Overview
In early 2016, multiple Dunkin’ Donuts stores in New Jersey and New York faced allegations of systematically overcharging customers by applying sales tax to items that are legally tax-exempt. The accusations, which led to civil lawsuits, highlighted a consumer protection issue that affects daily transactions at retail establishments throughout Bergen County, Fort Lee, and Manhattan — where customers may not realize they are paying more than state law requires.
The Allegations
According to lawsuits filed in New Jersey and New York, certain Dunkin’ Donuts franchise locations charged customers the full 7% New Jersey sales tax on items that are exempt from taxation under New Jersey law. These items included bottled water, packaged coffee beans, and other products designated as non-taxable by the New Jersey Division of Taxation.
In Fort Lee, New Jersey, a lawsuit alleged that the local Dunkin’ Donuts applied the 7% state sales tax to a range of tax-exempt products. A similar case emerged in Manhattan, where a customer was charged sales tax on pre-packaged coffee beans — an item that qualifies as a non-taxable grocery product under New York law.
Attorney Carl Mayer, who commented to the New York Post on the litigation, estimated that approximately a dozen Dunkin’ Donuts stores overcharged customers roughly 70% of the time. Mayer further estimated that Dunkin’ Donuts stores had profited approximately $10 million from overcharging New York customers and $4 million from overcharging New Jersey customers over a three-year period.
The Legal Framework
Under the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 et seq., businesses that engage in deceptive practices — including charging unauthorized fees or taxes — may face significant civil liability. The Act provides for treble damages, attorney’s fees, and costs for successful plaintiffs. Even small overcharges, when applied across thousands of transactions over several years, can result in substantial aggregate damages.
The New Jersey Division of Taxation maintains specific guidance on which products are subject to sales tax and which are exempt. Generally, unprepared food items, bottled water, and packaged coffee sold for off-premises consumption are not subject to sales tax. When retailers incorrectly apply tax to these items, they are collecting money that does not go to the state — raising questions about where the funds go and whether the overcharges were intentional or negligent.
What Consumers Can Do
Consumers who suspect they have been overcharged should keep receipts and compare the charges against New Jersey’s tax-exempt product categories. Complaints can be filed with the New Jersey Division of Consumer Affairs. In cases involving systematic overcharging, class action litigation may provide a mechanism for affected customers to recover their overpayments collectively.
Under the New Jersey Consumer Fraud Act, plaintiffs do not need to prove that a business intended to deceive customers. The Act covers “ascertainable loss” caused by unlawful practices, regardless of intent. This lower burden of proof makes consumer fraud claims particularly viable for retail overcharging cases.
Key Takeaways
- Dunkin’ Donuts stores in NJ and NY allegedly charged sales tax on tax-exempt items
- Overcharges were estimated at $14 million across both states over three years
- The New Jersey Consumer Fraud Act provides for treble damages and attorney’s fees
- Consumers should review receipts for improperly applied sales tax
- Class actions can recover small overcharges aggregated across many transactions
Reviewed by Britt J. Simon, Esq., Managing Partner — Simon Law Group, LLC — May 2026
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