Grocery delivery service Instacart must pay Washington, D.C., $2.54 million to settle a 2020 lawsuit that alleged the company failed to pay required sales taxes and misled city consumers about its service fees over the span of two years, D.C. Attorney General Karl Racine’s office announced Friday.
The Democratic attorney general alleged in the lawsuit that between 2016 and 2018, Instacart misrepresented its service fees as tips that went directly to workers, while in reality they were used to subsidize the company’s operating expenses.
Instacart must now pay $1.8 million to resolve the matter, money that Racine’s office says can be used to pay for legal fees and provide restitution to affected workers and consumers.
The company must also release $739,057 in disputed tax payments to the city, Racine’s office said in a statement, after failing to collect and pay city sales taxes on revenue from service and delivery fees from 2014 to 2020.
Instacart has operated in the Washington area since at least 2014. In a statement, the company disputed the claims that spurred the lawsuit.
“While we strongly deny the District’s allegations, we are pleased to put this matter behind us after phasing out the waivable service fee more than four years ago,” the statement said.
Racine said in a statement that Instacart changed its service fee practices in 2018 after the company was contacted by his office.
“Today’s settlement with Instacart sends a clear message: any company that attempts to dodge their obligations to workers and consumers will be held accountable,” Racine said.
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