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Sunday, August 18, 2019

Appeals court dismisses call for California consumers to be reimbursed sales tax on Ensure


By John Breslin | Jul 24, 2018

SAN FRANCISCO (Legal Newsline) – A California appeals court has dismissed an action over claims that consumers were wrongly charged sales tax on a line of nutritional drink products.

Plaintiff Larry Littlejohn wanted to sue retailers Costco Wholesale Corp., Costco Wholesale Membership, Abbot Laboratories, and California's Board of Certification, which is charged with defining taxable products, over the sale of Ensure.

Littlejohn's central allegation is that the Ensure line is a food not subject to tax, rather than a nutritional supplement, which does attract a tax. Foreseeing a class action, the plaintiff wanted tax refunded to the retailer, Costco, and then to consumers.

He asked the San Francisco Superior Court in his third amended complaint to order "Costco to immediately apply to the full extent it legally can do so to the [Board] for reimbursement of all sales tax it paid to the [Board] due to sales of Ensure in order to immediately return to the class the sales tax reimbursement it paid to Costco for Ensure and to pay interest on said sums from the date they were paid to Costco to the full extent allowed by law."

The plaintiff produced documents that appeared to show some within the board agreed that it should be classified as a food. Indeed, sales tax on the product was discontinued after the plaintiff's purchase and before he filed a third amended complaint.

The action fails, the 1st Appellate District Court found, because the board has made no determination that the sales tax should be refunded. Consumers have no other statutory way to force refunds other than through the board.

"Because this case does not involve allegations of unique circumstances showing the Board has concluded consumers are owed refunds for taxes paid on sales of Ensure, we affirm," Associate Justice Peter J. Siggins wrote in the opinion.

Acting Presiding Justice Stuart Pollack wrote in a dissenting opinion that he would reverse the dismissal of the third amended complaint and affirm the judgments.

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Costco Wholesale Corporation First District Court of Appeal California

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