Costco Faces Lawsuit Over Improper Sales Tax Collection

A New Jersey couple on Friday filed a class-action lawsuit against Costco Wholesale, alleging that the warehouse retailer is illegally charging sales tax on toilet tissues — a product exempt from the state’s 7% sales tax — CNBC reports.

Jacqueline Taufield and Robert Arnold say that they were charged sales tax when they bought Charmin toilet tissue on July 26, 2015 from a Costco location in Wayne, NJ, and then again in Hackensack five days later. They were denied a refund after complaining to Costco management, the suit also alleges. The couple’s attorney, Rosemarie Arnold, told CNBC that her clients are probably not the only Costco customers encountering sales tax charges illegal under New Jersey law, and said that despite the small dollar amounts, the issue over the tissue is a “huge problem” for Costco.

The problem could stem from the fact that point-of-sale systems are set up to automatically add sales tax, and the New Jersey’s Treasury Department told CNBC that it regularly fields such complaints, though it didn’t comment on this particular lawsuit. Costco didn’t comment after an inquiry by CNBC.

While Costco enjoys a stellar reputation for customer service, its image has suffered a series of hits in recent months.

Before this sales tax suit, Costco suffered a snafu-riddled rollout of its new store credit card. The new issuer, Citi Visa, conducted a shaky rollout that had many customers waiting for their cards or unable to activate them, and later sent error-riddled messages to some Costco members that falsely indicated their accounts had been closed. The switch was meant to be a boon for both Costco and its customers, with lower fees and better benefits than the club’s previous American Express card.

Earlier this month, Costco reported flat August same-store sales, missing the Retail Metrics consensus estimate for a 1.3% increase. Full results for the quarter and year will be released later this month. Costco did see an encouraging 2.33% increase in store traffic in August, while transaction values were down about 2%, mostly due to gas price deflation, according to Retail Metrics’ report.

Despite it all, Costco has long enjoyed deep loyalty from members, who pay $55 each year. Renewal rates are high, as members keep coming back for the retailer’s attractive assortment and merchandising and its helpful store associates. That should help the retailer weather its current woes; it will have to, considering that Costco has largely eschewed e-commerce, a strategy to boost fuel sales and impulse buys.

Source: www.retaildive.com www.retaildive.com

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