NY AG sues Sprint for allegedly under-collecting $100 million in taxes

Sprint denies the charges, saying the state is trying to collect more taxes than it is due

New York state's attorney general has filed a lawsuit against Sprint Nextel, alleging that the mobile provider has deliberately under-collected US$100 million worth of state and local sales taxes on mobile phone service.

Attorney General Eric Schneiderman is seeking $300 million from Sprint. The company has continued to under-collect sales taxes of $30,000 a day in an effort to gain a competitive advantage over other mobile carriers, Schneiderman alleged in a news release.

"By deliberately evading sales taxes, Sprint cost state and local governments over $100 million that could have been used for critical services and much needed resources that our state and its citizens need given the challenging economic times we are in," he said in a statement.

Sprint spokesman John Taylor denied the charges. "We have collected and paid over to New York every penny of sales taxes on mobile wireless services that we believe our customers owe under New York state law," he said in an email. "With this lawsuit, the attorney general's office is claiming New York consumers, who already pay some of the highest wireless taxes in the country, should pay even more. We intend to stand up for New York consumers' rights and fight this suit."

Schneiderman alleged that Sprint has "repeatedly and knowingly" submitted false records and statements to New York state tax authorities in an effort to circumvent a 2002 state law requiring mobile carriers to pay sales taxes on the full amount of their monthly access charges. Starting in 2005, Sprint failed to collect taxes on an "arbitrarily set portion" of its fixed monthly charges, Schneiderman alleged.

The lawsuit is the first tax enforcement action filed under the New York False Claims Act, which allows whistleblowers and prosecutors to take legal action against companies or individuals that defraud the government. Companies found liable under the False Claims Act must pay triple damages, penalties and attorneys' fees.

Under the law, whistleblowers may be eligible to receive up to 25 percent of any money recovered by the government as a result of information they provide.

The investigation of Sprint began with a whistleblower lawsuit filed in New York State Supreme Court in Manhattan in March 2011, Schneiderman's office said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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Grant Gross

IDG News Service
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