Instacart is being sued for refunds and for the way it is providing its grocery service in Washington, DC, as the second major legal action against the 8-year-old company. The latest lawsuit – filed Thursday by Attorney General Karl Racine – alleges that Instacart misled customers about service charges.
Instacart did not tell customers that between September 2016 and April 2018, an optional service was added to shopping. Legal documents also allege that customers were led to believe that service charges were tips for delivery workers. But instead of using the money to boost workers’ wages, Instacart has pocketed the fees and has not paid sales tax in six years, Racine said Thursday.
“Instacart used these fraudulent fees to cover its operating expenses while not paying DC sales tax,” Racine claimed in a statement. “We have filed a lawsuit to force Instacart to honor its legal obligations, pay DC the taxes it owes, and return millions of dollars to District consumers who have defrauded the company.”
Instacart rejected Racine’s claims, calling the allegations “without merit” in a statement. Instacart said transparency is important for business employees and that all customer tips go to retailers.
“In our product, we tell customers that tips are always separate from and in addition to all service costs, and we clearly state that service costs go to our operations,” said Instacart.
However, Racine’s office believes Instacart has broken the District’s consumer protection statues. To the problem was the way Instacart presents customers’ accounts. The company puts a 10% automatic service charge on orders without showing customers that the fee was optional and could be adjusted, the lawsuit states.
Racine has not disclosed the exact amount he believes Instacart is liable to pay taxes, but the lawsuit claims “Instacart has owed the District hundreds of thousands of dollars, plus fines and interest, for unpaid sales taxes since 2014.”
Instacart was sued in 2015 by workers who claimed they were owed extra wages but did not receive them because they were declared independent contractors and not employees. The company finally settled with the workers in 2017, paying $ 4.6 million.
The DC Attorney – General’s Office has an ongoing lawsuit against food service provider DoorDash, alleging that the company misled customers about tips intended for drivers. DoorDash changed their corporate policy last year after widespread criticism, and is already passing a tip to executives.
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