‘Overcharged’: Uber Eats Miscalculates Sales Tax for New York Promo Code Users, Class Action Says [UPDATE]

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A proposed class action alleges Uber Eats has overcharged New York customers who use a promotional discount by calculating sales tax based on the price of food prior to application of the discount. 

The 10-page lawsuit contends that by calculating sales tax based on the price of an order prior to when a promotional discount is applied, Uber Eats effectively disregards the promotion altogether. The case says this practice, despite involving relatively small amounts, benefits defendant Uber Technologies given the volume of business flowing through Uber Eats. 

“Reasonable users of Uber Eats would not expect they would be paying higher than required, unlawful, and erroneous amounts of sales tax,” the complaint argues. “Defendant benefits from these small charges, given the high volume of its business.” 

Per the lawsuit, Uber Eats issues a significant amount of promotional offers to gain customers and market share. The food delivery platform does this on the reasonable belief that once a customer begins to use Uber Eats, they will continue to do so even after a promotional offer ends, the suit says. 

According to the case, Uber Eats charges sales tax in New York based on the original amount of an order before a promotional code has been applied. For example, on a $30.23 food order on which a $20 promo has been applied, Uber Eats will charge $2.42 sales tax on the original $30.23 price, and not the amount after the discount was applied, the lawsuit claims. 

The filing contends that Uber’s reduction of a purchase price through the application of a promotion is effectively a “store-issued” coupon. Per the case, sales tax is calculated differently when a store-issued coupon is used as opposed to a manufacturer’s coupon. A manufacturer’s coupon, the lawsuit explains, allows a seller to charge sales tax on the full price of an item because the seller is reimbursed by the manufacturer for the price of the coupon. A store-issued coupon such as Uber’s promotion, on the other hand, is aimed at incentivizing customers to shop at the store and results in the seller not receiving the full amount of the item, the suit states. This means a purchaser should pay sales tax as calculated on the lower price discounted by the promotion, the case argues. 

“This discount is not reduced by a third-party, i.e., a manufacturer,” the complaint reads. “Since the seller is not reimbursed for the amount of the coupon, the seller receives a reduced amount. Since the seller receives a lower amount, sales tax is calculated on this lower price.” 

The lawsuit claims consumers end up paying higher prices than they’ve been led to expect when Uber taxes the full amount of their food orders rather than the discounted amount plus the requisite service and delivery fees. Using the same hypothetical example, the suit explains that the purchaser of the $30.23 food order would have paid only $1.26 in sales tax, as opposed to $2.42, had Uber properly calculated the tax. 

As the lawsuit tells it, consumers are likely to use Uber Eats within a fiercely competitive mobile food delivery app market based on brand recognition and trust of Uber, critical when “it comes to having strangers bring food to your home.” Unfortunately, the suit says, this trust “allows Defendant to overcharge customers, who would not even know how to discover or dispute this practice.” 

“Had Plaintiff and proposed class members known the truth, they would not have paid Uber Eats excess sales tax, and would have kept that money for themselves,” the case says. 

The lawsuit looks to represent all persons in the state of New York who used Uber Eats during the applicable statute of limitations periods.

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