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Peloton Overcharged Members With False ‘Sales Tax,’ Suit Claims

Aug. 13, 2021, 11:25 PM

Exercise equipment company Peloton overcharged thousands of members through purported state sales taxes that weren’t actually applicable in the members’ states, according to a federal class action lawsuit filed in New York.

The lawsuit centers on digital goods Peloton provided to members, which the plaintiffs say aren’t taxable in their states of residence—New York, Virginia, and Massachusetts. Yet when the company charged a $39 membership fee to access those products, it “knowingly and unlawfully” also charged the plaintiffs sales taxes, according to the complaint filed Thursday at the U.S. District Court for the Southern District of New York.

By January of 2021, Peloton had ceased the billing practice in at least the plaintiffs’ states, but “Peloton has not reimbursed plaintiffs for the unlawful taxes it collected,” according to the lawsuit.

Cause of Action: The plaintiffs are alleging Peloton engaged in a breach of contract under New York law by charging an inapplicable tax that the plaintiffs hadn’t agreed to pay. They also say the tax charges violated Virginia’s Consumer Protection Act, which bars using deception, fraud, or misrepresentation in connection with a consumer transaction. In addition, they claim the company broke New York’s General Business Law, which prohibits deceptive acts within business, trade, or commerce.

Relief: The plaintiffs asked for a court order certifying the classes, a judgment against Peloton, monetary and punitive damages, attorney’s fees, and costs.

Attorneys: Peloton declined to comment. Information on Peloton’s legal representation in the lawsuit wasn’t immediately available.

The case is Skillern v. Peloton Interactive, Inc., S.D.N.Y., No. 1:21-cv-06808, complaint 8/12/21.

To contact the reporter on this story: Aysha Bagchi in Washington at abagchi@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Yuri Nagano at ynagano@bloombergtax.com