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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