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Tax Law

California Court of Appeal Tosses Sales Tax Case

The California Court of Appeal for the Fourth Appellate District upheld a trial court’s judgment that a plaintiff lacked standing to challenge the sales tax practices of a technology company because she did not establish the existence of an economic injury. The plaintiff purchased cellphones from the technology company at a discounted price as part of bundled transactions along with telecommunications provider service contracts. In accordance with California law, the technology company chose to collect and remit sales tax from customers based on the unbundled price of these cellphones. Although the technology company was not required to include the unbundled price or the method of calculating the sales tax on customer receipts, the plaintiff alleged that by not adequately disclosing to customers that the sales tax for these bundled transactions would be calculated based on the unbundled price the technology company violated California’s Unfair Competition Law and Consumer Legal Remedies Act. Relying on a previous court of appeal decision with nearly identical facts, the court found that a plaintiff whose only claimed harm is the denial of the opportunity to shop around must show that she could have purchased the same product from another retailer without having to pay the sales tax on the unbundled price. Therefore, because the plaintiff did not present evidence that she could have purchased the same cellphones from another retailer in bundled transactions without paying sales tax on the unbundled price, the court concluded that the plaintiff lacked standing. Adame v. Apple Inc., Dkt. No. D073567 (Cal. Ct. App. Dec. 31, 2019) (unpublished).