Are Sales Tax Class Action Lawsuits the New Trend?

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Companies are being hit with class action lawsuits involving allegations of illegal sales tax practices. Papa John’s Pizza has already been the target of two class action lawsuits accusing the company of illegally charging sales tax on delivery charges. Other class action lawsuits have accused companies of improperly collecting sales tax on the full purchase price even when customers use coupons or apply other discounts.

Sales tax class action lawsuits are a controversial issue these days, as critics raise concern that consumers are willing to take legal action over what may amount to a few cents. While these charges may seem tiny on an individual basis, they can add up to millions of dollars paid by consumers over time. And many consumers are concerned that these sales tax practices violate the law.

Papa John’s is currently facing class action lawsuits in Illinois and Florida. They were filed by plaintiffs who allege they were incorrectly charged sales tax on delivery fees. The Illinois class action lawsuit alleges the pizza chain illegally tacked on a 16-cent sales tax for each delivery charge of $2.39. Allegedly, Papa John’s charges sales tax on its delivery charges at all of its 122 Illinois locations.

However, Papa John’s is not the only company to be accused of improperly charging sales taxes. In 2012, consumers in Missouri filed a class action lawsuit against Home Depot alleging the company violated state law by collecting sales tax on purchases that involve coupons. The plaintiffs claim Home Depot charged a sales tax based on the full retail price of the item purchased, even if the price the customer actually paid was much lower after the coupon was applied.

Similarly, Hertz Rent-A-Car was hit with a class action lawsuit accusing it of illegally charging sales tax on the pre-discount total when customers used coupons or applied other discounts. This practice may have cheated customers out of millions of dollars. Wal-Mart Stores Inc. is facing a similar class action lawsuit in Pennsylvania state court. In April, the City of Los Angeles was accused of improperly overcharging residents by relying on non-gas related fees when calculating its gas utility user tax, allegedly in violation of state law.

Sales tax is imposed in 45 states and the District of Columbia. In states with sales tax, retailers are required to collect the sales tax and give it to the state. In many cases, it is unclear whether retailers are purposefully imposing improper sales taxes to pad their pockets or if improper sales tax collection is the result of an error in the point of sale system. Regardless of the reason behind the charge, consumers have the right to take legal action when they feel they’ve been treated unfairly. Although a few cents here and there may not seem like a big deal, consumers may end up paying millions of dollars in taxes they should not have owed. As awareness of potentially excessive sales taxes grows, it is likely that the number of class action lawsuits against retailers and other businesses will continue to rise.