LuLaRoe has been hit with a class action lawsuit regarding sales tax. A Pennsylvania woman is claiming that the company is disguising sales tax as miscellaneous fees in states that don’t tax clothing.
About LuLaRoe
The company, LuLaRoe, is a multi-level marketing company (MLM) that sells women’s fashion. LuLaRoe has 35,000 consultants across the United States and has become a popular company to purchase comfortable, modest clothing from. Most of LuLaRoe sales are made online or through pop-up boutiques hosted by LuLaRoe consultants. Many people have been wildly successful working with the company, however, it seems the MLM may have been breaking a few rules.
Why is LuLaRoe Being Sued?
As previously stated, LuLaRoe has had a class action lawsuit filed against them. The complaint is 13 pages long and states illegal sales tax as the reason for taking action. It says that LuLaRoe has been charging sales tax for products based on the consultant’s location and not where the product is being shipped to.
You may be thinking, “big deal,” however, each state’s sales tax differs from the next. The woman that filed the lawsuit lives in Pennsylvania, a state that does not tax food or clothing. According to the complaint, LuLaRoe customers are being overcharged as much as 10.25 percent and the charges are being disguised by the company.
“[LuLaRoe’s] sales tax assessment practices, in effect, are improperly and fraudulently adding a surcharge to purchases, and are disguising those surcharges as a ‘sales tax’ that does not exists, and for which [LuLaRoe] lacks authority to collect or remit,” the complaint reads. “The ‘sales tax’ surcharge is more than the price advertised online for the product and purchasers do not become aware of this overcharge until Audrey sends them an invoice.”
Who is Getting Overcharged?
The complaint, which you can view in its entirety here, was made by a woman who lives in Pennsylvania,a state with no sales tax. According to the lawsuit, the plaintiff has ordered from LuLaRoe at least a dozen times from consultants in different locations throughout the U.S. She believes that because she lives in a state where sales tax on clothing doesn’t exist that she should be exempt from these fees on her order as well.
“Pennsylvania does not charge sales tax on the clothing [LuLaRoe] sells and [the plaintiff] purchased,” the lawsuits states. “Yet, throughout 2016, [LuLaRoe’s] payment system, Audrey, charged [the plaintiff] a nonexistent sales tax on these 12 clothing purchases. For these purchases, [the plaintiff] paid a total of $585.16, of which [the defendant] overcharged her $35.16 in the guise of an ostensible ‘sales tax.’”
If the lawsuit is successful anyone who was charged these disguised fees should receive the money they paid in taxes back. Additionally, anyone who would be charged this illegal tax will no longer be charged the tax.
What LuLaRoe is Doing to Fix The Problem
The company has issued a statement regarding the class action lawsuit.
We are fully aware of this issue and have invested significant resources to address it. Our former payments vendor had a technology systems failure that misidentified the accurate location of certain customers. When affected customers have contacted us to identify their proper location, we have immediately issued them a refund for sales tax overcharges. In addition to contracting a new payments vendor, we are proactively working to ensure that all affected customers are refunded for sales tax overcharges. LuLaRoe is committed to our thousands of passionate Independent Retailers and consumers who love and support our quality brand.
Any proceedings that occur in relation to this complaint are likely to take months to a year to resolve, however, LuLaRoe is doing its best to take care of the issue.
Do you think you’ve been overcharged by LuLaRoe? Share your story in the comments.
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Photo: LuLaRoe
Amanda Blankenship is the Chief Editor for District Media. With a BA in journalism from Wingate University, she frequently writes for a handful of websites and loves to share her own personal finance story with others. When she isn’t typing away at her desk, she enjoys spending time with her daughter, son, husband, and dog. During her free time, you’re likely to find her with her nose in a book, hiking, or playing RPG video games.
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