Class Action Lawsuit: Forever 21 Illegally Keeps Sales Tax on Returns

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Fashion retailer Forever 21 Inc. illegally withholds sales tax payments from returned merchandise, according to a class action lawsuit filed Wednesday in California state court.

According to the Forever 21 class action lawsuit, the retailer fails to disclose that it does not provide customers with full credit for the amount paid for merchandise because it withholds the sales tax that was imposed at the time of purchase.

“In effect, Defendants effectively charge over seven percent of the purchase price by withholding sales tax during customer exchanges/returns,” the Forever 21 class action lawsuit says. Forever 21’s exchange policy allegedly also fails to inform customers that the sales tax will be withheld, in violation of California law.

The Forever 21 class action lawsuit was filed by plaintiff Jacqueline Tatum. She alleges that she paid a total of $13.95 ($12.80 plus 9 percent sales tax) for a shirt in early August 2013. When she returned the shirt later that month, Forever 21 allegedly only gave Tatum $12.80 in store credit and withheld the $1.15 sales tax she paid at the time of purchase.

According to the class action lawsuit, California law requires retailers that have policies of not giving full refunds to post an exchange policy that informs consumers about whether they are entitled to the full purchase price of merchandise and any conditions that govern the refund, credit or exchange of the merchandise.

Tatum alleges she carefully reviewed Forever 21’s exchange policy prior to making her purchase and anticipated that she would be able to receive store credit for the full amount she paid for merchandise. Although she complained to the store manager about the improper charges, Tatum says the manager refused to refund the sales tax amount. She claims that she has had similar experiences at other California Forever 21 locations. Had the retailer not violated California law, Tatum says she would have received store credit for the full purchase price of the merchandise when she returned it.

The Forever 21 class action lawsuit was filed on behalf of a Class of individuals who purchased merchandise (excluding jewelry or sale items) at a California Forever 21 location (or online, if the billing address for the online purchase is located in California) and returned the items within the last four years and received store credit that did not include the sales tax paid for the merchandise.

Tatum asserts claims under the Consumer Legal Remedies Act and Unfair Competition Law. She seeks restitution, injunctive relief, damages for breach of contract and costs of bringing the class action lawsuit.

Tatum is represented by David C. Parisi and Suzanne Havens Beckman of Parisi & Havens LLP and Ethan Preston of Preston Law Offices.

The Forever 21 Sales Tax Class Action Lawsuit is Jacqueline Tatum, et al. v. Forever 21 Inc., et al., Case No. BC548896, in the Superior Court for the State of California, County of Los Angeles.