Papa John’s in lawsuit over sales tax on delivery fees
sales tax on delivery fees
On July 23, a federal judge in Tampa declined to dismiss a class action against Papa John’s, America’s fourth-largest pizza chain, over allegations Florida customers were improperly charged sales tax on delivery fees. While the judge did not determine whether or not the allegations were true, her decision forced Papa John’s to file a formal answer to the class action complaint. The judge also ordered both sides to meet with a mediator this coming November in an effort to avoid a jury trial.
The crux of the class action complaint is that Papa John’s improperly included its $3 delivery fee in calculating Florida sales tax. The class action plaintiffs argue Florida law only requires sales tax on the sale of pizza itself, not any additional delivery fees. The plaintiffs seek to recover the alleged sales tax overpayments on behalf of all affected Papa John’s customers.
In its motion to dismiss, Papa John’s argued the class action was inappropriate for several reasons. First, Papa John’s cited Florida law, which expressly bars a customer from recovering sales tax overpayments collected by a retailer—so long as the retailer actually remitted said payments to the state. Second, Papa John’s said since customers voluntarily paid the sales tax on the assumption it applied to the delivery fee, the company could not be held liable even if the tax was erroneously charged. Finally, Papa John’s said even if the plaintiffs are entitled to a refund, they must first apply to the Florida Department of Revenue, who actually received the allegedly erroneous payments.
U.S. District Judge Virginia M. Hernandez Covington said none of those arguments justified dismissal at this time. The judge did not rule on the merits of Papa John’s first two arguments; she merely found they presented disputed issues of fact for a jury to decide. On the final argument, the judge said Florida law does not allow customers to request a tax refund directly from the state. To the contrary, the law only permits the retailer, Papa John’s, to seek a refund, and customers must then seek a refund from the company.
Judge Hernandez Covington also denied Papa John’s request to delay the case until the Florida Department of Revenue could determine whether or not sales tax was required on delivery fees. No delay was justified, the judge said, because Florida administrative regulators have already made it clear that such charges are illegal.
S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog Bonham’s Cases.
Lucinda Rowlands has been the general manager at Zip2Tax since 2010. She has extensively researched sales and use tax regulations in order to help small businesses navigate complicated tax rules.