The Pennsylvania Supreme Court handed down an opinion just a few months ago that represents a major win for businesses. These businesses illegally charged consumers that 6%, 7% around Pittsburgh, or even 8% sales tax around Philadelphia, for things that should not have been taxed. The case is Garcia v. American Eagle Outfitters et al., 331 A.3d 541 (Pa. 2025), and signals a continuing shift of big money winning over ordinary citizens.
The facts are straightforward. During the height of COVID in 2020, Garcia went out and bought cloth face masks from various stores. Those businesses all charged sales tax on the masks that Garcia bought. Since masks are classified “medical supplies” (or “clothing”, I would also argue), they should not have been taxed under 72 P.S. §7204(17). Garcia sued those businesses in a class action lawsuit on behalf of all Pennsylvania consumers, and alleged that the businesses violated Pennsylvania's consumer protection law.
In an admirably lawyerly move, the businesses' learned counsel argued that collecting sales tax was not part of the “conduct” that is “inside the doing” of business. Yes, lawyers are paid well to say that with a straight face.
The facts are straightforward. During the height of COVID in 2020, Garcia went out and bought cloth face masks from various stores. Those businesses all charged sales tax on the masks that Garcia bought. Since masks are classified “medical supplies” (or “clothing”, I would also argue), they should not have been taxed under 72 P.S. §7204(17). Garcia sued those businesses in a class action lawsuit on behalf of all Pennsylvania consumers, and alleged that the businesses violated Pennsylvania's consumer protection law.
In an admirably lawyerly move, the businesses' learned counsel argued that collecting sales tax was not part of the “conduct” that is “inside the doing” of business. Yes, lawyers are paid well to say that with a straight face.
And with Pennsylvania Supreme Court races becoming dump sites for massive campaign “donations”, it was hardly shocking that the court’s decision parroted the business’ argument – and against the interests of all Pennsylvania consumers.
First, the court completely ignored whether the sales tax was proper. Its decision simply skipped over whether cloth masks were “medical supplies” – or “clothing” for that matter – and whether consumers should have been charged sales tax.
Second, the court glossed over the fact that almost no consumer is going to go through the refund procedure in Section 252 of the Pennsylvania Tax Reform Code, 72 P.S. § 7252. Really, who is going to file for a tax refund for $0.14 on a $2 mask in Allegheny County? Not the PA Supreme Court’s concern.
Third, businesses are the ones whom made the illegal decision to charge consumers sales tax –while making a sale. But again, the court skipped this concern.
Instead, the court’s reasoning copied the retailers’ argument verbatim:
First, the court completely ignored whether the sales tax was proper. Its decision simply skipped over whether cloth masks were “medical supplies” – or “clothing” for that matter – and whether consumers should have been charged sales tax.
Second, the court glossed over the fact that almost no consumer is going to go through the refund procedure in Section 252 of the Pennsylvania Tax Reform Code, 72 P.S. § 7252. Really, who is going to file for a tax refund for $0.14 on a $2 mask in Allegheny County? Not the PA Supreme Court’s concern.
Third, businesses are the ones whom made the illegal decision to charge consumers sales tax –while making a sale. But again, the court skipped this concern.
Instead, the court’s reasoning copied the retailers’ argument verbatim:
“While we recognize that Section 3(a) of [Pennsylvania’s Consumer Protection Law] might prohibit unfair or deceptive acts or practices within a broader category of circumstances than the advertising, offering for sale, sale, or distribution of property or services alone, we conclude that it cannot be so broad as to encompass actions taken by a merchant in its collection of sales tax.” Garcia, 331 A.3d at 553.
Never mind that the only time sales tax is collected is when a sale is made, and never mind that sales tax is always part of the consumer’s final lump sum paid to a business, the court elucidated,
“[A] merchant's collection of sales tax is best understood as ‘a statutory obligation attendant to,’ but not within, the conduct of any trade or commerce.” Id.
The final decision?
Millions of dollars of liability for wrongdoing wiped out with the stroke of a pen:
Millions of dollars of liability for wrongdoing wiped out with the stroke of a pen:
“We hold that a merchant's collection of sales tax does not occur ‘in the conduct of any trade or commerce’ as that phrase is used in Section 3(a) of [Pennsylvania’s Consumer Protection Law].” Id. at 554.
A huge win for big business. Make no mistake, businesses now have even less incentive to accurately report – or even pay – sales tax. The state certainly likes to keep that extra taxpayer money. Do not hold your breath for the state to issue a refund check to each citizen who was cheated. With so much campaign contribution money sloshing around judicial election campaigns nowadays, the focus is on hot button political issues and business interests, while ordinary consumers’ interests get drowned out. Consumer advocacy groups, who help all Pennsylvanians regardless of political leaning, are always outspent and outgunned by big business money. The vast majority of people struggle to name even one consumer advocacy group – and no, I do not believe the BBB, a private entity, really counts, given its history of “pay-to-play”.
The majority of sales tax payment cases are also administrative or civil in nature, so the worst businesses have to fear is usually just a slap on the wrist for being “inaccurate”. And many retailers already pad their margins by committing sales tax fraud.
Now you know – cheating on your taxes can be profitable and just a “cost of doing business”. Heck, the biggest tax fraud in Western PA recently got 3 years of “supervised release”, including 6 months of house arrest. Meaning Joseph Nocito will serve his time... in his 51,000 square foot mansion with an “outdoor pool and pool house; tennis, basketball and bocce courts”, and is also the biggest mansion in Western PA. Nocito had to repay $15.8 million in back taxes, but got to keep his $30 million mansion. But I digress.
The majority of sales tax payment cases are also administrative or civil in nature, so the worst businesses have to fear is usually just a slap on the wrist for being “inaccurate”. And many retailers already pad their margins by committing sales tax fraud.
Now you know – cheating on your taxes can be profitable and just a “cost of doing business”. Heck, the biggest tax fraud in Western PA recently got 3 years of “supervised release”, including 6 months of house arrest. Meaning Joseph Nocito will serve his time... in his 51,000 square foot mansion with an “outdoor pool and pool house; tennis, basketball and bocce courts”, and is also the biggest mansion in Western PA. Nocito had to repay $15.8 million in back taxes, but got to keep his $30 million mansion. But I digress.
Mr. Nocito is "serving" his "sentence" for tax fraud in his 51,000 sqft. mansion. Image courtesy Google Maps.
This Garcia case represents an increasingly concerning trend. “Equal justice” has more and more become a mere slogan. Common sense is more and more defeated by bending the law into hyper-technical definitions, to suit a result that big money sees fit. This is not rule of law. This is rule of money.
“Different spanks for different ranks” is not just for the military. Steal a candy bar and Joe Sixpack get cuffed for retail theft. Steal millions from consumers collectively, hire really good lawyers and make some campaign donations, and you get… a favorable Supreme Court opinion.
“Different spanks for different ranks” is not just for the military. Steal a candy bar and Joe Sixpack get cuffed for retail theft. Steal millions from consumers collectively, hire really good lawyers and make some campaign donations, and you get… a favorable Supreme Court opinion.
RSS Feed
