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On the heels of Zara being hit with (and subsequently settling) a massive lawsuit in connection with its allegedly deceptive pricing practices, Forever 21 is being accused of illegally collecting sales taxes from customers. According to Laura Togut’s lawsuit, which was filed in the U.S. District Court for the Southern District of New York on Monday, the Los Angeles-based fast fashion giant has been “deceptively” and “fraudulently” charging online shoppers for taxes on orders that are legally tax-exempt.
New York-based Laura Togut alleges that her lawsuit arises from Forever 21’s “charging and retention of spurious and unlawful retail sales taxes on purchases by New York-based customers taking delivery of such purchases in New York City, an exempt jurisdiction, where no such taxes exist.”
“On or about May 19, 2017,” Togut says she “purchased at least 20 separate items of exempt clothing from [Forever 21’s] website, with each item being priced at less than $110 … [She] ordered these items for delivery to her mailing address in New York City, a jurisdiction exempt from all retail sales tax on clothing items each priced at less than $110.”
Togut further claims, “New York City does not charge sales tax on the clothing [Forever 21] sells and that [Togut] purchased,” and yet, Forever 21 charged her a nonexistent retail sales tax on these clothing purchases, totaling $22.90.
According to the complaint, for sales to New York-based customers, “the sales tax laws of the buyer’s state” – New York in the case at hand – “govern the transaction.” New York state law holds that “purchases of items of clothing and footwear [for which the price per item] is less than one hundred ten dollars ($110) are exempt from the four percent (4%) New York State retail sales tax.”
With that in mind, Togut claims that Forever 21 is “aware of these tax collection and assessment procedures,” and yet, has been “illegally overcharging up to 8.875% every time a resident of New York City [and other New York counties] makes an online purchase of clothing or footwear for less than $110 and have such purchase shipped to an address in their exempt jurisdiction [in New York].”
And as far as Togut knows, Forever 21 – which does not comment on pending litigation – “retains the fraudulently obtained” funds.
In addition to seeking upwards of $5 million, Togut has asked the court to certify her class action lawsuit, thereby allowing“All persons who were or will be assessed retail sales tax on clothing or footwear purchases from [Forever 21] for items 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 the clothing [Forever 21] sells.”
* The case is Laura Togut, on behalf of herself and all others similarly situated, v. Forever 21, Inc., 1:17-cv-05616 (SDNY).
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