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Sprint Owes NY Big Money in Taxes: AG

Thursday, April 19, 2012

New York Attorney General Eric Schneiderman is suing Sprint Nextel, one of the nation's largest wireless carriers, for failure to collect and pay state and local sales taxes over the past seven years, he announced Thursday.

Schneiderman is seeking $300 million from Sprint in restitution and penalties. He said Sprint's under-payment of taxes amounts to $210,000 per week, and continues today.

"Sprint's major wireless competitors, including Verizon, AT&T, T-Mobile, and Metro PCS all correctly collect and correctly pay these sales taxes," Schneiderman said. "So everyone else had no trouble figuring out what the tax law was, except Sprint."

In an emailed statement, Sprint public affairs manager John Taylor categorically rejected the charge.

“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,” he said in a statement.

Sprint is framing the suit as a consumer rights issue, with the carrier fighting on behalf of New York mobile users who pay “some of the highest wireless taxes in the country.” Sprint says Schneiderman’s move would force them to pay even more.

Schneiderman said Sprint saw advantage over its competitors by paying a lower tax rate.

The heart of the dispute seems to be over what portion of the bill is considered taxed. Schneiderman said state law requires that all-inclusive wireless packages purchased in New York be taxed in their entirety.

But someone with knowledge of Sprint’s position said the state only has the power to tax intrastate calls (for example from Brooklyn to Syracuse) – not interstate calls, (like from Brooklyn to Jersey City.)

The suit is the first-ever tax enforcement brought under the state's False Claims Act, enacted in 2010 with a push from then-state senator Eric Schneiderman.The suit is the first-ever tax enforcement brought under the state's False Claims Act, enacted in 2010 with a push from then-state senator Eric Schneiderman.

Among other things, the act rewards whistleblowers who uncover fraud against the government. Schneiderman said the tip for this suit came from Empire State Ventures.

David Koenigsberg, the firm’s attorney, refused to describe how his client became aware of Sprint’s tax practices. He said Empire State Ventures is a Wyoming-based limited liability corporation and is not involved in telecommunications.

As Attorney General, Schneiderman created a taxpayer protection bureau focused on enforcing the new law.

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