Pair may have just bought themselves the world's most expensive batteries and light bulbs
Two people who sued Home Depot for charging sales tax on the value of coupons on some batteries and light bulbs have just had their suit dismissed by the Massachusetts Appeals Court - which ordered them to reimburse Home Depot for eight years' worth of court costs in the case.
In November, 2000, Lisa McGonagle purchased a package of batteries at the Home Depot store in Somerville, using a manufacturer's coupon worth $1 off. State law requires that in such cases, the store only charge a sales tax on the reduced price of the item, but McGonagle was charged the same tax as if she didn't have a coupon - which means she paid 5 cents more than she should have. The same thing happened to her a month later at a Home Depot in Danvers.
In January, 2001, her lawyer threatened a class-action lawsuit. The company responded by offering to reimburse the difference in tax with interest or $25, whichever was greater and said it had investigated, found that Massachusetts Home Depots had overcharged customers by a total of $204 in sales tax and vowed to correct the problem by instructing cashiers not to charge tax on the value of coupons.
The lawyer said no deal. When another customer, Paul Cass, used several $5 coupons to buy energy-efficient light bulbs for $20.40 at the Quincy Home Depot but was charged a sales tax on the original bulb value of $50.40 (an increase of $1.50), the suit was on.
In its ruling, the appeals court said that if the plaintiffs really wanted their money back, under state law, they should have gone to the state Department of Revenue, not Home Depot - and sought a tax refund:
It is undisputed that the company sought and received no profit from the imposition of the sales tax. It transmitted to DOR all tax payments received from the plaintiffs and from the classes whom they proposed to represent. It carried out a legal duty, and not a profit-making exercise.
The court also reversed a lower-court ruling dismissing the case without awarding lawyer's fees to the winner, in this case, Home Depot. It kicked the case back to Superior Court for a determination of those fees. And here's where Neil Chayet would say something witty. They could appeal to the Supreme Judicial Court.
Comments
How does this make any sense??
Here's a hyperbolic example of where this logic can easily lead to:
I go to Home Depot. I buy a $10 piece of wood. They charge me $10 for the wood and $20 in sales tax, a 200% sales tax. I complain and they're going to say what? "We're allowed to charge whatever we want in sales tax, because it's not profit. We're just going to send it all on to MassDOR, so you should complain to them for a tax refund."? Seriously? That's just absurd. Isn't there a law that explains that you can't be requested to pay more in taxes to the company collecting them than is rightly required?
What a racket *that* could be. Companies overcharging sales tax forcing customers to essentially pay a deposit on their purchases that they then have to get refunded from the DOR at a later date...then the State just has to throw them concessions to close the loop! Even if it were like Office Space and they rounded everything up or just added an extra penny or two to the taxes (are you gonna file a sales tax refund request for every penny on every purchase you make??), the state would rake in millions in new revenue!
Um, why...
Would any company act in such a faction? They don't profit from the extra tax charged; in fact they have to pay the cost (accounting, so on so forth) of remitting that amount to the state...And then there is the hit they'd take in the way of lost customer goodwill and loyalty.
Should Home Depot come up with a realiable way of avoiding this from happening? Yes. However since it seems pretty clear to me that the lawyer was looking to extort a large settlement from HD, I'm not really fussed by this ruling.
I dunno....
Sounds to me like Home Depot tried to correct a mistake in good faith and the customer got too greedy. It doesn't sound like Home Depot told these people to screw and to get their refund from the state does it?
Fundamentals
The situation required her to pay a lawyer to get even $25 out of them and to also get Home Depot to fix its illegal ways. $25 isn't going to cover the lawyer and it doesn't sound like it should have ever come to that (I also don't understand why their registers even ALLOW them to charge on the original price...that shouldn't be up to the cashier, but up to the software to do it correctly).
But then this nonsense about going to the DOR instead of applying the sales tax law to the company to charge the correct sales tax? What the hell is that about from the court?
I didn't read that far into it....
You are assuming that she already went to the store manager and attempted to get a refund on her own and got rejected. If that happened and she was told to go to the state then yea, Home Depot was wrong.
We're talking about 5 cents here
She showed up with a $1 coupon and then was charged on the full value of the batteries. At the time, that meant a difference of 5 cents.
So I'm not thinking she went to the lawyer to right some horrible wrong done strictly to herself. Ditto for the guy with the light bulbs - the court notes he never even contacted the chain - the first they heard of him was the lawsuit.
Sorry, I forgot to link to the full decision
It's at the bottom of the main post now.
From the ruling
She sent Home Depot a letter requesting the greater of $25 or her tax difference and they offered her that and reasonable lawyer fees as well as telling her they'll train the cashiers.
She rejected that offer and pushed for trebling. Ok, so they offered her more than the $25 mentioned in the summary here. I'm less okay with this lawsuit and more okay with how Home Depot tried to settle it early in the process.
I'm still not thrilled with the ruling that just because this was a case of overcharging taxes it doesn't fall under the "deceptive business practices" part of MA law. Does that mean if a company is doing this (by accident or malice) then the correct option is to sue the state for overcollecting the tax? Is the state responsible for correct sales tax compliance of every business? Because the DOR is only told "we sold X, here's 6.25% * X in tax receipts"...so how are they to know X included coupon money?
It seems like this ruling puts the over collection of sales tax into a no-man's-land now. You can't sue the store for misconduct, because they're only acting as an agent of the state and you can't sue the state because it has plausible deniability from lawsuit because it never has a clue what the tax collected came from in terms of purchases...but you can ask the state for your money back (every time you buy something? weak...).
She was offered everything she was entitled to...
...and which she herself had initally requested. Not much of a basis for a law suit at such point.
Their lawyer might want to update his Web site
He's still listing the case as a win.
Please provide, in plain legal brief format...
OMG I moused over that link and thought it said "zaklaw.com"
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http://1smootshort.blogspot.com
Nor is it...
"kazlaw.com". Just sayin'.
It's a good ruling
So what if she couldn't pay her lawyer on the $25 offer? She's the one who went out and hired a lawyer over pennies and said lawyer then took the case! The lawyer is an idiot. The client is an idiot. Case closed. They were looking for deep pockets. Home Depot made a mistake. They corrected it. Done. Were they supposed to pay her thousands of dollars because she raised a stink? That's not how the legal system works.
Costs Aren't Attorney's Fees
The Court only allowed ordinary fees, which does not include attorney's fees. It would be filing fees, deposition costs and maybe expert witnesses. Not quite as onerous as 9 years of attorney's fees.
Thanks for the clarification
I've changed the original post to reflect that. Still more expensive than the extra $1.50 or whatever they paid in incorrect taxes.