Costco accused of improper sales tax charges on toilet paper in New Jersey

CNBC.com
by Dan Mangan
Friday, September 16, 2016, 2:18 PM

http://www.cnbc.com/2016/09/16/costco-accused-of-improper-sales-tax-charges-on-toilet-paper-in-new-jersey.html

Don’t you know you’re not supposed to squeeze the Charmin toilet paper — or charge sales tax on it?

A New Jersey couple on Friday filed a class-action lawsuit against Costco Wholesale and several of its stores, claiming the membership-only warehouse giant has been illegally overcharging them — and potentially hundreds of thousands of other customers — by charging sales tax on toilet tissue purchases in violation of state law.

Toilet tissue sold for household use is exempt from New Jersey’s 7 percent sales tax.

But the couple, Jacqueline Taufield and Robert Arnold, said that they were charged the tax when they purchased Charmin toilet tissue on July 26, 2015, from a Costco in Wayne, New Jersey, and then again when they picked up some more Charmin in a Costco in Hackensack five days later.

The suit said that when the Leonia couple complained to Costco management after realizing they had been charged sale tax improperly, “they refused to issue a rebate to them.”

The couple’s lawyer, Rosemarie Arnold, said, “Rather than refund [Robert’s] money, they told him, ‘Well, if you believe that, you have to mail your receipt to the corporate headquarters along with a letter and tell the corporate headquarters how you were improperly charged tax.'”
The couple was “annoyed and angry” about the charge, and that response, said Arnold, who is not related to Robert.

“The obvious solution is to say, ‘You’re absolutely right … we made a mistake, here’s your money back,’ ” the lawyer said.

The suit says that Costco “despite being aware of the illegality of their actions… continues to cheat their customers, causing them to incur monetary damages when they purchase toilet tissue.”

The claim, filed in Bergen County Superior Court, alleges violation of the New Jersey Consumer Fraud Act, breach of contract, unjust enrichment, negligence, violation of the state’s “Truth-in-Consumer Contract,” and fraud.

A Costco spokeswoman, when asked for comment on the suit, said, “Unfortunately, we are not able to provide a response at this time.”

Arnold, the plaintiffs’ lawyer, said the amount of tax charged improperly in the couple’s case is less than $1.50 in each purchase.

But nonetheless, Arnold said, “I think it’s huge problem” for Costco and its customers because of the likelihood that the couple were not the only ones subject to the incorrect tax charging.

Costco has 19 warehouse locations in New Jersey, according to the company’s website. And the suit says the class of potentially affected customers is more than 100,000 people.

Arnold said the potential damages for the class would be in the “millions of dollars.”

“Everybody uses toilet paper,” Arnold said. “You have to figure that a patron of Costco is always going to buy toilet paper.”

The lawyer also said it’s an open question of whether Costco “is actually paying the taxes to the government, or keeping the money?”

“Most likely, it’s the latter, because if they submitted tax resolutions to the government, the government would say, ‘This is an non-taxable item, it’s toilet paper,’ ” Arnold said.

A spokesman New Jersey’s Treasury Department, which oversees tax regulations, declined to comment on the lawsuit. But the spokesman noted that “large chain stores have point-of-sale cash registers that are programmed to charge sales tax on a variety of items.”

The spokesman also noted that the department does investigate complaints about stores improperly collecting or not collecting sales tax, and that anyone can file such a complaint anonymously.

Leonia couple sue Costco, alleging they were charged sales tax on toilet paper

BY NICHOLAS PUGLIESE
STAFF WRITER | THE RECORD
September 16, 2016, 7:45 PM

http://www.northjersey.com/news/leonia-couple-sue-costco-alleging-they-were-charged-sales-tax-on-toilet-paper-1.1661653

A Leonia couple have filed a class-action complaint against Costco Wholesale, alleging that they were illegally charged sales tax on toilet paper at the retailer’s stores in Wayne and Hackensack.

Robert Arnold and Jacqueline Taufield lost only about $6, their attorney said, but their suit could have a big financial impact. They allege in their complaint that more than 100,000 customers could have been similarly affected.

“Conceivably, Costco has to return all of their money plus interest,” said the attorney, Rosemarie Arnold, who has no relation to Robert. “Plus, in this particular case, I think punitive damages are warranted because they know they can’t be charging tax on toilet paper.”

Lawmakers in New Jersey and many other states have exempted toilet tissue and other necessities to keep lower-income consumers from paying extra for things they must use on a daily basis.

Robert Arnold and Taufield allege in their complaint that they were charged a 7 percent sales tax when they purchased Charmin Toilet Tissue at Costco locations in Wayne and Hackensack. Both transactions occurred in July 2015.

When they asked managers for a refund, they were refused and told to contact Costco’s headquarters in Washington state, Arnold, the attorney, said Friday.

“Despite being aware of the illegality of their actions, Costco Wholesale continues to cheat their customers, causing them to incur monetary damages when they purchase toilet tissue,” the couple allege in their complaint.

The couple accuse the warehouse giant of breach of contract, unjust enrichment, negligence and fraud, as well as violating the New Jersey Consumer Fraud Act and something known as the Truth-In-Consumer Contract, Warranty and Notice Act.

Another open question, Arnold said, is what Costco is doing with the money that they are collecting on the toilet paper.

“I think that they’re keeping it because if they’re turning it over to the government, isn’t the government going to say, ‘This isn’t taxable’?” she said.

“Unfortunately, we are not able to provide a response at this time,” a Costco spokeswoman said when reached for comment on Friday.

Costco is the second largest retailer in the United States and has about 18 locations in New Jersey, according to the complaint.