New York A.G. Accuses Sprint of $100 Million in Tax Fraud

Sprint deliberately evaded more than $100 million in New York state and local taxes, New York Attorney General Eric T. Schneiderman claims in a lawsuit.

Schneiderman is seeking more than $300 million in damages against Sprint for underpaying and undercollecting taxes on flat-rate access charges for wireless calling plans.

The lawsuit was brought under the New York False Claims Act, which Schneiderman authored. The law provides for triple damages and grants whistleblowers the opportunity to receive a portion of monies recovered by the government.

Sprint, the third-largest U.S. wireless operator, is accused of failing to collect and pay sales taxes on the entire amount of its monthly access charges for calling plans. Sprint’s illegal activity began in 2005 and continues to date despite being informed of its illegal practices, according to the A.G.’s complaint. Sprint’s behavior, the lawsuit alleges, is resulting in an underpayment of taxes totaling $210,000 every week.

“To carry out this plan, Sprint repeatedly and knowingly submitted false records and statements to New York State tax authorities,” Schneiderman’s office declared in a press release. “Sprint concealed this practice from taxing authorities, its competitors, and its customers.”

Sprint asserts it has done nothing wrong and “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 company told us. “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.”

If found liable, Sprint could be required to pay more than $300 million to New York state and local governments, including school districts, according to Schneiderman’s office.

The complaint stems from the filing of a whistleblower suit, or “qui tam” action, that was filed about a year ago after Schneiderman created a “Taxpayer Protection Bureau” that is responsible for working with whistleblowers and enforcing the False Claims Act. Working with the New York State Department of Taxation & Finance, the Bureau conducted a probe into Sprint’s allegedly unlawful activities.

Twenty-nine states and Congress have passed False Claims Acts, but only the law in New York expressly covers tax fraud thanks to a law that Schneiderman authored, according to his office.

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