Kilpatrick partners David Hughes and David Ruskin recently presented a webinar providing a comprehensive overview of the growing litigation risks facing businesses under state False Claims Acts and consumer class action lawsuits in the sales tax context. Their discussion examined the legal frameworks governing qui tam actions— including the elements of liability, procedural defenses, and state-specific legislative developments in jurisdictions such as Illinois, New York, Ohio, and the District of Columbia—alongside the certification requirements and defense strategies for sales tax class actions. Drawing on recent case law through 2026, the session equipped tax professionals with practical mitigation strategies and litigation insights to reduce exposure and respond effectively when claims arise.
They provide the following key takeaways from their presentation:
Expanding Tax FCA Exposure - State False Claims Acts can create liability for both traditional false claims and “reverse” false claims, including alleged efforts to avoid tax or other payment obligations to the state. Exposure varies substantially by jurisdiction, but may include treble damages, per-claim civil penalties, relator awards, and attorneys’ fees.
Scienter Is Central - A false-claims case generally turns on a false statement or claim, an obligation to pay the state, and the requisite knowledge. Although specific intent to defraud is not required, ambiguity in governing law, reasonable legal...
Darlene Musgrove inflated clients’ refunds with false deductions, costing the federal government about $127,166, prosecutors said. What's on your ballot: Prop 141 prohibit taxes or fees on miles tr...