Forever 21 facing class action for illegally taxing NY customers

Forever 21 is facing a potential class action lawsuit for allegedly illegally collecting up to 8.875% taxes from New York customers shopping online.

In her complaint filed in NY federal court on Monday, customer Laura Togut alleges the retailer was collecting "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.” She is asking the court to certify the case as a class action so that all New York residents affected can join the class.

In New York, clothing items costing less than $110 each are tax-exempt from New York's 4% New York State's retail sales tax. Despite this law, the lawsuit argues that New York consumers were still taxed by the retailer.

The complaint alleges that Forever 21 was aware of the tax exempt law and still was "illegally overcharging up to 8.875% every time a resident of New York" shopped online and had the order delivered within New York State.

According to her complaint, Togut purchased twenty items online each with a price tag under $110 and she was still charged sales tax. The amount she was taxed on her order totaled just over $22.

The complaint also opens the door to a deeper potential tax liability on Forever 21's part. While the retailer does not comment on pending litigation, the complaint argues that the retailer "retains the fraudulently obtained" tax collections.

While Forever 21 is based in Los Angeles, the complaint explains that “the sales tax laws of the buyer’s state” – New York in the case at hand – “govern the transaction" giving the case some traction in New York.

The complaint asks for $5 million dollars to remedy Forever 21's "deceptive" and "fraudulent" practices.

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