Legging Co. Says LuLaRoe Sales Tax Class Action Lawsuit is Moot

LuLaRoe is fighting a class action lawsuit alleging it improperly charged sales tax by arguing that it refunded all the sales tax at issue.

The LuLaRoe sales tax class action lawsuit alleged that the multilevel marketing company charged sales tax to residents of states with no sales tax, including Alaska.

The plaintiff says that the stretchy clothing retailer failed to disclose the improper collection of sales tax as well.

LuLaRoe contends that it refunded all consumers from sales tax-free states after being hit with the class action lawsuit.

According to LuLaRoe’s motion to dismiss the class action lawsuit, the plaintiff “has not and cannot allege any concrete and particularized injury beyond the overcharged sales tax, for which she has already received a refund.”

LuLaRoe contends in its motion to dismiss the class action lawsuit that it mistakenly collected sales tax due to limitations on its sales tax software system.

“Recognizing the problem, [LuLaRoe (LLR)] communicated that issue to its Retailers, and spent extensive time and resources fixing the problem, including issuing refunds to all affected consumers through an automatic refund program,” states the retailer in its motion.

LuLaRoe further contends that it did not retain the sales tax proceeds, instead, it paid all sales taxes to the sales tax jurisdictions where they were collected.

LuLaRoe is a direct sales marketer of, most notably, brightly colored and patterned leggings as well as other clothing items. Local sales retailers actually purchase clothing from LuLaRoe and then resell it to third-party customers.

“The Retailers are responsible for managing all aspects of their businesses, including inventory control and sales, advertising, and pricing,” notes LuLaRoe’s motion to dismiss the class action lawsuit.

The clothing retailer says that it signed up for tax software called Audrey in 2014 under the false belief that the program would be able to track sales through geolocation and determine whether sales tax should be charged based on where purchases were shipped.

However, LuLaRoe says that Audrey was actually programed to assess sales tax on where the retailers were located.

LuLaRoe insists that, in addition to remitting sales tax proceeds to the states where it was owed, the company implemented measures to stop incorrectly collecting sales tax once it became aware of the problem.

The company says it sent a letter outlining the sales tax policy to all retailers in 2016 while it worked on correcting the sales system, Audrey.

However, LuLaRoe discovered that Audrey could not reprogramed to correctly calculate sales tax. Ultimately, claims LuLaRoe, the entire system was replaced with Bless in May 2017.

LuLaRoe also contends that a similar class action lawsuit filed in Pennsylvania was tossed because the company showed it had refunded the sales tax.

Plaintiffs are represented by Bruce Carlson, Kelly K. Iverson and Kevin W. Tucker of Carlson Lynch Sweet Kilpela & Carpenter LLP; and James J. Davis Jr. and Goriune Dudukgian of the Northern Justice Project LLC.

The LuLaRoe Sales Tax Class Action Lawsuit is Van, et al. v. LLR Inc. d/b/a LuLaRoe, et al., Case No. 3:18­-cv-­00197, in the U.S. District Court for the District of Alaska.

UPDATE: On Nov. 26, 2018, LuLaRoe customers are arguing against a dismissal motion of their sales tax class action lawsuit, saying the refund program isn’t enough to cover actual financial injuries.