PITTSBURGH – Counsel for Dollar General and Aldi argue that allegations brought against them and other retailers which said they unlawfully charged sales taxes on the purchases of face masks during the COVID-19 pandemic are unsupported, and should be dismissed.
Joshua James of Freeport (and on behalf of all others similarly situated) filed suit in the Allegheny County Court of Common Pleas on Nov. 12.
(The case was later removed to the U.S. District Court for the Western District of Pennsylvania on Feb. 11.)
The lawsuit took aim at many different retailers, including Marshall’s, Forever 21, Sally Beauty Supply, Dry Goods, Amazon, Zazzle, Etsy, Brave New Look, Outdoor Research, Aldi, Dollar General and eBay.
“Retailers operating in Pennsylvania cannot collect sales tax on protective face masks or coverings because they are nontaxable as ‘medical supplies’. Retailers operating in Pennsylvania cannot collect sales tax on protective face masks or coverings because they are nontaxable as ‘clothing and accessories.’ In order to charge or collect sales tax, retailers must first obtain a license from the Pennsylvania Department of Revenue,” the suit stated.
“During Governor [Tom] Wolf’s declared state of emergency, [the plaintiffs] and others similarly situated purchased protective face masks and coverings from various Pennsylvania-licensed retailers and were charged an unlawful sales tax on said purchase. Defendants represent a fraction of retailers that failed to comply with 72 P.S. Section 7204(4) and 72 P.S. Section 7204(18) despite information readily available to them.”
During the coronavirus pandemic, charging consumers, like the plaintiffs and others similarly situated, sales tax on medical supplies and/or clothing and accessories – both of which are non-taxable, the suits say – constitutes unfair methods of competition and unfair and deceptive practices in stark violation of the Unfair Trade Practices and Consumer Protection Law.
The lawsuit seeks class action status for all those who purchased face masks from those businesses since March 6, 2020 and paid sales tax for them.
Since there are an estimated 12.8 million people in Pennsylvania and everyone was ordered to wear a mask in public since Wolf’s emergency orders were enacted in the spring, the lawsuits estimate the class of plaintiffs could number in the hundreds of thousands.
In a social media post, potential class counsel Joshua P. Ward of Pittsburgh-based law firm Fenters Ward stated, “It’s illegal to charge any sales tax on any COVID mask.”
UPDATE
Attorneys for Dollar General and Aldi filed a motion on March 12 to dismiss the case and its counts with prejudice.
“This putative consumer class action arises from the global COVID-19 pandemic. In response to this health crisis, many retailers, including defendants, began to sell non-medical face masks, some for the very first time. As plaintiff acknowledges, such non-medical face masks were subject to Pennsylvania sales tax before the pandemic. Indeed, it was not until Jan. 20, 2021 – months after this action was filed – that the Pennsylvania Department of Revenue issued a Sales and Tax Bulletin stating its position that cloth and disposable non-medical masks are exempt from sales tax as of Oct. 30, 2020,” according to the dismissal motion, in part.
“Nevertheless, plaintiff alleges that defendants improperly collected sales tax on ‘protective face masks’ he bought at some unidentified time between March 6, 2020, the date Gov. Wolf declared a state of emergency in Pennsylvania, and Nov. 12, 2020, the date this action was filed in state court.”
According to the defendants, “the sole question here is whether Plaintiff can state claims for an alleged violation of the Unfair Trade Practices and Consumer Protection Law, violation of Pennsylvania’s Fair Credit Extension Uniformity Act, unjust enrichment, ‘misappropriate/conversion,’ and for injunctive relief.”
Among other counter-arguments, the defendants say that as for the plaintiff’s UTPCPL claims, he cannot establish four requisite elements.
“First, he cannot establish that the ministerial act of collecting sales tax for the Commonwealth constitutes ‘trade or commerce’ under the UTPCPL, as defendants derive no profit from such act. Second, plaintiff has alleged no misrepresentation or deceptive act by defendants; to the contrary, plaintiff admits he was charged sales tax and thereafter paid it,” the dismissal motion stated.
“Third, plaintiff has not alleged how he justifiably relied on any alleged statement or conduct by defendants. Finally, plaintiff has not – and cannot – allege any ascertainable loss when he could easily seek a refund of the tax from the Department of Revenue.”
For counts of violating the Pennsylvania’s Fair Credit Extension Uniformity Act and Unfair Trade Practices and Consumer Protection Law, unjust enrichment, misappropriation/conversion and the seeking of permanent injunctions looking to end unlawful charging of sales tax, the plaintiff is seeking a long list of reliefs:
• Declaring these actions as proper class actions, certifying the classes as requested herein, designating plaintiffs as class representatives and appointing the undersigned counsel as class counsel;
• Ordering defendant to pay actual, consequential, statutory, and/or punitive damages to plaintiff and the class members, including restitution and disgorgement of all profits and unjust enrichment that defendant obtained from plaintiff and the class members as a result of defendant’s unlawful conduct;
• Ordering declaratory and injunctive relief as permitted by law or equity, including enjoining defendant from continuing the unlawful conduct;
• Ordering defendants to pay attorney’s fees and litigation costs to plaintiff and the other members of the class;
• Ordering defendants to pay both pre- and post-judgment interest on any amounts awarded and;
• Ordering such other and further relief as may be just and proper, plus a trial by jury.
The plaintiff is represented by Joshua P. Ward of Fenters Ward, in Pittsburgh.
The defendants are represented by Craig D. Mills and Bridget J. Daley of Buchanan Ingersoll & Rooney in Philadelphia and Pittsburgh, Courtney S. Schorr and Gerald J. Stubenhofer Jr. of McGuire Woods in Pittsburgh, plus Andrew J. Soven and Hyun Yoon of Holland & Knight, in Philadelphia.
U.S. District Court for the Western District of Pennsylvania case 2:21-cv-00209
Allegheny County Court of Common Pleas cases GD-20-011704
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com