Juice Drink Sales Tax Action Dismissed by Washington Court of Appeals

This case began after Keith Caneer purchased 100% juice from four major grocery stores which charged Mr. Caneer sales tax on the juice, tax which the plaintiff claims was wrongly and unfairly collected, as the juice was exempted from sales tax. While Washington does apply a retail sales tax to “soft drinks”, the tax does not apply to beverages that are more than 50% vegetable or fruit juice by volume. As a result of being charged this tax erroneously, Mr. Caneer filed a putative class action lawsuit, seeking to recover damages for the unlawfully collected tax, attorney’s fees, three times the amount of actual damages, and an injunction prohibiting taxation on exempt food items by the grocery stores.

Safeway, one of the involved grocers, moved to dismiss and argued first that the process to challenge incorrect tax payments is to seek a refund from the Department of Revenue. Safeway further contended that Caneer’s complaint did not support his allegations, and that his claims failed as a matter of law. Kroger, another affected grocer, adopted Safeway’s arguments and added that Caneer had failed to exhaust administrative remedies put forth by Washington’s tax regulations. Whole Foods and Town & Country, the other two grocers, joined the motions to dismiss. The trial court granted the grocers’ motions and dismissed the complaint without prejudice and without class certification.

Caneer appealed the care to the Washington Court of Appeals, claiming the dismissal was erroneous. He alleged that this case is not a tax refund case and pointed out that he is instead challenging if the grocery stores have the authority to collect tax under the circumstances brought to light in the case. The Washington Court of Appeals, however, disagreed with Mr. Caneer and upheld the dismissal. No matter what his reasoning is, the Court points out the grievance is over a tax imposed on him that he is seeking a refund for, which means he must follow the procedures set out for claiming a refund, which he has not done.

It is important to be aware of what taxes one is being charged and charging. If an item should be exempt from tax, ideally it should be correctly considered so that tax is not charged by a retailer. However, if tax is incorrectly charged, it is critical to follow the correct process to seek tax relief. Much like businesses must consider what they are actually selling when figuring out what taxes to charge, those seeking to challenge tax should be aware of what they are actually asking for, and endeavor to take their claims before the correct parties in the stipulated manner to get the intended relief. (Caneer v. Kroger, No. 85009-1-I (Wash. Ct. App. Div. 1-l) Unpublished Opinion filed 7/8/2024)

Posted on October 17, 2024