Kim Kardashian and her billion-dollar fashion empire just took a major financial hit.

Her shapewear company, Skims, agreed to pay $200,000 to settle allegations that it illegally charged New Jersey customers sales tax for five straight years.

New Jersey Attorney General Matthew Platkin announced the settlement on Tuesday after investigators discovered Skims Body Inc. collected 6.625% sales tax on clothing purchases between 2019 and 2024.

The problem? Clothing and footwear are completely exempt from sales tax under New Jersey state law.

The investigation found that Skims engaged in “unconscionable business practices” by charging customers taxes they never owed. Attorney General Platkin didn’t hold back in his statement about the celebrity brand’s actions.

“We’re holding Skims accountable because their conduct harmed New Jersey consumers by requiring them to pay more than what they owed,” Platkin said. “We won’t tolerate conduct that unlawfully takes money out of the pockets of hard-working New Jerseyans.”

Skims called the five-year tax collection a “technical error” in their sales tax system. A company spokesperson said they fixed the problem and started reaching out to affected customers for refunds.

“We remain deeply committed to the highest standards of compliance and have implemented enhanced safeguards to prevent any recurrence of similar issues,” the Skims spokesperson stated.

The consent order, signed January 16, requires Skims to pay the $200,000 civil penalty immediately. The company must also use “best efforts” for the next four years to identify and refund customers who paid the bogus taxes.

Skims already remitted all the improperly collected sales tax money to the New Jersey Division of Taxation before the settlement was announced. The company had been issuing refunds to complaining customers even before the formal agreement was reached.

The shapewear brand, valued at $5 billion according to Fortune magazine, primarily serves Gen Z and millennial customers. The company’s rapid growth has made it one of the most successful celebrity fashion ventures in recent years.