Tax Whistleblower Uncovers Failure By “My Pillow” To Collect Sales Tax On Millions Of Dollars In Sales To New York State Customers
Attorney General Eric T. Schneiderman today announced a $1.1 million dollar settlement resolving a whistleblower case against My Pillow, Inc., a Minnesota corporation that sells pillows and other sleep-related products. The lawsuit alleged that My Pillow knowingly failed to collect and remit New York sales taxes on sales made to New York customers through its website and over the telephone.
The action began when a whistleblower filed a complaint in state Supreme Court in Manhattan. Based on its investigation of the whistleblower’s allegations, the Attorney General’s Office contends that from 2011-2015, My Pillow failed to collect and remit approximately $537,000 in sales taxes on taxable sales made over the phone and through the Internet to New Yorkers. My Pillow was required to collect and remit sales taxes because the company sold products at trade shows in New York through independent contractors and other representatives, among other reasons. The Attorney General’s Office claims that My Pillow knowingly made false records or statements concerning the sales taxes it was required to collect and remit.
“Out-of-state companies like My Pillow cannot shirk their obligations to New York. Companies that fail to collect and remit applicable sales taxes harm the State and local governments—something that cannot be tolerated,” said Attorney General Schneiderman.
This settlement is the latest tax-related recovery resulting from an action filed under the New York False Claims Act. The Act is one of the state’s most powerful civil fraud enforcement tools because it allows whistleblowers and prosecutors to take legal action against companies or individuals that defraud the government. Persons found liable under the False Claims Act must pay treble damages, penalties and attorneys’ fees. Under the False Claims Act, whistleblowers may be eligible to receive up to 30 percent of any money recovered by the government as a result of information they provide. The whistleblower in this action will receive $221,800.00 from the settlement proceeds.
Attorney General Schneiderman expresses his thanks to the whistleblower and its attorneys, and to the New York State Department of Taxation and Finance, for their assistance in bringing this case to resolution.