Proposed Class Action Claims Forever 21 Charges Illegal Sales Tax for Online Orders

If you live in New York and have purchased clothing or footwear from Forever 21’s online store, you may have been illegally charged sales tax.

A proposed class action lawsuit has been filed this week against the retailer and its affiliate – Forever 21 Retail, Inc. – by a consumer who claims she was charged $22.90 in tax for items delivered to a location in New York City, where, the suit alleges, “no such taxes exist.”

How Is Sales Tax Calculated?

According to the lawsuit, sales tax applied to online orders is calculated based on where the items are delivered – the “ship to” address – instead of where the seller is located. In other words, the laws of the buyer’s state, rather than the seller’s, are applied to the transaction, the complaint says. Some areas of New York state, such as New York City, allow for sales tax exemptions. The suit argues that Forever 21 overlooks these exemptions and has overcharged residents of certain New York counties a “phony” sales tax of up to 8.875% for online clothing and footwear items that are priced at less than $110 each.

Should I Be Charged Sales Tax on My Online Order?

The plaintiff argues that the answer is “no” for consumers living in New York City and other counties in the state of New York.

According to the complaint, clothing or shoes that are each sold for less than $110 and shipped to an address in New York City are exempt from local and state sales tax requirements.

If you live in one of these counties, you may want to pay close attention to your online purchases. According to this lawsuit, you could be handing over money to a taxing authority that never receives it.

What Happens to the ‘Illegally Collected’ Sales Tax?

Forever 21 keeps the money for itself, according to the lawsuit.

The plaintiff claims that the New York State Department of Taxation and Finance never authorized the defendants to collect an extra $22.90 from her in “sales tax” and therefore never received the “nonexistent” charge. Instead, the suit alleges that Forever 21 “improperly and fraudulently” collects the so-called sales tax for itself, injuring consumers who never should have paid it.

Forever 21, Inc. and Forever 21 Retail, Inc. allegedly “disclose little about their finances.” According to this suit, there is reason to believe that they have been “unjustly enriched” at the expense of their customers.

Am I Covered By This Suit?

The lawsuit seeks to cover a proposed class of consumers who were or will be charged sales tax on clothing or footwear purchases from the defendants for items that are priced at less than $110 and whose purchases were or will be delivered to New York state tax jurisdictions that do not authorize a collection of sales tax on those items.

The full complaint can be read below.