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N.J. man files toilet paper tax class action lawsuit

For the last five years, I've been regularly grocery shopping with my mother. She's a retiree on a fixed income, so much of our time is spent examining shelf prices, determining which size offers the best per-unit value and debating whether it's worth a few more pennies to get something she knows she likes or save cents by buying a cheaper, but untried store brand.

Cat kitten toilet paper attack_Tastefully OffensiveSource: TastefullyOffensive.com from YouTube

Now I guess we need to start double checking the register receipts to make sure our savings aren't negated by improper tax charges.

That's what some Garden State shoppers say they found after buying household supplies at Costco.

TP tax trouble: Specifically, Robert Arnold of Leonia, New Jersey, claims that he and his wife Jacqueline Taufield purchased Charmin toilet tissue from two different Costco stores in the area and each time they were charged a 7 percent sales tax on the bathroom product.

But toilet paper, as well as other disposable household paper products like tissues and paper towels, are not subject to N.J. sales tax.

Arnold now is leading a class-action lawsuit against Costco Wholesale Corporation, reports NJ.com.

Effort to recover tax rebuffed: Arnold says when he discovered the improper charge and went back to the Costco in Hackensack, store employees told him they could not refund his money.

Instead, he was instructed to fill out forms, submit them to Costco's corporate office and that his money would be mailed to him.

The couple's lawyer, Rosemarie Arnold (no relation to her client), told CNBC that the amount of improperly collected tax in this case is less than $1.50 for each purchase.

But the lack of immediate customer service in recovering that small amount directly from the store apparently was the last straw for Arnold.

Off to court: Arnold's lawsuit, filed in Bergen County Superior Court, accuses Costco of fraud, unjust enrichment and negligence. The filing claims the business violated the New Jersey Consumer Protection Act, the Truth-In-Consumer Contract Warranty and Notice Act, and New Jersey common law.

The lawsuit further alleges that Costco has "a policy and practice" of charging unlawful sales tax on its products. Last year, a federal class action suit was filed in California against the chain alleging the retailer collected more sales tax than it should have on products that included manufacturer rebates.

While we might be chuckling at this legal effort, it isn't the first such toilet paper tax lawsuit. Back in 2007, Kmart lost a lawsuit filed by one of its Pennsylvania customers after she said she was improperly charged sales tax on her toilet paper purchase at that store.

From pennies to millions: The New Jersey legal action seeks to represent the "hundreds of thousands of New Jersey residents [who] have paid a 7 percent surcharge in the guise of a sales tax when purchasing toilet tissue at" New Jersey Costco stores.

It asks for reimbursement of the tax paid on toilet paper by the N.J. couple who filed the lawsuit and anyone else who joins the class action, as well as punitive damages.

If found guilty, attorney Arnold says Costco's potential damages for the class could be in the "millions of dollars."

"Everybody uses toilet paper," she told CNBC. "You have to figure that a patron of Costco is always going to buy toilet paper."

Show me the tax money: The attorney also raised the question of where the improperly collected tax money was going. Is Costco "actually paying the taxes to the government, or keeping the money?" asks Arnold.

"Most likely, it's the latter, because if they submitted tax resolutions to the government, the government would say, 'This is an non-taxable item, it's toilet paper,'" Arnold says.

That's something for N.J. tax officials and the legal action to sort out.

But I do know that the next time I shop, either with my mom or for my own pantry and household needs, I'll keep an eye on the receipt and the Texas sales tax code.

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