PITTSBURGH - Collecting sales tax does not open retailers to lawsuits under Pennsylvania's consumer protection law, the state Supreme Court has held in a proposed class action against companies like Kohl's and J. Crew.
In a case that traces its history to the rush for facemasks in the first year of the COVID pandemic, the court refused to allow Daniel Garcia's claim under the Unfair Trade Practices and Consumer Protection Law to move forward.
Garcia and lawyer Kevin Tucker of East End Trial Group sued 15 companies in October 2020, alleging it was wrong for them to collect sales tax on cloth facemasks needed during the pandemic.
Defendants said the miscollection of sales taxes alleged did not occur during any trade or commerce, according to the UTPCPL. After an adverse ruling in the Allegheny County Court of Common Pleas, the Superior Court reversed and the Supreme Court agreed with its findings on Feb. 19.
"Admittedly, a merchant's collection of sales tax occurs concurrent with a sale in a single, seamless transaction," Justice Kevin Brobson wrote.
"Timing alone, however, is not determinative of the nature of conduct."
Collection of taxes is a duty imposed by the state, Brobson wrote. And retailers do not keep any money they collected wrongly.
"Furthermore, Pennsylvania law maintains separation between a merchant's actions in trade or commerce - as defined by the UTPCPL - and its role as an agent of the government," Brobson wrote.
"Indeed, the Pennsylvania Code requires an explicit distinction between the advertising of a product's price and the sales tax due... Similarly, (Tax Reform Code) instructs merchants to collect sales tax 'at the time of making the sale,' impliedly treating the collection of sales tax as something distinct from 'the sale.'"
The UTPCPL describes violations as unfair methods of competition or deceptive acts "in the conduct of any trade or commerce." The justices were asked to find out if collecting sales tax is in that conduct.
And while there may be other theories of consumer protection that can arise from that language, the court found it doesn't extend to sales tax. In collecting sales tax, a merchant is acting "in the conduct of government," the court ruled.