Will consumers have to pay sales tax on instant rebates?

[Mike Buckley]

New York attorney general suing B&H Photo:
https://petapixel.com/2019/11/14/bh-photo-accused-of-avoiding-over-7-million-in-taxes-on-instant-rebates/

 

[480sparky]

So let me see if I got this straight.

B&H buys a camera from a manufacturer. Say, for $1000. They would normally sell it for $1500. And they would collect/remit the sales tax on that $1500.

Along comes a rebate program. B&H still buys the camera for $1000, and sells it for $1300 instead, garnering a $200 rebate from the manufacturer. In the end, they bought it for $800 and sold it for $1300.

So at the end of the day, the camera that used to cost $1000 wholesale now costs $800, so the retail price drops by $200 as well.

Last I knew, sales tax is figured on the price paid to get it out the door.

 

[Mike Buckley]

If the attorney general's suit holds up in court, imagine the impact on big-ticket items such as automobile manufacturers' rebates.

 

[RoyC01]

If the attorney general's suit holds up in court, imagine the impact on big-ticket items such as automobile manufacturers' rebates.

Are you assuming that automobile dealers have been violating this law.?

 

[Mike Buckley]

Are you assuming that automobile dealers have been violating this law.?

I'm not assuming anything about whether the law has been violated, as I don't pretend to understand the law. I am assuming that if many camera retailers are not collecting sales tax on the instant rebates, that it's also rampant in other retail markets including the automobile market.

 

[Walter]

So let me see if I got this straight.

B&H buys a camera from a manufacturer. Say, for $1000. They would normally sell it for $1500. And they would collect/remit the sales tax on that $1500.

Along comes a rebate program. B&H still buys the camera for $1000, and sells it for $1300 instead, garnering a $200 rebate from the manufacturer. In the end, they bought it for $800 and sold it for $1300.

So at the end of the day, the camera that used to cost $1000 wholesale now costs $800, so the retail price drops by $200 as well.

Last I knew, sales tax is figured on the price paid to get it out the door.

I think the logic the NY AG is using is this.

Assume BHPV pays $1000 for the camera, lists for $1500, offers $200 instant rebate. So buyer pays $1500 minus $200 instant rebate = $1300.

Camera manufacturer reimburses BHPV the $200 rebate so BHPV has still earned $1500 and thus is supposed to claim that $200 manufacturer reimbursement as income. BHPV may be claiming $300 per unit income whereas the NY AG may claim they should be claiming $500 per unit income.

 

[Mike Buckley]

Camera manufacturer reimburses BHPV the $200 rebate so BHPV has still earned $1500 and thus is supposed to claim that $200 manufacturer reimbursement as income. BHPV may be claiming $300 per unit income whereas the NY AG may claim they should be claiming $500 per unit income.

It's an interesting situation that I don't pretend to understand. Insofar as B&H's revenue is concerned, that interpretation would be the same as if one consumer paid $1300 for the camera and a second consumer paid $200 while giving B&H permission to send the camera to the first consumer.

 

[Panther]

I'm quite sure that smaller local camera shops where everyone is paying some type of tax are keeping their eye on this....

 

[rick_reno]

New York state debt is the 2nd highest in the country, right behind that pillar of fiscal responsibility California, the NY deficit is somewhere in the ballpark of $65B to $70B. They're hemorrhaging people, and those people pay taxes, more people are leaving NY than any state in the country. The state is a train wreck waiting to happen. They're desperate for money and will look for it wherever it can be found. B&H offered up some low hanging fruit. The $7M+ they can snatch from B&H isn't going to come close to solving their problems, but if this case holds up on appeal it could give NY state is nice bit of pocket change.

 

[kilofoxtrott]

New York state debt is the 2nd highest in the country, right behind that pillar of fiscal responsibility California, the NY deficit is somewhere in the ballpark of $65B to $70B. They're hemorrhaging people, and those people pay taxes, more people are leaving NY than any state in the country. The state is a train wreck waiting to happen. They're desperate for money and will look for it wherever it can be found. B&H offered up some low hanging fruit. The $7M+ they can snatch from B&H isn't going to come close to solving their problems, but if this case holds up on appeal it could give NY state is nice bit of pocket change.

Rick, do you know we have rain tax in Germany?
It is calculated by the size of your roof of your house and the paved aera of your lot...

Very creative
Klaus

 

[Growltiger]

So let me see if I got this straight.
...
Last I knew, sales tax is figured on the price paid to get it out the door.

Exactly, unlike Value Added Tax (as used in Europe) which is payable on the difference between what the retailer pays and what he sells for.

I suspect their argument goes like this.
The price is quoted as $1500, with a rebate (not a discount).
The sale is for $1500.
Therefore the sales tax is on $1500.
The instant rebate is a separate issue not covered by tax law, it is not relevant to the calculation. It follows the sale, even if instantly.

It may matter how the customer receives the instant rebate. It might be a separate payment for example, perhaps from the manufacturer.
A rebate doesn't sound to me the same as a discount, legally.
Don't expect common sense to apply here.

