Amazon Sales Tax Lawsuit, Company Overcharges Third-Party Sales, Refuses Refunds
Amazon faces multiple class action lawsuits alleging the company systematically overcharges sales tax on purchases made through its marketplace. The most recent lawsuit claims Amazon overcharges sales tax by 0.25% on third-party seller transactions shipped to Tennessee addresses, continuing to collect excessive tax even after being notified by customers.
Earlier lawsuits allege Amazon improperly charged sales tax on gift cards and digital goods in states where these items are tax-exempt—then refused to issue refunds. The lawsuits assert claims for consumer fraud, breach of contract, unjust enrichment, and violations of state consumer protection laws. Consumers nationwide who purchased through Amazon’s marketplace or bought digital goods/gift cards may be eligible to join class actions seeking refunds and damages.
Americans spent over $600 billion on Amazon in 2023. If the company overcharged sales tax by even a fraction of a percent on those transactions, we’re talking about millions—possibly hundreds of millions—of dollars improperly collected from customers.
The Tennessee Sales Tax Overcharge Lawsuit
The newest Amazon sales tax lawsuit dropped like a bombshell in January 2026.
Plaintiff: Cullen Duke
Court: Superior Court of the State of Washington for King County
Case No: 25-2-37599-4 SEA
Filed: January 2026
What Amazon Allegedly Did Wrong
Duke claims Amazon, acting as a “marketplace facilitator,” is responsible for calculating and collecting the correct sales tax rate on third-party sales.
But according to the lawsuit, Amazon overcharges by 0.25% on sales shipped to Tennessee addresses.
That might not sound like much—until you multiply it across millions of transactions.
Amazon Refused Refunds
Here’s what makes this particularly egregious:
Duke notified Amazon about the overcharges and specifically requested a refund.
Amazon allegedly refused.
The company continued calculating and collecting excessive sales tax from Duke and other customers even after being informed of the error.
Under Tennessee law, customers must seek refunds directly from the company that collected the tax. When Amazon refuses, consumers have nowhere else to turn—except the courts.
Who’s Covered
The lawsuit seeks to represent a nationwide class of consumers who purchased goods or services from third-party sellers through Amazon’s marketplace where Amazon collected sales tax at a rate higher than applicable for their shipping address.
Timeframe: December 12, 2021 forward
Legal Claims:
- Violation of Washington Consumer Protection Act
- Unjust enrichment
Relief Sought: Actual and exemplary damages for all class members
The Gift Card and Digital Goods Lawsuits
Amazon’s sales tax problems didn’t start with the Tennessee case.
In September 2021, two nearly identical class action lawsuits were filed in Washington federal court alleging Amazon improperly charged sales tax on gift cards and digital goods in states where these items are tax-exempt.
The Debbie Chaves Lawsuit
Plaintiff: Debbie Chaves (Massachusetts resident)
Court: U.S. District Court for the Western District of Washington at Seattle
Case No: 2:21-cv-01213
Filed: September 2021
What Happened: Chaves purchased two Roblox gift cards on Amazon.com in August 2021 and was charged 6.25% sales tax—despite Massachusetts law exempting gift cards from sales tax.
Amazon’s own Conditions of Use explicitly state: “No tax is charged when purchasing gift cards.”
Yet Chaves was charged anyway.
What Makes This Worse
The lawsuits allege Amazon’s sales tax violations aren’t limited to Massachusetts.
When a billing address is set to New York, Amazon applies $0.89 sales tax to Roblox gift card purchases—even though New York doesn’t assess sales tax on gift cards either.
Amazon allegedly violates its own stated tax policy in multiple states, including:
- Massachusetts
- New York
- Other states with gift card tax exemptions
The Inconsistency Problem
Here’s what’s particularly suspicious:
Amazon does not charge sales tax on:
- Movies purchased through Amazon Prime Video
- Certain other gift cards
But it does charge sales tax on:
- Roblox gift cards
- Other digital gift cards
- Digital goods that should be tax-exempt
The lawsuit claims this inconsistent application suggests Amazon knows which items should be tax-exempt but chooses to charge tax anyway on certain products.
Where Did the Money Go?
The lawsuit raises a disturbing question: Did Amazon even remit the improperly collected sales tax to state authorities?
Or did the company keep the overcharges “in an effort to maximize profits” under the guise of state-imposed taxes?
If Amazon collected millions in sales tax on tax-exempt items and pocketed the money instead of sending it to states, that’s not just consumer fraud—it’s potentially tax fraud.
No Refunds, No Fixes
According to the lawsuit, Amazon:
- Has not reimbursed customers for incorrectly charged sales tax
- Continues charging sales tax on digital items that should be tax-exempt
- Refuses to fix the problem despite being notified
Consumers who paid the improper tax would not have done so if Amazon hadn’t automatically included it or if they’d known the tax wasn’t owed by law.
