Kat Bryant  |  May 26, 2020

Category: Consumer News

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overstock.com on tablet

A customer has filed a class action claiming Overstock.com is “illegally and erroneously” charging Missouri residents nearly double the legal tax.

The lawsuit states that Kathryn Schott purchased merchandise in February from the online retailer, and it was shipped to her home from an Overstock facility in Iowa. The company reportedly collected 8.25 percent in taxes from her on that merchandise.

However, according to the Missouri Department of Revenue, the correct tax rate is far lower than that: 4.225 percent.

Through its website, Overstock.com sells home décor, furniture and other merchandise acquired primarily from failed retailers, then ships those items from one of several distribution sites.

In the plaintiff’s case, the goods were shipped from Overstock’s facility in Iowa to her home in Missouri.

Under the Missouri Merchandising Practices Act, retailers must charge either sales or use tax on sales of their products to Missouri residents.

Sales taxes are levied on “the sale of tangible personal property between a Missouri seller and a Missouri purchaser,” the Overstock class action lawsuit reports. The state sales tax is set at 4.225 percent. The jurisdiction where the seller is located may apply additional sales tax to such transactions.

However, state law also provides for what’s called the “in commerce” sales tax exemption, which applies to retail transactions conducted between buyers in Missouri and sellers in other states. So, instead of sales taxes, such interstate purchases are subject to Missouri’s 4.225 percent compensating use tax — levied for “the privilege of storing, using or consuming within this state any article of tangible personal property.”

woman online shopping on Overstock.comThe Overstock class action lawsuit argues that Overstock.com’s sales involving shipment to Missouri purchasers are subject only to that compensating use tax of 4.225 percent.

Overstock and other sellers from outside Missouri are required to collect that amount from Missouri buyers and remit the funds to the state.

Schott is far from the only state resident affected by this practice, the Overstock.com class action lawsuit argues.

“Despite clear Missouri law to the contrary, Overstock.com has charged in the past, and on information and belief continues to charge, excess ‘tax’ on sales of their products through remote sales channels … to Missouri purchasers that are shipped from an out-of-state facility to a Missouri delivery address.”

Missouri customers have been paying more tax than required “under a mistake of fact due to Overstock.com’s misrepresentations,” the Overstock class action lawsuit states.

“Overstock.com’s actions alleged herein constituted, and continue to constitute, illegal deceptive practice in violation of [Missouri law] in that they were and are deception, fraud, false pretense, false promise, misrepresentation, unfair practice and/or the concealment, suppression, or omission of material fact in connection with the sale of merchandise in trade or commerce, within the meaning of the [Missouri Merchandising Practices Act],” the Overstock.com class action lawsuit claims.

Schott originally filed suit in the St. Louis County Circuit Court, but the case was moved to federal court as a proposed class action on behalf of all Missouri customers of Overstock.com in the past five years.

The plaintiff asserts that “thousands of class members have similarly purchased numerous other products from Overstock.com through remote sales channels, including its internet website, that were delivered from an out-of-state facility to a Missouri delivery address and were illegally and erroneously charged tax monies at a higher tax rate rather than the lower use tax rate.”

The only material difference among these people, according to the Overstock class action lawsuit, is the exact amount each overpaid in taxes based on the total cost of the merchandise they ordered.

“Unless a class is certified, Overstock.com will retain monies received and Plaintiff will have suffered damages as a result of Overstock.com’s illegal collection of taxes from Plaintiff and proposed members of the Class,” the Overstock.com class action lawsuit argues. “Unless a class-wide injunction is issued, Overstock.com will continue to commit violations against Missouri customers.”

The class action claims Overstock.com is in violation of the Missouri Merchandising Practices Act and engaged in unjust enrichment, negligence, and money had and received.

In addition to injunctive relief to stop Overstock’s allegedly illegal collection of taxes, the plaintiff is seeking restitution, compensatory and punitive damages, and court costs.

Overstock’s tax overcharges are “malicious, corrupt, and intentional and/or reckless,” Schott maintains, adding: “Allowing Overstock.com to retain the aforementioned benefits violates fundamental principles of justice, equity, and good conscience.”

The plaintiff is represented by Daniel J. Orlowsky of Orlwosky Law LLC and Adam M. Goffstein of Goffstein Law LLC.

The Overstock Class Action Lawsuit is Kathryn Schott, et al. v. Overstock.com Inc., Case No. 4:20-cv-00684, in the U.S. District Court for the Eastern District of Missouri.

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