Dunkin' Donut Sued Over Charging Sales Tax on Non-Taxable Items

The restaurant holding brand was charging tax on items which as per the Sales Tax Guide were not taxable; and hence got sued for it by a resident.

A lawsuit has been filed against Dunkin Brands Group by a resident according to which it has been the coffee chain has been overcharging its customers, at a few of its franchises in New Jersey and New York; it has been doing so since the last three years. According to the complaints filed by the resident, the franchises of Dunkin Donut were charging 7% sales tax on non-taxable items in New Jersey which included grounded coffee and bottled water and in New York they were charging sales tax on packaged coffee beans.

The lawyer who is covering the matter, Carl Mayer explained to the New York Post that the coffee brand should stop doing this with its customers and either refunds them the extra money that it has charged them or simply provides them with discounts; so that they are compensated for the extra money they were being charged. In a time span of three years, Mr. Mayor informed that the franchises made as much as $10 million from New York and $4 million from New Jersey.

According to the New Jersey Sales Tax Guide, a number of food items which specifically include water and packaged coffee are not subject to sales tax – and it is clearly mentioned in the guide that stores and restaurants cannot charge its customers extra money on those. Furthermore, the lawyers have evidence to prove that the franchises were aware of this rule before making money off their customers. Carl Mayor informed the New York Post that initially Dunkin Brands was made aware of this issues which it did not comply to.

The reaction that was received by Dunkin Brands Group Inc. was that, Michelle King, its spokesperson stated that they organization will contact these franchises and see into this issue further, as per the statement that was given to Fortune. This would mean that the company will contact over 1000 franchises in New York and New Jersey that are being owned by individuals – who are ultimately liable to comply by these terms and conditions of the state that they are in. An attorney for the New York plaintiffs, Zachary Liszka stated that he does not understand why a company would want its customers to pay more taxes than they are required to- despite the fact that it was clearly stated that it can’t do so.

Dunkin stock is being traded at a share price of $40.93 currently; which represents an increase of 0.89% during the previous trading session. Throughout the session, the stock price of the restaurant chain kept fluctuating between a high share price of $41.38 and a low share price of $40.19 – while the 52-week reported by the business of $56.79 and the one year low reported by the company was $36.44. The earnings reported Dunkin Brands was 1.08 with price to earnings ratio of 37.94. Additionally the revenue generated by the restaurant holding group was reported to be $203.8 million. The figure was very close to the estimation of the analysts, who had expected the revenue to be at $204 million.