LuLaRoe Sued Over Sales Tax Charges

A federal lawsuit has been filed against LuLaRoe for the collection of sales tax.

LuLaRoe is a popular fashion company that was founded by DeAnne and Mark Stidham. The company is know for knitted apparel, including leggings and dresses. It relies on multi-level marketing and direct sales and provides individual consultants with a percentage of profits from selling inventory and for signing up new consultants. The practice is one that Tupperware relied on decades ago, except that parties for LuLaRoe’s products are usually done online through Facebook.

The Case Against LuLaRoe

The company is being sued for charging sales taxes on its goods. Particularly, the plaintiff alleges that in her state, there are no such taxes on apparel.

The plaintiff in the case is Rachael Webster, who resides in Allegheny County, Pennsylvania. She alleges that she was charged $35.16 in sales tax on around a dozen purchases she made from LuLaRoe in 2016. This was a particular distressing situation for her as Pennsylvania doesn’t charge sales tax on clothing. In other words, Webster asserts that she was overcharged and that the charges are not provided to legitimate tax authorities.

Ms. Webster is attempting to turn her lawsuit into a class action suit to include other people in the same situation. Her goal is “on behalf of herself and all others similarly situated to challenge Defendant’s unlawful, unjust, deceptive and fraudulent practice.” In addition, she seeks compensation for attorney’s fees, damages and restitution, as well as other relief.

What is LulaRoe’s Stance?

LuLaRoe responded to the lawsuit through a spokesperson who acknowledged that there has been a problem with payments and that it involves the company’s former vendor. At the same time, the company disputes that it has gained any advantage as a result of the issue. LuLaRoe’s stance on the sales tax charges is that it is considered “trust fund” taxes. The spokesperson declares that any customer who was found to have been improperly charged a sales tax has been reimbursed and that the company is working to ensure that other people affected by it will be refunded as well.

The company can face considerable loss of money for the practice if forced to pay back the sales tax charges. At the same time, LuLaRoe has grown by around 600 percent as a company over the past 24 years, so it might not hit it too hard.