No stranger to litigation, DoorDash has recently been hit with a proposed class action lawsuit, this time alleging that the on-demand food delivery service adds sales tax to customers’ orders in states that don’t have a sales tax on prepared food.
Class Action Claims Customers in Delaware, New Hampshire, and Montana Were Overcharged
DoorDash, the case explains, operates an app that allows customers to order food from local restaurants and have it delivered by the company’s “dashers.” The price charged to customers includes the cost of the meal, a service fee, a delivery fee, an optional driver tip, and sales tax, the suit says.
Delaware, New Hampshire, and Montana, however, don’t charge sales tax on food, according to the lawsuit. To be more specific, Delaware and Montana don’t charge sales tax for prepared food or meals, and New Hampshire doesn’t charge sales tax when those meals are not eaten on premises, which is the case with DoorDash deliveries.
Nevertheless, DoorDash charges a sales tax of up to 8.75 percent on customers’ orders even when they’re delivered to addresses in these tax-free states, the lawsuit charges.
Interestingly, the states of Oregon and Alaska are also tax-free, the case notes, but DoorDash appears to correctly refrain from applying sales tax to deliveries made in those states.
The effect of the allegedly unlawful tax, the case says, is that customers are overcharged for their meals and DoorDash gets to pocket the extra money instead of remitting it to local taxing authorities.
Case Claims DoorDash Has Acknowledged the Problem, Yet Has Taken No Action
According to the lawsuit, the alleged tax issue has surfaced among forum users on Reddit.com. The complaint cites one thread posted on the site in which a Montana resident described his experiences trying to address the allegedly improper tax with DoorDash customer service [sic throughout]:
M: "I need a refund on sales tax, it doesn't exist here."
DD: "Our system automatically adjusts for sales tax based on zip code. If you are in a tax free location it won't charge you sales tax."
M: "It isn't working. I'm in Montana where there is no sales tax, I was charged sales tax, provide a refund of the sales tax."
DD: "After further checking to see if your state is Sales Tax Free, I found that your state is not currently Sales Tax Free."
M: "It is. I'm in Montana and the restaurant is in Montana. Show me proof that Montana has a sales tax."
DD: "I've checked our documentation and our list of states without sales tax is: Alaska, Delaware, Montana, New Hampshire, and Oregon. Since you are not in a state without sales tax I cannot provide you a refund."
M: "Montana is in the list of sales tax free states you just provided. Give me a refund."
DD: "Let me check again... I'll provide you a refund."
M: "You need to fix this permanently."
DD: "I've forwarded this issue to the appropriate department, it will be fixed."
The lawsuit claims that despite acknowledging the sales tax issue, DoorDash has yet to fix it and continues to overcharge customers living in tax-free states.
How Do I Join the Lawsuit?
As with most class actions, you don’t need to do anything to join the lawsuit. If the lawsuit settles, potential class members should receive notification with instructions on how to claim their part of the settlement.
In this case, the suit seeks to cover a proposed class of “[a]ll persons in a Tax-Free State who paid sales tax to DoorDash on a food delivery order,” with proposed sub-classes of people in Delaware, New Hampshire, and Montana.
The full complaint can be read below.