Peloton hit with class-action lawsuit claiming it improperly charged sales tax

peloton bike
A Peloton bike
  • Peloton users filed a lawsuit against the exercise company saying it improperly charged sales tax.
  • Customers were taxed in New York, Massachusetts, and Virginia where digital goods are tax-exempt, the lawsuit said.
  • This is the latest lawsuit for Peloton after its Tread+ treadmill was recalled earlier this year.
  • See more stories on Insider's business page.

Peloton users have filed a class action lawsuit against the at-home exercise bike and workout company, claiming it improperly charged a sales tax to its customers.

Peloton, which costs $39 a month for an "All-Access" membership and $12.99 a month for a "Digitial" membership, unlawfully charged users an additional sales tax between 6.3% and 8.9% in New York, Virginia, and Massachusetts, according to court documents obtained by Bloomberg Law.

Because all Peloton memberships are digital, plaintiffs Brannon Skillern and Ryan Corken believe that Peloton memberships should not have sales tax and should be tax-exempt as "digital goods," according to the lawsuit.

While Peloton no longer charges its customers a sales tax in the three states, Skillern and Corken are seeking unspecified compensatory, statutory, and punitive damages, and reasonable attorney's fees and costs.

Peloton declined to respond to Insider's request for comment, stating that the company does not comment on active litigation.

After a child was fatally injured and on a Peloton Tread+ treadmill in March, the company faced a lawsuit after featuring a child in its advertisements for the treadmill. More than 39 people were injured on the Tread+ treadmill before it was recalled in May, according to Insider. Despite this, the demand for Peloton remains strong.

Since the start of the coronavirus pandemic, the at-home fitness market grew substantially as gyms closed and people exercised at home. Peloton made $1.8 billion in revenue in 2020 and has over 4.4 million subscribers across its exercise platforms, Insider reported. In 2021, Peloton hopes to make $4 billion in revenue.

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