New York’s attorney general sued Sprint Nextel Corp. on Thursday, seeking $300 million for the carrier’s alleged failure to pay sales taxes due on some of its wireless plans over the past seven years.
Sprint denied the state’s claims in the suit, which takes advantage of new legislation making it easier for the state to pursue whistleblower lawsuits in tax cases.
“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,” New York Attorney General Eric Schneiderman said in a press release.
Under the law, the state could recoup three times the amount of the underpaid taxes, which could put $300 million back into the coffers of various governments within New York State.
Sprint vehemently denied the charges and said it would fight the suit. “This complaint is without merit,” the carrier said in a statement.
At issue is exactly what proportion of a flat-rate calling plan can be taxed by the state where the customer lives. Sprint’s position is that New York can only tax calls that start and end in the state. Schneiderman, however, said state law requires cellphone companies to collect and pay sales taxes on the full amount of their monthly charges.
In the release, Schneiderman said in 2005, Sprint allegedly chose not to collect an “arbitrary” portion of the tax, flouting the law. He alleges that Sprint was warned of the issues with its tax collection, but continued with the practice anyway. Currently, according to Schneiderman’s office, Sprint’s underpayment of sales taxes is growing by $210,000 a week.