Getty Images Extortion Letter with Sales Tax

[Oscar Michelen]

Yes I  realize that would be their claim. My point is that if that is the case, then why are they only charging  it now and again and not in every letter because presumably they could make the same argument for all settlements and are they then sending the government the sales tax they collect?

[Matthew Chan]

Sales tax is highly regulated with very specific rules in reporting and payment.  In the case I saw, the letter was being sent to a recipient in Texas. But why Texas?  Generally sales tax is only collected by businesses that have a physical presence. There appears to be no Getty presence we can find in Texas at this time. Unless it is one of the Getty Images subsidiaries that have a presence.

In any case, all the Getty letters have specified that this is a "settlement", not a retroactive license or another product-based item subject to sales tax.

As aggressive as Getty might be, it is difficult for me to imagine them doing something so blatantly underhanded.  There is a piece of information we do not have.

We absolutely need to find out which states are getting letters where sales tax is being added to the amount.  Something is definitely off here.

This could be very interesting.  To my knowledge, you cannot collect sales tax on an infringement; that's a settlement not a sale. More importantly, the forum is correct that if you collect sales tax, you better forward it to the proper authorities as opposed to keeping it yourself. It would be interesting to track when and where they ad sales tax to their letters. We are seeing it once in a blue moon in my office as well recently. I would like to hear from any Getty victim who settled with Getty and included sales tax in their settlement. There may be the elements of a class action there if Getty is wrongfully charging sales tax.

[Oscar Michelen]

Will start to have my office keep a lookout for "tax added" letters

[Robert Krausankas (BuddhaPi)]

why do I have a feeling I 'll be making some calls to different states in the near future??

Will start to have my office keep a lookout for "tax added" letters

[Couch_Potato]

I'm unfamiliar with US law but as has already been mentioned they do charge VAT here in the EU. That to me suggests they are trying to form a sale contract rather than a legal settlement which is why I have long held the view that the reason they do not take any cases to court is because there are very strict laws regarding forming contracts that would not side well with them.

If adding sales tax in the US means they are trying the same thing then would that not strengthen the letter recipients position because any contract can be negotiated and a judge would surely not look favourably on a company threatening legal action to try to complete the contract?

[stinger]

Oscar, I just need to say that I just love it when a lawyer uses the words "Getty" and "class action lawsuit" in the same sentence. 

[Moe Hacken]

Good point, Stinger!

It could be even messier than "Getty" and "class action suit". The state of Texas would be in the unfavorable position of having to explain why they received sales tax monies for a settlement if it turns out to be illegal. Their rules are fairly specific and that cuts both ways. Some states have actually had their sales tax regulation shaped by class actions in the past.

Getty would be in hot water even if it's legal to collect sales tax in Texas for a settlement if it can be proven that they did so inconsistently. They were either obligated to collect sales tax for every settlement or obligated NOT to collect sales tax at all. They can't have it both ways. We've seen them make other mistakes, so it wouldn't be entirely out of the question that they're screwing this up.

Oscar and Buddhapi make a good point when they suggest that we could try to keep track of how consistent they have been with this practice.

[Matthew Chan]

I just received another Getty extortion letter with a sales tax amount tacked on. This time it is from Colorado with a tax rate of 4% being added.

We now have a Texas letter with 8.25% sale tax and a Colorado letter with 4% sales tax.

I have a working theory of this new sales tax thing but I want to see if this is going out to most of the 50 states or not. I am not revealing my theory at this time until I have some confirmation.

[SoylentGreen]

Thanks for the info, Matt.  Quite interesting...

Here's some posts regarding the Irish VAT (tax) thing.  Once contributor mentioned that:
"Getty are issuing invoices headed with a US address, posted in London, with no VAT number but charging UK VAT. It is illegal to charge UK VAT without a UK VAT number on the invoice. HM Revenue and Customs takes a very dim view of this kind of malpractice."
http://www.sitepoint.com/forums/printthread.php?t=390902&page=4&pp=25

Also, a refence to Irish VAT on this forum:
http://www.extortionletterinfo.com/forum/profile/?area=showposts;sa=topics;u=14570

Both posters had name "Ian", however, the dates of alleged infringement and the amount demanded by Getty differ.

Many other postings related to the Irish VAT here also:
http://www.startups.co.uk/getty-images-unlawful-use-of-pictures.html

Not sure if it's helpful in terms of the US, but it's interesting.  Maybe some pieces of the puzzle are in there?

