equally silly statement. B&H pay their corporate and business taxes for whatever services they will use. End of story. It’s just another reason to stiff the consumer.

  2. Jose Corro Avatar
    Jose Corro

    Another business leaving NY soon.

    1. Smarten_Up Avatar
      Smarten_Up

      Not bloody likely. They have a primo location, and it is a great money-maker. Stand outside the store and watch THOUSANDS of dollars in shopping bags (gear) walk out, go round the corner, and watch MILLIONS of dollars of gear get delivered. And that is just the retail part. Big warehouse across the river in Brooklyn that ships out even more.

      Do not mourn for B&H, they are doing QUITE well, thank you! They may be smart, and deserving of their success, but not if accomplished by cheating on taxes…”bad B&H.”

  3. Bill Worley Avatar
    Bill Worley

    Is the Attorney General anti Semitic?

    1. Smarten_Up Avatar
      Smarten_Up

      Why? I know Tish James to be one of the most honest leaders. She is actually looking out for the taxpayers…if B&H does not pay its fair share, the rest of us who live in NY will have to…fair is fair.

  4. Dan Sulla Avatar
    Dan Sulla

    Yeah and they hurt businesses nationwide, as they reap an unfair advantage.

  5. Josh Feres Avatar
    Josh Feres

    Instant rebates are common now, though.

  6. Randy Dalton Avatar
    Randy Dalton

    I wonder if this practice is unique to B&H, or more likely a common practice across most, if not all businesses.

    1. Smarten_Up Avatar
      Smarten_Up

      The B & H statement is very strange: “…while leaving the national online and retail behemoths …”
      When it comes to the photo gear world B&H is one of the “…national online and retail behemoths…” International too, I might add. Maybe US Customs needs to look into their business practices?

      Taxes? Don’t forget the subways that get you to their stores, and their employees too? The EMS services that will care for them or customers as needed? Fire, police, traffic? Etc, etc.

      Do not like taxes, move to Mogadishu, with total anarchy in the streets. Tell me how that works out for you. Me, I am PROUD to pay my taxes:

      “I like to pay taxes. With them, I buy civilization.” -Oliver Wendell Holmes, Jr. Justice, US Supreme Court, 1903-1932

  7. John G Schickler Avatar
    John G Schickler

    This is a royal tax scam. A company gets a rebate for giving the customer a rebate but the tax dept wants money for the entire amount. Taxes should be paid on the actual sale price. Same in Virginia.

  8. Chris Gunnell Avatar
    Chris Gunnell

    So what is the deal with coupons from the manufacturer? If I use a coupon at the grocery store for 50 cents off an item, is that amount taken off before or after I pay the tax on said item?

    They have a point. The govt wants its “share” of money that never exchanged hands.

    1. Jason Page Avatar
      Jason Page

      Chris Gunnell I believe one is a discount and one is a rebate. At least in texas, many of the coupons for groceries are on tax free items. But I know at CVS in texas their coupons are applied before tax.
      In texas with car sales you don’t have to pay tax on the manufacturer rebate amounts.
      I’m sure it comes down to what new york statutes on the books actually say…

  9. David Hodgson Avatar
    David Hodgson

    I assume that the anti tax crowd never drive on roads or have to deal with anyone who went to school.

    1. Sergi Yavorski Avatar
      Sergi Yavorski

      Schools and roads should be private, and people would then be able to decide what they wish to pay for, instead of having their money squandered on politicians’ pet projects and their inflated salaries. It’s not a secret that government is the most wasteful spender, especially the federal one.

    2. David Hodgson Avatar
      David Hodgson

      you want small government look to Mogadishu

      1. Gus Cantavero Avatar
        Gus Cantavero

        It’s totally fare to compare a third world country starting from nothing to the USA. Mogadishu is a city in Somalia, which under statelessness rose much faster than her neighbors. It wasn’t statelessness that caused the decline, it was the corrupt state.

  10. James D McCallum Avatar
    James D McCallum

    I suppose customer rebates should be treated as taxable personal income also.

  11. Brant Dempster Avatar
    Brant Dempster

    I try to play it honest in Pennsylvania by claiming my online purchases exceeding $1000.00 (online purchases under 1000. in PA are apparently exempt) IE camera gear, tools, and all other taxable products that I haven’t paid tax upon via B&H, Amazon, Adorama etc..but I only end up screwing myself. These taxes are pure greed.

  12. panikmedia Avatar
    panikmedia

    Taxation is theft.