Sprint Loses Attempt to Dismiss $400 Million Tax Lawsuit
Published on: 3rd Mar 2014
By: Ian Mansfield
USA based Sprint has lost an attempt to dismiss claims that it owes USD400 million in unpaid taxes and penalties to the New York state government and the matter is now set to go to a full trial.
Brought under the New York False Claims Act, the Attorney General's lawsuit requires Sprint to pay three times the alleged underpayment of approximately $130 million, plus penalties, if found liable.
"Today's decision allows my office to proceed in holding Sprint accountable for deliberately evading sales taxes and costing state and local governments approximately $130 million," said Attorney General Schneiderman.
Since 2002, New York Tax Law has required mobile phone companies to collect and pay sales taxes on the full amount of their monthly access charges for their calling plans. For example, when a customer pays Sprint a fixed monthly charge of $39.99 for 450 minutes of mobile calling time, the law requires Sprint to collect and pay sales taxes on the entire $39.99.
Sprint Nextel however would "unbundle" the portion of the calls made within the State, on which taxes were paid from calls made to other States, on which Sprint says taxes cannot be levied.
Sprint is citing the New York tax code that excludes interstate phone calls from sales tax, and a Federal law that allows the mobile networks to split taxable and exempt portions of its monthly invoices.
The Attorney General is also seeking to ensure that Sprint -- and not its customers -- will be liable for any back taxes, and to empower Sprint's current New York customers to terminate their contracts without having to pay termination fees.
Under New York State legislation, a whistleblower who originally contacted the Attorney General could be awarded on-average, 15-20% of any settlement fee if Sprint is found guilty.