Class Definition
The lawsuit seeks to represent:
Nationwide Class: Anyone who paid sales tax on a digital item sold on Amazon.com with a billing address in a state where the digital item should have been exempt from sales tax
Massachusetts Subclass: Massachusetts residents who paid sales tax on digital items or gift cards that should have been tax-exempt
Plaintiff Attorneys:
- Wright A. Noel, Carson Noel PLLC
- L. Timothy Fisher, Max S. Roberts, Matthew A. Girardi, Bursor & Fisher, P.A.
Real Consumer Experiences
Online comments reveal widespread frustration with Amazon’s sales tax practices:
“I have been charged sales tax on ebooks that are all digital and not with audio capabilities and since they are digital items there is supposed to be no sales tax on digital/ebooks. I stopped buying books from Amazon and started using the Book Bub free ebook site to get my ebooks for free. I bought more than 25 ebooks when I realized that Amazon was charging sales tax on these and many other digital items.” – Amazon customer
“I buy gift cards frequently for my kids. Never realized I was being charged sales tax when I shouldn’t have been.” – Parent and Amazon shopper
“If your child suffers from video game addiction — including Fortnite addiction or Roblox addiction — you may be able to take legal action.” – Note from lawsuit coverage (unrelated but shows Roblox gift card context)
The pattern is clear: consumers trusted Amazon to charge the correct sales tax. That trust was allegedly betrayed.
How Amazon’s Marketplace Facilitator Role Works
When you buy from a third-party seller on Amazon, the transaction isn’t as simple as it appears.
Amazon acts as a “marketplace facilitator”—a legal term meaning Amazon:
- Provides the platform where sales occur
- Processes payments
- Collects sales tax on behalf of sellers
- Remits collected tax to states
This role comes with legal responsibilities. Amazon is required to:
- Calculate the correct sales tax rate based on shipping address
- Collect only the legally required amount
- Remit collected tax to appropriate state authorities
- Issue refunds when overcharges occur
If Amazon fails in any of these obligations, it violates consumer protection laws.
Similar Sales Tax Issues at Other Companies
Amazon isn’t alone in facing sales tax overcharge lawsuits.
Peloton (October 2021): Class action claimed the fitness company charged members in New York, Massachusetts, and Virginia unlawful sales tax on subscriptions
Pizza Hut (2015): Florida class action over sales tax on delivery fees
South Carolina vs. Amazon (2019-2024): Amazon was found liable for $12.5 million in unpaid sales tax on third-party sales for just the first quarter of 2016. The South Carolina Department of Revenue estimated Amazon could owe up to $500 million if litigation continued.
The South Carolina case is particularly relevant. Courts ruled Amazon was “in the business of selling” even for third-party transactions, making it responsible for proper tax collection.
What Amazon Could Owe
The financial exposure is substantial.
Tennessee Lawsuit: 0.25% overcharge multiplied across millions of third-party transactions since December 2021 could total millions in damages
Gift Card/Digital Goods Lawsuits: Millions of customers purchased digital goods and gift cards while being charged improper sales tax
If each affected customer is owed even $5-$20 in overcharges, and the class includes millions of people, total liability could reach:
- Tens of millions in refunds
- Additional millions in statutory damages
- Exemplary/punitive damages to punish misconduct
- Attorney fees and costs
Current Status of the Lawsuits
Tennessee Sales Tax Lawsuit: Filed January 2026, in very early stages. No response from Amazon yet.
Digital Goods Lawsuits (2021): Status unclear as of January 2026. These cases may have settled confidentially, been dismissed, or are still in discovery. No public settlement website exists yet.
Typical class action timeline:
- Months 1-12: Class certification, initial motions
- Months 12-24: Discovery, motion practice
- Months 24-36: Settlement negotiations or trial
Most consumer class actions settle rather than go to trial.
Who Can Join
Tennessee Sales Tax Lawsuit:
- Anyone nationwide who purchased from third-party sellers on Amazon
- Amazon collected sales tax at a rate higher than applicable for shipping address
- Purchases made December 12, 2021 or later
Gift Card/Digital Goods Lawsuits:
- Anyone who purchased digital goods or gift cards on Amazon.com
- Charged sales tax in states where items should be tax-exempt
- Focus on Massachusetts and New York residents, but potentially nationwide
What You Need:
- Amazon purchase history (accessible in your Amazon account)
- Receipts showing sales tax charges
- Evidence of what sales tax rate applies in your state for specific items
How to Check If You Were Overcharged
Step 1: Log into your Amazon account and access Order History
Step 2: Review purchases, particularly:
- Third-party seller purchases (look for “Sold by [Seller Name] and Fulfilled by Amazon”)
- Digital gift cards (Roblox, PlayStation, Xbox, etc.)