 

[Mike Buckley]

The $7M+ they can snatch from B&H isn't going to come close to solving their problems

The article explains that "the AG is asking that B&H pay penalties, damages, and all of the back-tax 'plus applicable interest and penalties under the New York Tax Law,' and be forced to collect and pay sales tax on instant rebate reimbursements moving forward." That would surely still be only a drop of water in New York's bucket that is full of holes, but it would be a lot more than the $7 million the AG claims B&H owes in back taxes. That doesn't even include the taxes that would be collected going forward by B&H and all the other retailers that would then feel compelled to collect them.

 

[Panther]

Question: Why do people from out of state buy from B&H?
One Answer: (That a lot people don't like to admit) "I don't pay sales tax"

 

[Omar]

Exactly, unlike Value Added Tax (as used in Europe) which is payable on the difference between what the retailer pays and what he sells for.

I suspect their argument goes like this.
The price is quoted as $1500, with a rebate (not a discount).
The sale is for $1500.
Therefore the sales tax is on $1500.
The instant rebate is a separate issue not covered by tax law, it is not relevant to the calculation. It follows the sale, even if instantly.

It may matter how the customer receives the instant rebate. It might be a separate payment for example, perhaps from the manufacturer.
A rebate doesn't sound to me the same as a discount, legally.
Don't expect common sense to apply here.

I believe you have it figured out the way I've seen elsewhere. If there is a rebate, the sales tax is paid on the full price. If the normal selling price is reduced (ie discounted), then sales tax is paid on the reduced price.

I'm just happy that the tax man hasn't also decided the rebate is income in my hands.

 

[davidzvi]

I think the logic the NY AG is using is this.

Assume BHPV pays $1000 for the camera, lists for $1500, offers $200 instant rebate. So buyer pays $1500 minus $200 instant rebate = $1300.

Camera manufacturer reimburses BHPV the $200 rebate so BHPV has still earned $1500 and thus is supposed to claim that $200 manufacturer reimbursement as income. BHPV may be claiming $300 per unit income whereas the NY AG may claim they should be claiming $500 per unit income.

In this case it would be an income tax issue and not a sales tax issue. My understand is NY AG is looking at sales tax.

Exactly, unlike Value Added Tax (as used in Europe) which is payable on the difference between what the retailer pays and what he sells for.

I suspect their argument goes like this.
The price is quoted as $1500, with a rebate (not a discount).
The sale is for $1500.
Therefore the sales tax is on $1500.
The instant rebate is a separate issue not covered by tax law, it is not relevant to the calculation. It follows the sale, even if instantly.

It may matter how the customer receives the instant rebate. It might be a separate payment for example, perhaps from the manufacturer.
A rebate doesn't sound to me the same as a discount, legally.
Don't expect common sense to apply here.

Instant rebates are just that instant. You don't pay the $1500, you only pay the $1300 in this case. "Traditional" rebates would be pay full price and get money back later in which case the full tax amount would have been collected.

Question: Why do people from out of state buy from B&H?
One Answer: (That a lot people don't like to admit) "I don't pay sales tax"

Not anymore, they now have to collect tax. But I still look there.

--------
In MA at least, cell phones are always taxed at the full retail price through wireless carrier stores (Verizon for example). State specific tax law on phones.

BUT...... If you buy an iPhone at an Apple store you only pay tax on the discounted price. The reasoning I'm told is since Apple is the manufacturer they can effectively change the retail price to the discounted price if they want while resellers can only apply the discount.

 

[Mike Buckley]

Question: Why do people from out of state buy from B&H?
One Answer: (That a lot people don't like to admit) "I don't pay sales tax"

Not anymore, they now have to collect tax.

Consumers that use B&H's PayBoo card in effect avoid the sales tax. https://www.bhphotovideo.com/credit-cards

 

[RoyC01]

I'm not assuming anything about whether the law has been violated, as I don't pretend to understand the law. I am assuming that if many camera retailers are not collecting sales tax on the instant rebates, that it's also rampant in other retail markets including the automobile market.

The issue is not the collection of the tax it is the payment.
I would be lead to believe that others are in compliance since only B&H is involved. The AG could have charged a lot of business at once.

 

[bpdougd]

Rick, do you know we have rain tax in Germany?
It is calculated by the size of your roof of your house and the paved aera of your lot...

Very creative
Klaus

...Begin thread hijack...
We had something similar here except that it was imposed as a fee. It was shot down by the courts as an unconstitutional end-run around the Colorado constitution's requirement that tax increases have to be voted on and this was, in effect, a new tax.

It was called a storm water fee and based, as yours is, on the percent of impervious surface area on your property. (The interesting backstory is that the city of Colorado Springs was sued by the city of Pueblo for excessive runoff damaging their water quality. Needing money to comply with the legal settlement with Pueblo and knowing that Colorado Springs very conservative voters would never approve a new tax, the storm water fee seemed the perfect answer. Pueblo is, as you would expect from the lawsuit, downstream from Colorado Springs. )
... End thread hijack...

 

[Mike Buckley]

The issue is not the collection of the tax it is the payment.

I am assuming that when a retailer collects the sales tax it is also paid. SImilarly, I am assuming that when a retailer does not collect the sales tax it is also not paid.

 

[Mike Buckley]

...Begin thread hijack...
... End thread hijack...

It was such an interesting hijack!