Today, Sprint Nextel Corp. (NYSE:S) became the latest in a string of corporate giants to be accused of tax evasion as New York Attorney General Eric Schneiderman announced a lawsuit against the company for under-collecting and under-paying sales taxes. The lawsuit claims Sprint underpaid more than $100 million in state and local sales taxes on access charges for wireless plans.
Schneiderman said the lawsuit requires that Sprint, if found liable, must pay triple the amount it underpaid along with penalties to New York state and local governments, including school districts. According to Schneiderman, Sprint’s main rivals in the wireless industry — Verizon (NYSE:VZ), AT&T (NYSE:ATT), T-Mobile (DT) and MetroPCS (NYSE:PCA) — all abide by the tax laws. “Everyone else had no trouble figuring out what the tax law was, except for Sprint,” Schneiderman said during a conference call.
The action is the first tax enforcement lawsuit filed under the New York False Claims Act, which requires that parties found liable must pay three times their underpayment amount in damages, plus penalties and attorneys’ fees. The law also gives whistleblowers as much as 25 percent of any money the government recovers for the information they provide.
Sprint is wholly denying the accusation. “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,” said Sprint Nextel spokesperson John Taylor. “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.”
The U.S. government and 29 states have passed False Claims Acts, but New York’s Act specifically covers tax fraud, according to the Attorney General’s office. “This case represents a new era in tax fraud prosecutions,” said Schneiderman. “We’re sending a message to corporations that failure to pay your fair share of taxes will not be tolerated.”