Sprint accused of tax fraud in $300-million suit in New York

(Robert F. Bukaty / AP Photo)

By Tiffany Hsu

April 19, 2012 11:14 AM PT

Sprint Nextel Corp. is being sued for $300 million by New York Atty. Gen. Eric T. Schneiderman, who is accusing the wireless carrier of tax fraud.

Schneiderman called Thursday’s suit – which alleges, based on a whistle-blower’s tip, that Sprint underpaid sales tax on some of its wireless plans for the last seven years – a “groundbreaking” filing.

The complaint alleges that Sprint’s debt to New York is growing by $210,000 a week. Schneiderman claims the company already owes more than $100 million. Under the state’s False Claims Act, Sprint could be forced to pay out three times that in penalties.

The legislation also could require a quarter of any future settlement to go to the as yet unnamed whistle-blower, whose March 2011 suit against Sprint sparked the attorney general’s investigation.

Sprint, in a statement, said the government’s suit “is without merit” and that it “categorically denies the complaint’s allegations.”

“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,” the statement read. “We intend to stand up for New York consumers’ rights and fight this suit.”

Sprint’s argument is that New York should only tax calls on its flat-rate plans that originate and end within the state. Schneiderman said the company is on the hook for the full amount of its monthly charges, and mentioned that Sprint’s competitors – including Verizon, AT&T and T-Mobile – all have complied.

But since 2005, Sprint has “repeatedly and knowingly submitted false records and statements” to tax authorities and “concealed this practice from taxing authorities, its competitors, and its customers,” the attorney general’s office alleges.

The complaint claims that Sprint’s alleged tax dodging was an effort to “obtain an advantage over its competitors” by positioning its calling plans as cheaper options.

“The message of our office is clear - tax dodging is not acceptable and we will use every tool in our arsenal to make sure that taxpayers’ money is protected, and that honest businesses and consumers are not placed at a disadvantage for collecting and paying their fair share of taxes,” Schneiderman said.

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