Flag Case Resolution Funds Patriotic Efforts

Attorney General Spitzer today announced a settlement with retailing giant K-Mart over the company's improper collection of sales tax on American flags.

As part of the settlement, K-Mart will pay almost $10,000 to fund distribution of a booklet on flag etiquette and provide for the posting of flags on the graves of veterans.

"The American flag is not an ordinary article of commerce," said Spitzer "This settlement will help inform all retailers of the fact that state law prohibits the collection of sales tax on flags. In addition, the settlement will fund initiatives that will help build respect for the flag and for those who served our nation in the military."

Earlier this year, a consumer informed the Attorney General's office that a K-Mart store in the Hudson Valley was charging tax on the sale of American flags, including miniature plastic flags on a wooden stick and full-size flags flown from flag poles. The store policy violated Section 1115 of the state tax code.

A subsequent review by the Attorney General office found other K-Mart stores charging tax on flags. The Attorney General's office then informed K-Mart officials of the law and the company agreed to stop charging sales tax on flags. While the company is believed to have sold thousands of taxed flags, it was considered impractical to seek the buyers of those flags to provide a refund, which in many cases would amount to only a few cents. Instead, the company agreed to an $8,500 payment to two veterans groups.

These funds will be used to support distribution of American Legion handbook entitled "Let's Be Right on Flag Etiquette." Several thousand copies of the booklet -- which describes the proper way to display and handle a flag -- will be provided to schools statewide. In addition, a portion of the funds will go to a Veterans of Foreign Wars program that places miniature flags on the graves of veterans.

The settlement also includes a $1,000 payment to the state to cover costs associated with an investigation into the matter.

The case was handled by Assistant Attorney General Matthew Barbaro of the Consumer Frauds Bureau. Barbaro also serves as the Attorney General's official liaison to the veterans' community.

"I was pleased to work on behalf of the Attorney General in bringing about this settlement. I know this effort will be appreciated by veterans and others for whom the flag is an extremely important symbol," said Barbaro, who served as a Army officer during the Vietnam War.