Class Action Says Whole Foods Overcharged New York Consumers for Sales Tax

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A proposed class action lawsuit alleges Whole Foods has overcharged New York consumers for sales tax on certain food products that should have been tax exempt.

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The 12-page lawsuit says that the supermarket chain has run afoul of the state’s tax law by improperly charging sales tax on non-taxable ready-to-eat, -heat or -cook food products purchased from the store’s prepared food counter, resulting in overcharges of 8.875 percent or more.

In order to be tax exempt under state law, a food product must be sold unheated and in the same form, condition, quantities and packaging as is typical of retail food stores, the suit explains. In addition, a food item that is prepared, packaged and refrigerated by the store but not arranged on a plate or in a “ready-to-eat” format is similarly non-taxable if sold for “off-premises consumption,” the filing shares.

Moreover, the New York Department of Taxation and Finance has outlined that foods specifically exempt from sales tax include, among others, canned goods, bakery products and packaged salads sold by the pound, the complaint adds.

“However, ‘[f]ood that is cooked by the store and then packaged and refrigerated, but not otherwise arranged on a plate or platter, is not taxable if sold for off-premises consumption,’” the lawsuit says, citing New York Tax Law.

The plaintiff, a New York City resident, purchased green beans with capers and olives from a Whole Foods deli counter for $17.80 in October 2021, the case relays. As the complaint tells it, the store improperly added an 8.875 percent sales tax to the purchase, as it was prepared and packaged by Whole Foods and was not sold heated or on a plate or platter. Rather, the green beans were sold in the form commonly used by other food stores—that is, in a plastic container, packaged by the pound, with a custom printed label, the lawsuit states.

In light of the foregoing, the filing contends that the plaintiff’s purchase was not taxable under state law.

According to the case, Whole Foods has a history of overcharging consumers for sales tax, as New York City’s Department of Consumer Affairs has reportedly accused the store of numerous tax law violations in past years.

The lawsuit looks to represent anyone who paid sales tax on food that was prepared, packaged and refrigerated by Whole Foods, was not otherwise arranged on a plate or platter, and was sold for off-premises consumption in the state of New York.

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