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DC Attorney General Karl A Racine sues Instacart, alleging “deceptive” service fees and unpaid sales taxes

D.C. Attorney General Karl A. Racine has filed a lawsuit against the grocery delivery service Instacart, ­alleging it has failed to pay hundreds of thousands of dollars in D.C. sales tax and deceived local consumers into believing extra service fees were actually tips for workers.

Instacart, which operates nationwide and relies on gig economy workers, has operated in the D.C. area since at least 2014 and has seen a surge in use during the coronavirus pandemic. Racine’s office claims that from September 2016 through April 2018, the company charged consumers in the District a default “service fee” set at 10 percent of the order total, which the lawsuit alleges appeared as a tip to any “reasonable customer.” Instacart users had an option to adjust the percentage or waive the fee entirely, the suit says, but “unlike a tip, the service fee went to ­Instacart and did not change the wages or commissions that the company paid its shop.

Racine’s office says Instacart implemented a mandatory service fee in 2018 after media reports highlighted the issue but has since refused to refund customers who they say were deceptively charged.”

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About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.


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