LuLaRoe Hit with Class Action Lawsuit Over Unauthorized Sales Tax [UPDATE]

A Pennsylvania woman claims in a proposed class action lawsuit that multi-level marketing company and fashion retailer LuLaRoe (LLR, INC.) illegally charges “disguised” sales tax on purchases that are delivered to areas where no such tax exists.

What is LuLaRoe and why was this lawsuit filed?

Defendant LuLaRoe is a California-headquartered multi-level marketing company that sells women’s fashion through a nationwide network of more than 35,000 fashion consultants. The 13-page lawsuit takes particular issue with the defendant’s online point-of-sale system, called Audrey, that allegedly automatically charges customers sales tax based on the location of the LuLaRoe consultant who made the sale, not the laws of the taxing authority in whose jurisdiction the purchase’s “ship to address” lies.

The complaint claims consumers sometimes wind up being overcharged “up to 10.25 percent” as a result of LuLaRoe’s disguised surcharges.

“[LuLaRoe’s] sales tax assessment practices, in effect, are improperly and fraudulently adding a surcharge to purchases, and are disguising those surcharges as a ‘sales tax’ that does not exists, and for which [LuLaRoe] lacks authority to collect or remit,” the lawsuit argues. “The ‘sales tax’ surcharge is more than the price advertised online for the product and purchasers do not become aware of this overcharge until Audrey sends them an invoice.”

What was the plaintiff’s experience with LuLaRoe?

The plaintiff claims she made at least 12 purchases from LuLaRoe consultants who were spread across jurisdictions that place a sales tax on clothing. She claims she should have been exempt from these overcharges since Pennsylvania does not charge a sales tax on clothing. Even though the plaintiff’s home state does not charge sales tax on clothing, the lawsuit claims LuLaRoe enjoyed the benefits of this hidden charge.

“Pennsylvania does not charge sales tax on the clothing [LuLaRoe] sells and [the plaintiff] purchased,” the complaint reads. “Yet, throughout 2016, [LuLaRoe’s] payment system, Audrey, charged [the plaintiff] a nonexistent sales tax on these 12 clothing purchases. For these purchases, [the plaintiff] paid a total of $585.16, of which [the defendant] overcharged her $35.16 in the guise of an ostensible ‘sales tax.’”

Who is included in the proposed class?

The proposed class includes anyone in the United States who was or will be assessed a sales tax on clothes purchased and processed through LuLaRoe’s Audrey system, and whose purchases “were or will be delivered to tax jurisdictions of the United States that do not authorize a collection of sales tax on the clothing [the defendant] sells.”

The full complaint can be read below.