Tax Suit Against Dunkin Donuts Have Been Dropped
The tax suit filed against Dunkin’ Donuts for a matter of illegal tax charges made to customers on tax-exempt products was dismissed by the District Court.
The class action says that Dunkin’ Donuts illegally charged sales taxes on products that, according to the laws of New York, are not affected. As stated by the law, items that are not sold to be consumed immediately, such as bottled water and coffee beans, are exempt from sales tax; on the other hand, items that are meant to be consumed right after purchase, such as hot coffee and other food products, are taxable. Plaintiffs say that Dunkin’ Donuts franchisees deliberately did not make that distinction, charging sales taxes on all purchases. Based on this, the lawyer who filed the suits estimates that Dunkin’ Donuts has made over $14 million off New York and New Jersey Costumers by charging illegal sales taxes in the past three years. The complaint filed in New York federal court states that Dunkin’ Donuts continuously flaunted the law while being completely aware that their actions were illegal.
Originally, the case was dismissed by District Court under the claim that other remedies should be sought before going to federal court, which means they should first file a refund claim with New York’s Department of Taxation.
The Second Circuit affirmed the District Court’s dismissal, arriving at the conclusion that the whole argument does not merit further discussion and there was no violation of constitutional rights as plaintiffs had stated.
Dunkin’ Brands executives said that they are pleased with the ruling, affirming that taxpayers should go through the sales tax refund process, hence, the class action lawsuit was appropriately not allowed.
Given that all Dunkin’ Donuts locations are managed by franchisees, pricing decisions and tax costs setting are the responsibility of each franchisee, which means that the statement that Dunkin’ Donuts was deliberately acting illegally loses strength. According to Dunkin’ Brands executives, they are working hard to reach out to each franchisee to review the situation and solve any issue that could be occurring without their consent, although they are confident that their franchisees always act in accordance with the law.
Dunkin’ Donuts customers now know that if they believe they are erroneously being charge or were charged in the past with illegal sales taxes, they will have to go through the process of filing a refund claim in order to get their money back, which could or could not resolve into a lowering of the popularity of Dunkin’ Donuts among New York coffee enthusiasts.
