Peloton class action over sales tax claims sent to arbitration

Top Class Actions’s website and social media posts use affiliate links. If you make a purchase using such links, we may receive a commission, but it will not result in any additional charges to you. Please review our Affiliate Link Disclosure for more information.

Update:

• Peloton customers must arbitrate claims that the fitness company breached contract and consumer protection laws by charging members in New York, Massachusetts and Virginia unlawful sales tax on their subscriptions, a New York federal judge has ruled.
• On Aug. 29, U.S. District Judge Edgardo Ramos granted Peloton Interactive Inc.’s motion to compel arbitration, ruling that the company did not waive its ability to seek arbitration after it failed to pay filing fees to the American Arbitration Association and defaulted on arbitration in another case.
• “While Peloton defaulted in arbitration in regard to separate claims concerning deletion of streaming videos, Plaintiffs provide no support for the proposition that Peloton’s default there also waives its ability to arbitrate completely distinct action against completely different parties,” the order states. 
• The original lawsuit claims the company charged Peloton members sales tax on their memberships despite the tax-exempt status of the digital goods they were purchasing.

Peloton class action lawsuit overview:

• Who: Peloton owners in several eastern states filed a class action lawsuit. 
• Why: They say that Peloton charged them an “unlawful” sales tax on their subscription. 
• Where: The Peloton lawsuit was filed in New York federal court. 

(Aug. 16, 2021)

Peloton breached contract and consumer protection laws by charging members in New York, Massachusetts, and Virginia unlawful sales tax on their subscriptions, a new class action lawsuit alleges.

The class action lawsuit was filed in New York on August 12 by lead Plaintiffs Brannon Skillern and Ryan Corken. They claim the company charged Peloton members sales tax on their memberships despite the tax-exempt status of the digital goods they were purchasing  — a violation of state law.

The company’s practice is willfully and knowingly unlawful, deceptive, and fraudulent, the Peloton members allege. Claims of unlawful sales tax charges add to the legal woes that have besieged the company, including class action lawsuits alleging the defective Tread+ put kids and pets at risk, as well as complaints about defective pedals and shrinking class lists. 

Peloton members complain of ‘unlawful’ sales tax

According to the class action lawsuit,  Skillern and Corken purchased Peloton Bikes and subscribed to Peloton’s All-Access Membership subscription for $39 per month in 2019.

Peloton went on to charge the members both a more than 6 percent “sales tax” on their subscriptions every month through December 2020 even though no such tax was actually owed under state law, resulting in substantial overcharges in violation of Peloton’s Membership Terms and state law, the claim states.

With a $39 per month All-Access Membership subscription, users can access Peloton’s full catalogue of classes along with real-time performance metric tracking when used with the company’s bike or treadmill. Subscription to Peloton’s All Access Membership is required with the purchase of the Peloton Bike and Peloton Tread.

By purchasing or using a Peloton Membership, subscribers agree to Peloton’s Membership Terms, where they “agree to pay the monthly fee specified” at purchase “plus any applicable taxes and other charges,” the class action lawsuit states.

Peloton members also provide a payment method that is saved and charged on a recurring, monthly basis at the beginning of the monthly membership cycle, which is also authorized “to pay any amounts described [in the Membership Terms] without requiring a signed receipt.”

Peloton used that payment method to charge consumers sales tax on its digital goods, such as Peloton Memberships, which are not taxable under the laws of several US states including in Massachusetts, New York, and Virginia, collecting millions of dollars in overcharges, the class action lawsuit explains.

“Furthermore, Peloton willfully and knowingly overcharged its subscribers a false and unlawful sales tax on their Peloton Memberships. When customers complained or inquired about the impermissible tax charge, Peloton assured them that its business practices comply with state and local tax requirements,” the class action lawsuit reads.

“Worse, Peloton admittedly has not remitted the unlawfully collected ‘sales tax’ to state authorities, recouping these overcharges in an effort to maximize profits at their subscribers’ expense and under the guise of a state-imposed tax.”

Although Peloton has changed its taxation practices, it has not reimbursed members who were overcharged, the class action lawsuit states.

Skillern and Corken are suing the company on behalf of anyone living in Massachusetts, New York, or Virginia who paid tax on a Peloton Membership through December 31, 2020. 

They are suing for breach of contract and violation of state consumer protection and business laws. They seek certification of the Class, damages, interest, legal fees and costs, and a jury trial.

Are you one of the Peloton members that lives in a state where digital sales tax is exempt? Tell us whether you’ve been overcharged in the comments section!

Skillern and Corken are represented by Seth Ard of Susman Godfrey L.L.P., and Steven G. Sklaver, Krysta Kauble Pachman, and Jesse-Justin Cuevas of Susman Godfrey L.L.P.

The Peloton Sales Tax Overcharging is Skillern, et al., v. Peloton Interactive, Inc., Case No. 1:21-cv-06808 in U.S. District Court Southern District of New York.

Read About More Class Action Lawsuits & Class Action Settlements:

• DuPont, Corteva, Chemours to Pay $50M Settlement for Toxic Chemicals in Delaware
• Payday for Class Action Lawyers Granted $40.5M for Work on $135M DaVita Settlement
• Best Nutritionals Krill Supplements Are “Not Krill,” says Class Action Lawsuit
• Judge Axes Woman’s Claims Against Peloton, Saying Lack of Info Is ‘Puzzling’