November 8, 2021 – LuLaRoe Sales Tax Case Dismissed
The proposed class action detailed on this page was dismissed by U.S. District Judge David S. Cercone on September 19, 2018.
A two-page order submitted by Judge Cercone states that the lawsuit was tossed due to the plaintiffs’ failure to show cause as to why the suit should not be dismissed over lack of jurisdiction. For a court to have subject matter jurisdiction over a proposed class action, it must have the power to hear the specific kind of claim that’s brought before it.
On August 20, 2018, the court denied the plaintiffs’ motion to certify the class given the individuals failed to demonstrate that handling their allegations on a class-wide basis was a superior means to fairly and efficiently adjudicate the dispute. The plaintiffs then failed to show why the suit should not be dismissed due to the court’s lack of jurisdiction, despite being given a September 2018 deadline by which to do so.
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A Pennsylvania woman claims in a proposed class action lawsuit that multi-level marketing company and fashion retailer LuLaRoe (LLR, INC.) illegally charges “disguised” sales tax on purchases that are delivered to areas where no such tax exists.
What is LuLaRoe and why was this lawsuit filed?
Defendant LuLaRoe is a California-headquartered multi-level marketing company that sells women’s fashion through a nationwide network of more than 35,000 fashion consultants. The 13-page lawsuit takes particular issue with the defendant’s online point-of-sale system, called Audrey, that allegedly automatically charges customers sales tax based on the location of the LuLaRoe consultant who made the sale, not the laws of the taxing authority in whose jurisdiction the purchase’s “ship to address” lies.
The complaint claims consumers sometimes wind up being overcharged “up to 10.25 percent” as a result of LuLaRoe’s disguised surcharges.
“[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 lawsuit argues. “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.”
What was the plaintiff’s experience with LuLaRoe?
The plaintiff claims she made at least 12 purchases from LuLaRoe consultants who were spread across jurisdictions that place a sales tax on clothing. She claims she should have been exempt from these overcharges since Pennsylvania does not charge a sales tax on clothing. Even though the plaintiff’s home state does not charge sales tax on clothing, the lawsuit claims LuLaRoe enjoyed the benefits of this hidden charge.
“Pennsylvania does not charge sales tax on the clothing [LuLaRoe] sells and [the plaintiff] purchased,” the complaint reads. “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.’”
Who is included in the proposed class?
The proposed class includes anyone in the United States who was or will be assessed a sales tax on clothes purchased and processed through LuLaRoe’s Audrey system, and whose purchases “were or will be delivered to tax jurisdictions of the United States that do not authorize a collection of sales tax on the clothing [the defendant] sells.”
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A note on class action complaints:
Bear in mind that the information in this blog post summarizes the allegations put forth in the following legal complaint. At the time of this writing, nothing has been proven in court. Anyone can file a lawsuit, with or without the representation of an attorney, for any reason, and ClassAction.org takes no position on the merits of the suit. Class action complaints are a matter of public record, and our objective on this website is merely to share the information in these legal documents in an easily digestible way.