LuLaRoe class action sales tax lawsuit could cover 10,000+ Alaskan customers

I spend way too much time on social media, specifically Twitter. I like the quick hit, hyperbolic, melodramatic tone of many of the folks I follow.

One Tweet in particular caught my eye last week with its dismissal of LuLaRoe clothing. Geraldine DeRuiter, who blogs at The Everywhereist, is not a fan.

After I quit laughing, I read DeRuiter’s post. Then I went looking for more on LuLaRoe.

Under my, but not all, radars: Even before COVID-19 isolation, I worked much of the time from home. For the last two decades, that’s been in South Florida and Austin, Texas, where casual attire basically is de rigueur at just about every place or event.

So when the women’s clothing company appeared in 2013, I was oblivious, even though it’s initial claim to fame was leggings. My shorts and T-shirts from Target and my favorite sporting teams’ websites were (and are) still working for my lifestyle.

My Twitter-prompted search, however, led me to another side of LuLaRoe.

Apparently, the company was embroiled in product quality lawsuits.

It also faced accusations of functioning as a work-from-home pyramid scheme. In February, LuLaRoe paid a $4.75 million settlement to Washington State in connection with multi-level marketing (MLM) charges.

And it’s the subject of a four-part Prime Video docuseries.

Tax troubles, too: But what really caught my eye was, of course, a tax connection.

On Sept. 15, an Alaska federal judge ruled that a potential a class of more than 10,000 LuLaRoe consumers could proceed.

The decision, spelled out in the 31-page order, means that a class-action lawsuit can go forward in connection with a claim filed under Alaska’s Unfair Trade Practices and Consumer Protection Act, enacted to protect consumers from deceptive sales and advertising practices.

Alaska has no state-level sales tax, but the now-OK’ed class-action lawsuit alleges that customers in tax-free jurisdictions (local sales taxes are allowed in the Last Frontier) were charged tax on remote sales from retailers in other states from April 2016 through June 2017.

The improper collection of sales tax was in connection, according to court documents, “72,373 separate purchase transactions, which resulted in the payment of sales tax in the amount of $255,263.72” with LuLaRoe products “shipped to 10,369 unique addresses in Alaska.”

From one taxed buyer: Last week’s federal court order is the latest legal move in a case that was filed by a single Alaskan LuLaRoe customer back in 2019. That case was dismissed, but as we all know, there are many avenues within the U.S. court system.

Now, per this latest federal court order, the counsel for the proposed class must begin notifying the potential plaintiffs by “the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.”

That required notice, in consultation with the attorneys representing defendant LLR Inc., LuLaRoe’s parent company, is to be done by Oct. 18, 2021.

As they say in court, or at least courtroom TV dramas, stay tuned.

You also might find these items of interest:

• EU CumEx tax fraud finally reaches the U.S.
• Bernie Madoff’s tax legacy: Ponzi scheme loss deduction
• National Ice Cream Day is even better in the 5 states without a sales tax
• New Jersey residents projected to pay the most state taxes over their lifetimes

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