Foley Secures Bed Bath & Beyond Win in Tax Dispute

Foley & Lardner LLP obtained a victory as lead counsel on behalf of firm client Bed Bath & Beyond, a New Jersey-based chain of merchandise retail stores, in a dispute with the Michigan Department of Treasury over taxes on marketing materials mailed to state residents.

On March 23, 2022, The Michigan Supreme Court upheld the state appeals court’s July 2021 ruling that Bed Bath & Beyond is not liable for use tax on the promotional materials as it gave control of the materials (advertising brochures and coupons) to an out-of-state marketing agency, which subsequently delivered the materials to the U.S. Postal Service.

The appeals court said that the home furnishings retailer is not liable for the tax because its contract with the marketing agency, Harte Hanks Mailing House, ceded control over the materials and discretion over their transfers to the U.S. Postal Service. That ruling affirmed a state Court of Claims summary disposition ruling negating a $317,000 Michigan Department of Treasury assessment for the period August 1, 2008, to July 31, 2012.

Lynn Gandhi, the lead partner of the Foley team representing Bed Bath & Beyond, said, “The court’s order was appropriate, given the facts of the case and Michigan’s prior precedence that has determined that the mere distribution of advertising, without more, does not constitute a taxable use.”

The Foley team representing Bed Bath & Beyond was led by Partner Lynn Gandhi and included Associate Regina Gilmour.