New York accuses Sprint of tax fraud in $300M lawsuit

Sprint allegedly cost New York $100 million in uncollected sales taxes for its wireless service -- a claim the company denies.

Sprint allegedly failed to collect and pay sales tax to New York. Pictured is Sprint's flagship store in Manhattan. CNET/Marguerite Reardon

Sprint Nextel: tax dodger?

That's according to New York Attorney General Eric Schniederman, who filed a lawsuit against Sprint for allegedly failing to collect and pay sales tax to the state. Schniederman claimed Sprint missed out on $100 million in taxes and he's seeking $300 million in penalty.

It's a blow to Sprint as the carrier looks to get back on its feet financially. The company continues to lose money and is undertaking several costly projects, including the massive upgrade of its wireless network, as well as the hefty subsidies paid to Apple to carry the iPhone.

Sprint failed to collect and pay state and local taxes on flat-rate wireless calling plans, Schniederman said in a statement today.

"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," he said.

Sprint, however, denied any wrongdoing.

"This complaint is without merit and Sprint categorically denies the complaint's allegations," the company said in a statement. "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.

"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."

Sprint repeatedly and knowingly submitted false records and statements to New York state tax authorities, the attorney general said. Sprint concealed this practice from taxing authorities, its competitors, and its customers. The scheme, which he said continues today, costs New York about $210,000 every week, and more than $30,000 a day.

The lawsuit stems from an original investigation of Sprint sparked by a whistleblower lawsuit filed in March 2011.

Updated at 12:39 p.m. PT: to include a response from Sprint.

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Sprint
About the author

Roger Cheng is the executive editor in charge of breaking news for CNET News. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade. He's a devoted Trojan alum and Los Angeles Lakers fan.

 

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