S.G.

[Couch_Potato]

Here is a definitive list of what is required to charge VAT:

What a VAT invoice must show
A VAT invoice must show:
an invoice number which is unique and follows on from the number of the previous invoice - if you spoil or cancel a serially numbered invoice, you must keep it to show to a VAT officer at your next VAT inspection
the seller's name or trading name, and address
the seller's VAT registration number
the invoice date
the time of supply (also known as tax point) if this is different from the invoice date - see below
the customer's name or trading name, and address
a description sufficient to identify the goods or services supplied to the customer
For each different type of item listed on the invoice, you must show:
the unit price or rate, excluding VAT
the quantity of goods or the extent of the services
the rate of VAT that applies to what's being sold
the total amount payable, excluding VAT
the rate of any cash discount
the total amount of VAT charged

The Getty letter I have seen does not mention what rate of VAT applies, a VAT registration number or a sequential invoice number. They also don't mention the VAT for each item, just a total VAT with no VAT rate.

The letter is a couple of years old now so not sure if their practice has changed but if their letters are still unchanged I think we can see why no cases go to court here in the UK.

[Moe Hacken]

I just received another Getty extortion letter with a sales tax amount tacked on. This time it is from Colorado with a tax rate of 4% being added.

We now have a Texas letter with 8.25% sale tax and a Colorado letter with 4% sales tax.

I have a working theory of this new sales tax thing but I want to see if this is going out to most of the 50 states or not. I am not revealing my theory at this time until I have some confirmation.

There are five states that don't collect sales tax:

http://www.bankrate.com/finance/taxes/states-with-no-sales-taxes-1.aspx

It must be noted that they find other, sneakier ways of collecting revenue. The other 45 are all over the place for the amount of tax imposed and the list of goods and services the tax would apply to. Colorado's rate of 4% seems pretty low compared to California and Texas, which are among the wealthiest states in the US.

[Jerry Witt (mcfilms)]

California, wealthy? We're broke. We keep kicking the can down the road every year and producing budgets that are pure fiction. http://latimesblogs.latimes.com/california-politics/2012/05/sp-issues-warning-on-california-finances.html

But we sure do get to pay a great sales tax rate: 8.25% statewide and 9.25% in Santa Monica.

[Moe Hacken]

California, wealthy? We're broke. We keep kicking the can down the road every year and producing budgets that are pure fiction. http://latimesblogs.latimes.com/california-politics/2012/05/sp-issues-warning-on-california-finances.html

But we sure do get to pay a great sales tax rate: 8.25% statewide and 9.25% in Santa Monica.

OUCH. Almost double digits in Santa Monica, huh? I do realize California's pretty much broke, except "on paper".

San Diego has been nicknamed "Enron-by-the-Sea" for a decade now because our fine City Hall leadership pulled a total boner and put the city in the hole for more than two BILLION dollars by bilking the city employees' pension fund.

Kicking the can down the road is an art form perfected by San Diego since it became a City almost 100 years ago. The whole state is a total mess but of course the numbers are massaged to keep us sedated. According to KPBS, S&P is saying San Diego's happy times are here again:

http://www.kpbs.org/news/2012/apr/25/san-diegos-sp-credit-rating-improves/

Getting back to the original topic, I don't see how it's legal for anyone to charge sales tax for a settlement, as Oscar mentioned. It's not really a sale in the pure sense even though they require a "retroactive purchase" as part of the settlement.

Has anyone received an extortion letter in California with sales tax tacked on to the total amount? That would be worth a phone call to the State Board of Equalization's legal department to find out how legitimate such a practice would be.

[Oscar Michelen]

Almost from the beginning of this program, Getty has added VAT to the European extortion letters but I never gave it much thought because we don't get involved in cases outside the States and I just assumed it must be allowed on settlements as well. Maybe Getty saw how much extra cash it was raking in from VAT and decided to start a pilot program in the States.  Wouldn't it be really  interesting if we find a letter charging sales tax in one of the five states that don't collect sales tax?

[MrNiceGuy]

The NEXUS laws pertaining to sales tax collection must be paid to the state in which the business is conducted. For example, I am in Colorado and any sales tax that Getty tries to collect, must be paid to Colorado and they can only collect it if they have a business presence of some sort in Colorado and a proper Colorado sales tax license.

This should not be reported to Texas Dept of Revenue but to your respective state since they are getting cheated out of the tax money. Texas won't care as it is bringing in additional revenue from out of staters.