Skims Settles New Jersey Sales Tax Case for $200,000

On January 16, the New Jersey Department of Law and Public Safety, more specifically the Division of Consumer Affairs, issued a Consent Order in a case concerning the investigation of whether Skims Body, Inc., an online apparel company founded by, violated the New Jersey Consumer Fraud Act. The investigation and the issued Consent Order center on whether the Skims improperly collected sales tax from New Jersey customers on clothing items that are exempt from sales tax under state law.

Skims Obligations Under the Consent Order

Under the New Jersey tax law, most everyday clothing and footwear are exempt from sales tax. Following the investigation conducted by investigator Aziza Salikhova and Gregory Turner, Assistant Deputy of Enforcement within the Division’s Office of Consumer Protection, the Division of Consumer Affairs determined that Skims incorrectly collected sales tax from New Jersey customers over a five-year period from 2019 through 2024.

As a result of the findings, Skims has agreed to pay a USD 200,000 civil penalty to settle allegations. Additionally, the company is committed to maintaining systems and procedures designed to ensure that New Jersey customers are not charged sales tax on merchandise that is exempt under the New Jersey Sales and Use Tax Act. Furthermore, for the next four years, the company will use its best efforts to process and complete any further consumer refund requests promptly.

Attorney General Matthew J. Platkin stated that Skims was held accountable because its actions caused consumers to pay more than they legally owed, and stressed that the state will not tolerate conduct that unfairly takes money from hardworking New Jersey residents.

Conclusion

By agreeing to pay the penalty and take other necessary steps to address it, Skims resolved the issue without admitting wrongdoing. Nonetheless, this case emphasizes that over-collecting taxes may be equally harmful to companies as under-collecting, and that it may expose companies to consumer protection issues, law enforcement, refund procedures, penalties, and reputational damage.

Source: State of New Jersey – Department of Law and Public Safety