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Law360 (July 9, 2021, 9:18 p.m. EDT) – A federal judge in Pennsylvania on Friday struck down a proposed class action lawsuit accusing Dollar General and Aldi of violating state law by wrongly charging a sales tax on tax-exempt protective face covers, finding that imposing a sales tax on masks is not misleading under Quaker State law.
In a 10-page notice granting the retailers ‘motion to dismiss, U.S. District Judge Marilyn J. Horan also said she was not convinced by Joshua James’ argument that Aldi and Dollar General benefited. maximization of costs and profits by taxing face masks.
“The sales tax collected by the two defendants was $ 0.45 and $ 0.36,” the judge wrote in his opinion. “To suggest that the defendants sought to keep these sums of money or benefited from these sums defies logic.”
Friday’s ruling marks the end of James’ putative class action lawsuit that was first raised in Pennsylvania state court in November, and then returned to federal jurisdiction in February.
James has filed a lawsuit under the Unfair Trade Practices and Consumer Protection Act and the Pennsylvania Uniformity of Credit Extension Act, alleging that Pennsylvania retailers cannot collect the sales tax on face masks as they are non-taxable “medical supplies” and “clothing and accessories”.
James further argued that the conduct of retailers was considered commerce under the Unfair Commercial Practices Act.
But retailers fought back, arguing that the collection of sales tax is required by state law “and not motivated by private profit or greed.” Collecting sales tax is not considered trade under the Unfair Trade Practices Act, the retailers added.
Retailers also pointed out that their conduct “cannot be considered misleading” since they disclosed the prices before taxes as well as the actual amount of sales tax.
Judge Horan ruled in favor of retailers on Friday, concluding that the collection of sales tax goes beyond what defines commerce or commerce under the Unfair Trade Practices Act.
And while James’ argument could justify a claim under the law, the judge noted that retailers “have not engaged in fraudulent, disloyal or deceptive behavior.”
Judge Horan also observed that since James did not suffer a “verifiable loss,” he cannot sue under the Unfair Commercial Practices Act.
The judge further pointed out that James had not alleged that the retailers pocketed the sales tax for their own benefit.
“The Pennsylvania tax collection system designates defendants to collect tax as an agent for the Department of Revenue, and it remains highly unlikely that the defendants kept $ 0.45 and $ 0.36 per face mask for their purposes. their own use when they were required to return this money to the state, ”the judge wrote in her opinion.
This would not be the first lawsuit in the state over the taxation of face masks amid the pandemic.
Dollar General, along with Big Lots and Jo-Ann Stores, faced similar charges of wrongly taxing exempt face coverings in another proposed class action lawsuit launched last year.
But Judge Horan put the ax this costume in june, concluding that the Unfair Trade Practices Act did not apply because the imposition of a sales tax – a tax required by state law – does not meet the definition of “commerce or commerce” under the law.
Lawyers and parties’ representatives did not immediately respond to Law360’s requests for comment on Friday.
James is represented by Joshua P. Ward of JP Ward & Associates LLC.
Dollar General is represented by Courtney S. Schorr and Gerald J. Stubenhofer Jr. of McGuireWoods LLP.
Aldi is represented by Craig D. Mills and Samantha L. Southall of Buchanan Ingersoll & Rooney.
The case is Joshua James v. Aldi Inc. et al., Case number 2: 21-cv-00209, in the United States District Court for the Western District of Pennsylvania.
–Additional reporting by Lauren Berg. Editing by Jay Jackson Jr.
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