Peloton Legal Updates: Tax case moved to arbitration & Peloton will be delayed in filing annual 10-K form

There have been two Peloton legal updates in recent days.

First, a judge sided with Peloton by ruling that an ongoing tax lawsuit against Peloton does not belong in federal court and must be put on hold pending ongoing arbitration. The case – Skillern et al v Peloton Interactive Inc. – was first filed in 2021 and has to do with how Peloton collects sales tax in New York, Virginia, and Massachusetts.

Until January 2021, Peloton added sales tax onto the cost of their memberships. This applied to both the Digital membership, costing $12.99, as well as the All-Access membership, costing $39.99. The lawsuit alleged that these should have been treated as “as tax-exempt ‘digital goods’ in the three states.”

This week a judge ruled that Peloton had not waived its right to arbitrate the case. CNBC provided additional details:

Saying the case did not belong in federal court, U.S. District Judge Edgardo Ramos in Manhattan put the proposed class action on hold, pending the arbitration’s outcome.
Ramos said Peloton had not waived its right to arbitrate after failing to pay filing fees and defaulting in an unrelated 2019 arbitration over the deletion of thousands of videos from its streaming library.
He also rejected claims that the plaintiffs were not formally told by Peloton or never formally acknowledged they had agreed to arbitrate.

Second, Peloton will delay the filing of their annual 10-K tax form. A 10-K is a comprehensive report filed every year by public companies that contains detailed information about their financial performance.

On Monday, August 29 Peloton indicated that they need additional time to compile the report. According to The Wall Street Journal:

Peloton said in a filing Monday it needed more time to complete the accounting and disclosures in connection with impairment charges recorded in the fourth quarter, which ended June 30. The charges resulted from Peloton’s plan to exit its field operations warehouses, a move announced earlier this month as part of a broader cost-cutting plan.
Having more time, Peloton said, would assist in evaluating the internal controls over financial reporting on these developments and for its accountant, Ernst & Young LLP, to complete an audit.

This development follows a tumultuous past month for Peloton. In early August they announced a significant restructuring. They shared that they would move all deliveries and repairs to a third party vendor; laid off hundreds of member support employees; and plan to close a high number of showrooms and retail stores in the U.S. and Canada.

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Katie Weicher
Katie Weicher is a writer for Pelo Buddy. She purchased her Peloton Bike in 2016 and has been riding, strength training, and yoga flowing ever since. You can find her on the leaderboard at #kweich.

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