SOURCE: Sadowski Fischer PLLC

September 08, 2014 11:28 ET

The Attorney General Settles First State Sales Tax Lawsuit Against a New Jersey Retailer Under the New York State False Claims Act and Its Qui Tam Provisions

NEW YORK, NY--(Marketwired - September 08, 2014) - New York's Attorney General has settled the first case against an out-of-state retailer, using the New York State False Claims Act and its qui tam provisions to collect state sales tax and corporate franchise tax from a New Jersey company. Topline Appliance Center is a New Jersey retailer of high-end kitchen appliances that was selling merchandise and doing business in New York, but evading and failing to charge, collect and remit sales tax to New York State. Topline has showrooms located in Westfield, Roselle and Wall Township, New Jersey. The lawsuit was commenced by a whistleblower, represented by Sadowski Fischer PLLC, who filed the complaint under seal and alerted the Attorney General of this fraud. Topline has agreed to pay New York State over $ 1.5 million in back taxes, penalties and interest. The whistleblower received 20% of the State's recovery as provided under New York States False Claims Act qui tam provisions.

The complaint alleged that kitchen designers were referring their wealthy New York clients to Topline, a high-end appliance retailer in New Jersey, in order to avoid paying New York sales tax. The Attorney General's investigation concluded that it was violating New York State sales tax law by selling appliances, installations and service contracts to New York residents without registering, charging and remitting to New York sales tax on purchases, as well as failing to pay New York corporate franchise tax. 

By failing to impose sales taxes on Topline's wealthy New York customers, Topline had an unfair and illegal advantage over its New York State competitors. Topline customers paid significantly less than customers of retailers who were complying with the law because Topline reduced the price charged on high-end appliances by the amount of New York State sales tax (up to 8.75%) that its New York competitors properly collected and paid. By virtue of this settlement, New York received its fair share of the tax revenue generated by the sale of high-end appliances to New York residents. In addition, wealthy customers are no longer able to avoid New York sales tax on high-end kitchen renovations with the installation of expensive appliances. In addition, this settlement levels the competitive playing field between New York and New Jersey retailers vis-a-vis sales in the lucrative New York marketplace.

The False Claims Act is one of the state's most powerful civil fraud enforcement tools because it allows whistleblowers and prosecutors in partnership to take legal action against companies or individuals that defraud the government. Fraudsters found liable under the False Claims Act must pay triple damages, penalties and attorneys' fees. Under the False Claims Act, whistleblowers may be eligible to receive up to 25 percent of any money recovered by the government as a result of information they provide.

Thirty states and the federal government have passed False Claims Acts, but only New York's expressly covers tax fraud. The Attorney General's Taxpayer Protection Bureau is charged to work with whistleblowers to enforce the False Claims Act in tax and other government fraud cases.

The False Claims Act encourages individuals or entities to come forward and expose fraud. By their nature, fraud schemes lurk in the shadows, so the Government relies on insiders who blow the whistle on the illegal schemes that law enforcement has neither the knowledge nor investigative resources to uncover. As Sadowski Fischer partner Raphael Katz stated, in conjunction with this settlement: "The partnership between private individuals and the Taxpayer Protection Bureau is the most effective tool to combat fraud and abuse in government funded programs, including tax collection." 

About Sadowski Fischer PLLC
Sadowski Fischer PLLC is a boutique New York law firm specializing in its whistleblower qui tam practice, having successfully represented whistleblowers nationwide. Sadowski Fischer attorneys are seasoned litigators, and have successfully litigated qui tam whistleblower cases that lead to significant recoveries. Sadowski Fischer lawyers are recognized by other attorneys in New York City as being among its "Super Lawyers."

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