In a recent turn of events, the popular fashion retailer LulaRoe is embroiled in a federal class action lawsuit, raising significant concerns over the sales tax practices employed by its independent consultants. If you’ve purchased from a LulaRoe consultant and noticed an unexpected sales tax charge, you might be a victim of this oversight.
LulaRoe, known for its vibrant and colorful leggings, is accused of incorrectly charging sales tax in states where clothing sales are exempt. States like Massachusetts, Minnesota, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont have specific exemptions on clothing, meaning customers in those areas should not be subjected to sales tax when purchasing apparel online. However, the lawsuit claims that LulaRoe’s consultants are using a proprietary online sales system named “Audrey,” which automatically assesses sales tax based on the consultant’s location rather than the buyer’s state tax laws.
According to classaction.org, the lawsuit details how these practices effectively impose an unjust surcharge on customers disguised as sales tax, which the company has no authority to collect or remit. The plaintiff, a woman from Pennsylvania, reported being charged $35.16 in sales tax on a dozen items, even though her state does not tax clothing sales.
One of the attorneys representing the plaintiff suggested that many consumers, particularly those buying from out-of-state consultants, could be similarly affected, potentially leading to substantial damages. In response to these allegations, LulaRoe stated that they are aware of the issue and have been proactive in issuing refunds to customers who have reached out about excessive sales tax charges.
The lawsuit highlights ongoing issues with the Audrey system, noting that consultants lack the ability to modify the sales tax that is applied. Furthermore, the system defaults to charging tax based on the consultant’s location, which can be misleading for customers. This situation has drawn criticism from the Better Business Bureau (BBB), which has assigned LulaRoe an F rating due to a surge of customer complaints regarding product quality, billing inaccuracies, and inadequate customer service responses.
While LulaRoe’s CEO, Mark Stidham, previously indicated that the sales tax would be calculated based on the location of the consultant, the current lawsuit raises questions about the fairness and legality of this approach.
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In summary, LulaRoe’s sales tax practices are under scrutiny, and customers may be unknowingly overpaying due to an automated system that doesn’t align with local tax laws. With growing complaints and a class action lawsuit in motion, it’s essential for consumers to stay informed about their rights and the potential for refunds.