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Class Action Lawsuit for Fraudulent Tax Charges Denied in Illinois


Admin/Rates/Audits/Use Tax

Finally a positive result in the class action cases related to sales tax in Illinois! An Illinois appellate court has held that a customer is barred from bringing a claim against a "take-and-bake" franchise pizza restaurant to recover sales tax overpaid on the purchase of an uncooked pizza, based on the voluntary payment doctrine. The doctrine prevents recovery of voluntarily overpaid taxes unless the transaction involved fraud, misrepresentation or mistake of fact, or the taxes were paid under duress. The customer purchased an uncooked pizza from the restaurant and paid sales tax on the purchase. The customer pursued a class action lawsuit against the franchise, claiming that the company engaged in fraud by not charging the lower tax rate applicable to food products that are sold not ready for immediate consumption. The customer did not establish a sufficient claim for fraud, the sales receipt put the customer on notice that he had paid the incorrect amount of tax, and a specialty item at a restaurant was not such a necessary item that it was purchased under duress. As a result, the class action lawsuit was denied. Based on this decision, if your company is hit with a class action case on sales tax, we recommend you talk to an Illinois attorney who specializes in sales and use taxes before making any decisions about steps to take.  If you need recommendations, please contact us.  (Karpowicz v. Papa Murphy's International, LLC, Appellate Court of Illinois, Fifth District, No. 5-15-0320, July 5, 2016)

(09/28/2016)
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