- Digital goods (ebooks, music, software)
Step 3: Check the sales tax charged against your state’s actual rate:
- Tennessee sales tax: varies by county (typically 7% to 9.75%)
- Massachusetts: 6.25% general sales tax, no tax on gift cards or digital goods
- New York: varies by location, no tax on gift cards
Step 4: Calculate the difference:
- If you were charged 0.25% more than your local rate, you were overcharged
- If you were charged any sales tax on gift cards in MA or NY, you were overcharged
Step 5: Document everything:
- Take screenshots of receipts
- Save order confirmations
- Note dates, amounts, and sales tax charged
What to Do If You Were Affected
1. Keep Your Documentation
Don’t delete emails or order history. You’ll need proof of purchase if a settlement is reached.
2. Monitor Class Action Websites
Check:
- ClassAction.org
- TopClassActions.com
- Settlement websites (if created)
3. Contact Plaintiff Attorneys
For the Tennessee case:
- Toby J. Marshall, Terrell Marshall Law Group PLLC
- Eric R. Nusser, Terrell Marshall Law Group PLLC
- Daniel A. Rozenblatt, Edge Professional Law Corporation
- Natasha Dandavati, Edge Professional Law Corporation
For the digital goods cases:
- Wright A. Noel, Carson Noel PLLC
- L. Timothy Fisher, Bursor & Fisher, P.A.
4. Request a Refund from Amazon
While Amazon has allegedly refused refunds in the past, document your attempt:
- Contact Amazon Customer Service
- Explain the sales tax overcharge
- Request a refund
- Save the conversation
If Amazon refuses, this strengthens the class action claims.
5. File a Complaint with State Authorities
Consider reporting to:
- Your state attorney general’s consumer protection division
- State department of revenue
- Federal Trade Commission (ftc.gov/complaint)
Frequently Asked Questions
Q: How do I know if I bought from a third-party seller?
Check your order details. It will say “Sold by [Seller Name]” if it’s a third-party seller, not “Ships from and sold by Amazon.com.”
Q: What if I only paid a few extra cents in sales tax?
Individual damages may be small, but class actions aggregate thousands or millions of people. You’re still eligible even if your overcharge was minimal.
Q: Can I get a refund now?
Not yet. Refunds typically come after a settlement is reached and approved by the court, which can take 2-3 years from filing.
Q: What if I don’t have receipts anymore?
Your Amazon account stores your complete order history. Log in and download purchase records going back years.
Q: Does this affect Amazon Prime purchases?
Yes, if you purchased from third-party sellers while using Prime, or if you bought digital goods/gift cards. The issue isn’t about Prime membership—it’s about sales tax calculation.
Q: What states don’t charge sales tax on gift cards?
Most states don’t tax gift cards, including Massachusetts, New York, California, Texas, Florida, and many others. Check your state’s department of revenue website.
Q: What states don’t charge sales tax on digital goods?
This varies significantly by state. Massachusetts exempts most digital goods from sales tax, as do several other states. Check your state’s specific laws.
Q: Will I get a big payout?
Unlikely. Most consumer class action settlements result in $10-$100 per person depending on how many claims are filed and the settlement size.
Q: Can Amazon face criminal charges?
These are civil lawsuits. However, if Amazon collected sales tax and didn’t remit it to states, that could trigger separate enforcement actions.
Q: Why did it take so long for these lawsuits to be filed?
Sales tax overcharges are small per transaction, making them easy to miss. It often takes attorneys analyzing patterns across thousands of customers to identify systematic problems.
Q: Has Amazon commented on these lawsuits?
Amazon has not issued public statements about the recent Tennessee lawsuit or the 2021 digital goods lawsuits.
Legal Resources and Information
Tennessee Sales Tax Lawsuit:
Duke v. Amazon.com Services LLC, Case No. 25-2-37599-4 SEA, Superior Court of Washington for King County
Digital Goods Lawsuits:
Chaves v. Amazon.com Inc., Case No. 2:21-cv-01213, U.S. District Court for the Western District of Washington at Seattle
A quarter of a percent here, improper tax on a gift card there—it doesn’t seem like much. But when you’re the world’s largest online retailer processing billions in transactions, those “small” overcharges add up fast.
The real question isn’t just whether Amazon made mistakes. It’s whether those mistakes were systematic, whether the company knew about them, whether it refused to fix them—and most importantly, where all that improperly collected money actually went.
As these lawsuits progress, millions of Amazon customers may finally get answers—and potentially, refunds.
About the Author
Sarah Klein, JD, is a licensed attorney and legal content strategist with over 12 years of experience across civil, criminal, family, and regulatory law. At All About Lawyer, she covers a wide range of legal topics — from high-profile lawsuits and courtroom stories to state traffic laws and everyday legal questions — all with a focus on accuracy, clarity, and public understanding.
Her writing blends real legal insight with plain-English explanations, helping readers stay informed and legally aware.
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