By Lauren Berg

Law360 (June 7, 2021, 10:10 PM EDT) -- A Pennsylvania federal judge on Monday tossed buyers' claims that retailers, including Walmart, Home Depot and Big Lots, illegally collected sales tax on nonmedical protective face masks amid the pandemic, ruling that charging sales tax doesn't amount to deceptive or unfair trade practices under Keystone State law.

U.S. District Judge Marilyn J. Horan granted the dismissal sought by the retailers, finding the Pennsylvania Unfair Trade Practices and Consumer Protection Law doesn't apply in this case because charging sales tax — a tax required by state law — does not fit the definition of "trade or commerce" under the law.

"A retailer's conduct in collecting taxes is not for purposes of profit, private gain or greed. The retailer realizes no increase in revenue or profit in a transaction that charges a sales tax," the judge said. "Indeed, a retailer has little incentive to engage in 'deceptive' or 'unfair' practices by charging more than it must at the expense of its competitors charging a better price."

The judge also rejected the buyers' allegations that the retailers deceptively represented that face masks were subject to sales tax, finding that at the time of sale, there were no changes in place to alter the taxability of nonmedical protective masks.

She found the retailers' conduct can't be considered deceptive because they disclosed the pre-tax price of the masks and the amount of sales tax collected on the receipts for each transaction, according to the order.

During a hearing last week, the customers — Gerry McLean, May Marous, Joyce Wojton, Beverly Evans and Jennifer Pollock — told the judge they didn't know they'd been charged sales tax for the masks unless they scrutinized their receipts, making retailers' conduct deceptive.

Their attorney, Kevin Abramowicz of East End Trial Group LLC, said the law put the burden on the companies not to overcharge or collect taxes on tax-exempt goods, which customers couldn't realize they'd done until they got to the register.

January guidance from the Pennsylvania Department of Revenue clarifying that masks weren't taxable wasn't an out for the retailers, either, Abramowicz said. Medical masks and masks for "everyday use" had always been exempt, he argued, and the guidance said retailers didn't have to ask if the cloth masks that proliferated during the pandemic were intended for such uses when exempting them from sales tax.

Michael McTigue of Cozen O'Connor, who represents Walmart and argued for the retailers at the hearing, said both sides agree that before the COVID-19 declaration of emergency, nonmedical face masks were considered clothing accessories and were taxable.

"Even if the law had clearly changed ... the interpretation of the Pennsylvania tax law can't be used as a basis to assert a claim under the UTPCPL," he said. "Every erroneous decision by a retailer could create liability."

On Monday, Judge Horan agreed with the retailers and dismissed the suit.

Representatives for the parties did not immediately respond to requests for comment Monday evening.

The customers are represented by Kevin Tucker, Kevin Abramowicz, Chandler Steiger and Stephanie Moore of East End Trial Group LLC.

Walmart Inc. is represented by Michael W. McTigue Jr. and Meredith C. Slawe of Cozen O'Connor.

Home Depot is represented by Molly E. Meacham of Babst Calland Clements & Zomnir PC.

Big Lots Inc., Dollar General Corp. and Jo-Ann Stores LLC are represented by Courtney S. Schorr, Gerald J. Stubenhofer Jr. and Bethany Gayle Lukitsch of McGuireWoods LLP.

The case is Gerry McLean et al. v. Big Lots Inc., case number 2:20-cv-02000, in the U.S. District Court for the Western District of Pennsylvania.

--Additional reporting by Matthew Santoni. Editing by Marygrace Murphy.

For a reprint of this article, please contact reprints@law360.com.