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Costco New York Excessive Sales Tax Collection Class Action

According to the complaint for this class action, Costco had customers pay portions of certain New York sales taxes on coupon-related, reduced-price items that were Costco’s responsibility, thus shifting some of its tax burden onto customers.

The class includes all Costco customers who, between June 26, 2014 and June 26, 2017, paid New York State sales tax for New York warehouse purchases on a full price of taxable items rather than on the reduced price, when the price reduction was based on a coupon from Costco’s monthly coupon booklet.

Sales taxes are a complicated matter. In New York state, the Code, Rules and Regulations of the State of New York Department of Taxation (NYCRR) specifies how taxes are to be collected and paid when coupons are used for a purchase. When the coupons are manufacturers’ coupons, three different ways are outlined.

First, when a manufacturer issues a coupon that entitles the consumer to a reduced price, the receipt charges tax on the full price of the item and the consumer pays it.

Second, when a store issues the coupon, and the store is reimbursed by the manufacturer, the receipt charges tax on the full price of the item and the consumer pays it. In this case, the coupons must show “mfr” or some other code indicating that the manufacturer is reimbursing the store.

Third, when a store issues the coupon, and the store is reimbursed by the manufacturer, but the store doesn’t disclose that on the coupon or advertisement, the consumer will pay tax only on the reduced price; the store will make up the difference so that it remits tax on the full price.

Costco mails it customers booklets of store-issued coupons that are valid between certain dates. According to the complaint, Costco made changes to its booklets and coupons beginning with the booklet for August 8-September 1, 2013. The booklets since that time, the complaint claims, have not indicated that the coupons are “manufacturers’ coupons” or that the reduced prices are due to “manufacturers’ reimbursements” to Costco.

Because these booklets and coupons do not show “mfr” or some other code indicating this, the complaint alleges that Costco customers should be paying taxes on only the reduced price, and Costco should be making up the difference to remit taxes on the full price. However, the complaint claims, Costco has been charging customers tax on the full price.

Costco has been remitting the correct amount in tax, the complaint says, but it has shifted the liability for part of the tax onto the consumer, making consumers pay the part of the tax that Costco should be paying. Thus the complaint asks that Costco pay damages for its violations under New York state laws.

Article Type: Lawsuit
Topic: Consumer

Most Recent Case Event

Costco New York Excessive Sales Tax Collection Complaint

June 26, 2017

According to the complaint for this class action, Costco had customers pay portions of certain sales taxes on coupon-related, reduced-price items that were Costco’s responsibility, thus shifting some of its tax burden onto customers. According to New York law, when items are reduced in price due to the offering of coupons, stores must fulfill certain conditions before making customers pay tax on the full price of the item.

costco_ny_state_tax_overcharge_complaint.pdf

Case Event History

Costco New York Excessive Sales Tax Collection Complaint

June 26, 2017

According to the complaint for this class action, Costco had customers pay portions of certain sales taxes on coupon-related, reduced-price items that were Costco’s responsibility, thus shifting some of its tax burden onto customers. According to New York law, when items are reduced in price due to the offering of coupons, stores must fulfill certain conditions before making customers pay tax on the full price of the item.

costco_ny_state_tax_overcharge_complaint.pdf
Tags: Shifting Tax Burden to Customer, Tax Charges