Uber Eats Sales Tax on Promotional Discounts New York Class Action

Uber Technologies, Inc. operates Uber Eats, a food delivery service that brings consumers dishes from restaurants. Uber Eats offers customers coupons so that they will try its services. The complaint for this class action alleges that Uber Eats charges excessive sales tax on promotions, basing it on the full amount of the bill before the promotional amount is subtracted.

The New York Class for this action is all persons in New York who bought the services during the applicable statutes of limitations.

The complaint alleges that Uber Eats “issues significant promotional offers to gain customers, or market share, based on the reasonable belief that once a customer begins to use its platform, this ‘stickiness’ will cause them to remain a user when the promotions eventually end.” The first page of the complaint shows an ad with one such promotion. Entitled, “Breakfast, lunch, or dinner? Your move,” it offers, “Take 75% off your next three orders…”

But the complaint alleges that Uber Eats charges sales tax based on the full amount, before the promotion is applied. It gives the example of a $30.23 order to which a $20 promotion is applied. The sales tax Uber Eats charges is $2.42, that is, 8% of the full $30, before the $20 discount is applied.

Two kinds of coupons exist, the complaint alleges: manufacturer’s coupons and store coupons. While both reduce the amount paid by the customer, the sales tax is figured differently for the two.

A manufacturer’s coupon is issued by the company that made a certain product. The purpose is to get the customer to buy that particular product. When a customer buys it, the amount of the coupon is subtracted from the product’s normal price. However, the manufacturer later reimburses the store for the amount of the coupon. The store thus earns the full amount of the product’s price, and it therefore charges the customer sales tax on that full price.

A store coupon is different. It is intended to get customers to shop at that particular store. The store is not reimbursed by the manufacturer of the discounted product. The store therefore is not receiving the full price of the product; it therefore charges the customer sales tax on only the lower, after-coupon price of the product.

The complaint alleges that the Uber Eats promotions are equivalent to store coupons, because they are intended to get consumers to use Uber Eats as opposed to their competitors in the food-delivery business.

The complaint then makes the calculation again. It starts with the $30.23 food bill, then adds $4.57 as a service fee and 99 cents as a delivery fee. From this total, it subtracts the $20 promotional amount, leaving a bill of $15.79 for the consumer to pay. The 8% tax on this is only $1.26, or a little more than half of what was paid on the full amount of the bill.

The counts include breach of contract and conversion, among other things.

Article Type: Lawsuit
Topic: Taxes
Tags: Conversion, Improper Sales Tax Charges, Sales Tax