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UTAH COURT TO DECIDE ON TAX OF WAREHOUSE MEMBER FEES

SALT LAKE CITY -- The Utah Court of Appeals gave wholesale customers in the state another chance to argue their case for eliminating taxes on warehouse club membership fees.The class-action suit, filed by four plaintiffs on behalf of all club members who have paid the Utah tax, will now return to Utah's Third District Court, presided over by Judge Glenn Iwasaki. He is the district court judge who

Martin Schneider

May 7, 2001

2 Min Read
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MARTIN SCHNEIDER

SALT LAKE CITY -- The Utah Court of Appeals gave wholesale customers in the state another chance to argue their case for eliminating taxes on warehouse club membership fees.

The class-action suit, filed by four plaintiffs on behalf of all club members who have paid the Utah tax, will now return to Utah's Third District Court, presided over by Judge Glenn Iwasaki. He is the district court judge who originally heard the class-action suit, filed in 1999, and dismissed it, arguing that the case should be decided by the Utah Tax Commission, not the trial courts.

The suit calls for a full refund of all sales taxes collected on membership fees by the state, plus interest, according to Thomas Karrenberg, the plaintiffs' attorney. He estimated that the refunds could amount to between $2 million and $6 million.

"We are confident that our tax statute does not authorize a tax on memberships. That is the way it is written out," Karrenberg told SN.

Karrenberg also said he cannot predict when the trial court will hear the case. He added that a similar case in Idaho was recently heard in which Costco members in that state received refunds.

"Idaho had a very similar tax statute. But instead of trying to put up a fight, the courts there said, 'Let's look into this,"' Karrenberg said. "The court examined the statute and determined that the plaintiffs were right, and quickly made arrangements to provide refunds."

Karrenberg also told SN that the legislature could enact a law that includes a tax on wholesale club memberships. However, he said, since no such law exists, his clients are justified in seeking refunds.

Taxes on warehouse club memberships vary from state to state and are not very common, according to Susan Briault, spokeswoman for BJ's Wholesale Club, Natick, Mass.

"We operate club stores in 16 states, and only two charge the tax -- New York and North Carolina. We're not sure of their reasoning behind the tax, but they are the only two states we operate in that have such a tax," Briault told SN.

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