October 8, 2021 – Walmart 5-Hour Energy Class Action Dismissed
United States District Judge J. Nicholas Ranjan has dismissed with prejudice the proposed class action detailed on this page, finding that the plaintiff has no standing to sue Walmart over the allegedly improper collection of sales tax.
In a 21-page opinion submitted on August 4, 2021, Judge Ranjan, granting Walmart’s motion to toss the suit, found that the plaintiff’s complaint suffered from “two insurmountable flaws which, in tandem, cause all his claims to fail as a matter of law.”
First, a retailer’s incorrect assessment of sales tax is conduct not covered by the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), which only regulates activity that is part of “the conduct of any trade or commerce,” the judge wrote.
“When collecting sales tax, a retailer is not conducting ‘trade or commerce,’ even if such collection occurs in connection with a commercial transaction,” the opinion reads.
Although the UTPCPL “extends broadly,” the judge said, the law does not reach so far as to regulate activity “disconnected” from a retailer’s commercial interests, such as tax collection.
Second, the plaintiff’s common law claims were barred by an existing administrative procedure for consumers to obtain sales tax refunds from the Pennsylvania Department of Revenue, Judge Ranjan said. Per the filing, state law requires claimants to strictly pursue this remedy in the event of a dispute “so long as it is constitutionally adequate.”
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Walmart Stores, Inc. faces a proposed class action wherein a consumer claims the mega retailer has unlawfully charged sales tax on 5-hour Energy dietary supplements sold in Pennsylvania.
The lawsuit says the 5-hour Energy “shots” are advertised and marketed as dietary supplements, which are exempt from sales tax in Pennsylvania. The plaintiff says he was nevertheless charged a $0.94 sales tax on the price of a 6-pack of 5-hour Energy supplements on at least two separate occasions at a Pittsburgh Walmart.
The complaint alleges the defendant, who operates at least 131 Walmart and Sam’s Club stores in Pennsylvania, has made millions on dietary supplement sales, including sales of 5-hour Energy products, on which an illegal tax was charged.
“It is believed and therefore averred that Defendant Walmart overcharges, continues to overcharge, and has in the past overcharged Pennsylvania residents in its Pennsylvania stores and internet sales, in violation of Pennsylvania tax law and regulation,” the complaint alleges.
Per the complaint, the Pennsylvania Department of Revenue has given express notice to the public and retailers in a “Retailer’s Information” booklet that “dietary supplements and substitutes” are exempt from the state’s six-percent sales tax (or seven percent in Allegheny County and eight percent in Philadelphia).
5-hour Energy products, according to the case, are “clearly labeled and identified” by Walmart as “dietary supplements” and are sold in the stores’ medicine, drug and medical supply sections. Despite Pennsylvania’s clear directive concerning the sales tax exemption for supplements, Walmart has continued to charge tax on the 5-hour Energy products and thereby overcharge consumers for their purchases, the lawsuit alleges.
The case, which echoes a similar suit that claims Giant Eagle unlawfully charged sales tax on 5-hour Energy products in Pennsylvania, was originally filed in Allegheny County’s Court of Common Pleas and removed to the state’s Western District Court on November 12.
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