Costco has found itself in the middle of a tax refund battle. In addition to suing the Trump administration late last year for efforts to bring back jobs they were paying due to the president’s economic policies, Costco is also facing lawsuits from consumers who want a cut of any refunds.
The savings club’s executives say Costco is still focused on offering competitive prices, suggesting that the now-defunct tax it collects in 2025 — and passes on to customers — could be returned to them in the form of lower prices on everyday items going forward.
Consumers don’t exactly buy.
After the Supreme Court struck down the Trump administration’s International Emergency Economic Powers Act (IEEPA) tariffs in February, a trade court judge ordered the federal government to come up with a refund plan. On Monday, the government portal – known as the “CAPE” system – was officially opened in Phase 1.
Costco is expected to pursue millions of dollars in tax refunds, along with thousands of other companies that import the products and materials they use and sell. The retailer did not disclose its IEEPA costs, although last year it said that about a third of its sales were imports.
On a March 5 earnings call, Costco CEO Ron Vachris volunteered a brief comment on the tax refund, acknowledging that the broader issue is “a huge benefit” to Costco’s 82 million members.
“The future impact of tariffs remains very strong, as the IEEPA tariffs that have just been phased out are now being replaced by new international tariffs for at least the next 150 days,” Vachris said. “Our buyers continue to work with great speed and urgency, always with the goal of minimizing the impact of the tax on prices for our members.”
The company previously admitted that tariffs were driving up the prices of certain items – such as flowers from South and Central America – despite efforts to keep the items on its shelves affordable. As prices threaten Costco’s margins, the company “has not passed the full cost on to our members,” Vachris stressed.
He said Costco’s cost-cutting strategies include shifting production to other countries and “relying” on its in-house brand, Kirkland Signature.
Costco officials haven’t committed to any direct refunds for customers — and neither has any other retailer, for that matter. (Until now, only shipping companies such as FedEx and UPS are responsible for refunds when tax refunds are processed.)
Costco did not respond to Money’s request for comment.
Will Costco refund the fees?
In a March 11 lawsuit, Illinois resident and Costco member Matthew Stockov accused Costco of “double-dealing” — charging high prices to consumers while holding on to tax refunds from the state. The lawsuit demands that Costco pay “any IEEPA tax costs passed on to customers.”
On the earnings call, Vachris said the refund process is still shrouded in uncertainty: “Regarding the IEEPA tax refund, it is not clear what the process will be, what refunds, if any, will be received, and when this will happen,” Vachris said.
Historically, he said, Costco has shared profits in legal disputes with members when prices have gone up, and the company remains committed to doing so.
“Our commitment will be to find the best way to return this value to our members at lower prices and better prices. We will be transparent about how we plan to do this,” added Vachris.
A complaint from Stockov called this statement insufficient, noting that “it is not a commitment to compensate certain people who paid high prices.” Instead, it is “a promise of potential future profits to an indefinite group of future buyers,” the lawsuit reads.
Another consumer-led lawsuit filed against Costco on March 27 disputed Vachris’ claims.
“That promise simply shifts the benefit of those refunds to future consumers while Costco keeps the profits made from illegal taxes, at the expense of some consumers who paid the premiums,” it read.
To be clear, this is not Costco’s only problem. Other retailers seeking tax refunds from the Trump administration are sure to face the same criticism — that the price exemption now doesn’t help people who had expenses last year and/or no longer shop at that store.
Costco did not say what items might cut prices if the company gets its millions back. Vachris noted that Costco lowered prices on “certain apparel, sleepwear and cookware SKUs” following the Supreme Court ruling.
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