Retailers Sued in Pennsylvania for Charging Allegedly Unlawful Sales Tax on Masks Amid COVID-19 Pandemic [UPDATE]

The lawsuit detailed on this page was dismissed after a federal judge agreed with the defendants’ argument that their practice of charging sales tax on face masks did not violate the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL).

According to an opinion issued June 7, 2021, found here, U.S. District Judge Marilyn J. Horan found that the collection of sales tax does not fall under the UTPCPL’s definition of “trade or commerce.” Retailers charge sales tax on behalf of the state and not for their own profit, the judge noted, adding that the defendants had little incentive to deceptively charge more than required given they would lose business to competitors who charged a lower price.

Judge Horan went on to state that the plaintiffs had not adequately pled that the retailers had engaged in deceptive conduct since the pre-tax sales price and the amount of sales tax charged for the masks were clearly disclosed on receipts.

“Under these allegations, Defendants’ conduct cannot be considered deceptive,” the judge wrote.

Moreover, at the time of the plaintiffs’ purchases, there existed no statutory or regulatory change to the taxability of non-medical face masks, the opinion stated. According to the document, the informal guidance issued by the state’s Department of Revenue was “for informational purposes only and should not be relied upon.” Indeed, the opinion noted, the department’s most recent guidelines have admitted that existing law places the onus on consumers, not retailers, to determine whether a non-medical face mask would be used for medical purposes and was thus not taxable.

“Under the law as it existed at the time of the transactions, along with the subsequent guidance, Defendants, were, at worst, representing their understanding of Pennsylvania law, and there could be no deception on this basis,” the judge wrote.

The judge further ruled that the plaintiffs’ UTPCPL claim fails because they have not shown that they justifiably relied on the defendants’ allegedly false representations when deciding to purchase the face masks. Under state law, the plaintiffs would have had to prove that they would not have purchased the masks but for the retailers’ representations regarding sales tax, and no such allegation has been made, according to the June 7 opinion.

Finally, Judge Horan noted that the Department of Revenue has already offered refunds for consumers who can show that they were charged sales tax for masks that were purchased for a medical purpose, such as protecting from COVID-19. Given the plaintiffs have simply chosen not to seek refunds from the state, they have not suffered an ascertainable loss at the hands of the defendants, the judge ruled.

In light of the aforementioned findings, the lawsuit has been dismissed without any option for amendment.