Amazon Sales Tax on Virtual Items Violates Its Own Policy, Tax Laws, Says Class Action

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Amazon Sales Tax Class Action Lawsuit Overview:

• Why: The plaintiff accuses Amazon of unlawfully charging sales tax on digital items.
• Who: An Amazon customer filed a class action lawsuit against online retail giant Amazon.com.
• Where: The class action lawsuit was filed in Washington federal court.

A Massachusetts resident filed a class action lawsuit against Amazon.com for breach of contract and consumer protection violations by charging customers sales tax on digital products that are supposed to be tax-exempt.

The lead plaintiff is Debbie Chaves, who bought two digital gift cards on Amazon.com in August 2021 and was charged a 6.25 percent sales tax on her purchases, despite Amazon’s Conditions of Use stating “No tax is charged when purchasing gift cards,” according to court documents. 

Chaves wants to represent a nationwide Class, as well as a subclass of Massachusetts residents, including anyone who has faced similar sales tax charges from Amazon.com.

Amazon has not reimbursed its customers for the incorrectly charged sales tax, and continues its practice of charging sales tax on digital items, according to the class action lawsuit. The complaint maintains that Chaves and the class members would not have paid the sales tax had Amazon not automatically included it or had they known the sales tax was not owed by law. 

Amazon Iffy on Sales Tax Policies

The class action lawsuit maintains that Amazon violates its own sales tax policy and tax law in several states, including Massachusetts and New York where sales tax is not assessed on virtual goods. 

Still, Amazon allegedly recognizes that digital goods are exempt from sales tax, since it does not charge the tax on certain digital gift cards or movies rented or purchased through its Amazon Prime video service. 

Further, the complaint claims that it is unclear whether Amazon sends the collected sales tax to state authorities, alleging that the company might keep the charges in order to maximize profit “at their subscribers’ expense and under the guise of a state-imposed tax.” 

The plaintiffs seek a declaration that Amazon.com’s conduct has been unlawful, compensatory, statutory, and punitive damages, prejudgment interest, restitution and all other forms of equitable monetary relief, and attorneys’ fees. 

Peloton was hit with a similar class action lawsuit last month, claiming the fitness company charged members in New York, Massachusetts, and Virginia unlawful sales tax on their subscriptions.

Have you ever purchased a virtual product from Amazon? Were you charged sales tax? Let us know in the comments below!

The plaintiff is represented by Wright A. Noel of Carson Noel PLLC and L. Timothy Fisher, Max S. Roberts, and Matthew A. Girardi of Bursor & Fisher, P.A.

The Amazon Sales Tax Class Action Lawsuit is Chaves v. Amazon.com Inc., Case No. 2:21-cv-01213, in the U.S. District Court for the Western District of Washington at Seattle. 

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