NY Attorney General Files $300 Million Lawsuit Against Sprint

Earlier today, the Attorney General for the state of New York accused the folks at Sprint-Nextel Corp of deliberately failing to collect more than $100 million in sales tax from customers — and now he wants the nation’s third-largest wireless provider to pay up.

Since 2002, New York has required wireless carriers to collect sales tax on the full amount of flat-rate wireless plans. So if your plan is a flat $39.99/month for a certain number of minutes, Sprint was supposed to have collected state sales tax on the full amount.

But NY AG Eric Schneiderman says Sprint has spent the last seven years under-collecting by only charging tax on a smaller portion of customers’ bill; not because of some math error or computer glitch, but as a deliberate attempt to keep costs low in an effort to maintain market share and remain competitive.

Schneiderman says that Sprint continued to under-collect on taxes even after the company was told it was breaking the law. His office claims that the wireless company’s bad behavior currently results in $30,000/day in taxes that are not being collected.

The AG’s complaint alleges that Sprint “repeatedly and knowingly submitted false records and statements to New York State tax authorities. Sprint concealed this practice from taxing authorities, its competitors, and its customers.”

Adds Schneiderman, “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.”

The lawsuit not only wants to collect on all that under-reported tax, plus oodles of penalties. It also wants that money collected in such a way that it comes out of Sprint’s coffers and not customers’ checking accounts.

“[T]ax 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,” says Schneiderman.

Chuck Bell, Programs Director for Consumers Union said:

We applaud Attorney General Schneiderman’s action to protect consumers, businesses and governments from illegal sales tax evasion. Companies that properly collect sales taxes, and consumers that pay them, should not be put at an unfair disadvantage for following the law. Companies must be held accountable to their consumers when they promise to collect sales taxes and fail to do so.

Comments

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  1. r-nice says:

    I used to have that phone.

    • chucklesjh says:

      I remember when everyone in the town I lived in had a Katana. “ITS THE GREATEST PHONE EVAR!” Ugh.

      • scoutermac says:

        LOL yes I used to have the Katana II. I liked it but I had to replace it because it started doing strange things.

  2. Boiled for your sins says:

    It also wants that money collected in such a way that it comes out of Sprint’s coffers and not customers’ checking accounts.

    Oh not directly, but it’s a good bet that the customers will end up paying this off.

  3. Blueskylaw says:

    So with all the bullsh*t fees that phone companies come up
    with, they decide that undercollecting on taxes is a good idea?

    • Verucalise (Est.February2008) says:

      Collecting the correct amount of taxes would deter customers from their fee driven profit margins!

  4. bhr says:

    I’m not sure how it would even be a competitive advantage, as most people compare pre-tax cost for cell phones.

    I wonder if this has to do with data? I remember reading somewhere that data plans aren’t subject to sales tax (according to some states). In the case of Sprints’ Unlimited plans where you pay one price for data AND voice I could see the company saying that the data is all or most of what the customer pays, to reduce the tax burden. Alternately, I could see the broke state government insisting on taxing the whole amount to increase revenue.

    The truth is probably somewhere in the middle.

  5. scoutermac says:

    This could be enough to put Sprint under.

  6. msbask says:

    When are they going to file suit against Sprint for charging $10 for 4G when it’s impossible to get 4G where I live?

    • scoutermac says:

      you mean the $10 4G fee that they say is not for 4G but instead for data which is supposed to be included on all plans already.

      • Free Legal Advice! says:

        That what the fee is for? Stupid Sprint salesman … (mutter, mutter, mutter).

        • scoutermac says:

          Yes.. and the reason there is such scarce 4G coverage is because Clearwire which owns the rights to Wimax went bankrupt. Sprint is supposed to be switching to 4G LTE but they do not have the money to implement it.

  7. evilpete says:

    I like that the are going after Sprint’s coffers and not customers’ checking accounts.

    • Fumanchu says:

      And where do you think sprint is going to get the money to pay the lawsuit? thin air?

      • ajaxd says:

        I expect it to come from a new “legal compliance fee” that will be in addition to 911 surcharge, number portability surcharge and other BS charges that cell phone providers try to pass as if they are collected by the government.

  8. Fumanchu says:

    As protest for what is clearly just a money grubbing sales tax scheme, all the service providers should pull their services from New York State. Bet the State would blink first as they would have a bunch of pissed of constituents who would have no phone service.

    It would never happen I know, and it would have to be every single carrier. But it would be amazing to see.

    • majortom1981 says:

      How is it money grubbing? Att ,verizon, and tmobile all colelcted the tax right. Sprint should not get away with not doing it right just because they are the smallest.

      • Fumanchu says:

        its money grubbing becuase they are charging sales tax on services not rendered.
        it says that :
        plan A is sold as if you used 1000 minutes you get charged $100. But if you don’t use the whole 1000 mintues its prorated. So its no longer $100 its whatever amount of dollars

        • Fumanchu says:

          not sure why it cut off… but

          I was saying that NY still wants the tax on the full $100 instead of the prorated ammount. That would be like charging $20 Dollars of sales tax on a $10 meal because you thought that you might want to buy a $200 meal. Its money grubbing and imo should be illegal.

        • NeverLetMeDown says:

          No, it’s not. It’s more like:

          1. you go to a restaurant that offers “$10 for up to three trips to the salad bar”
          2. you only go to the salad bar once, but you still pay $10
          3. the restaurant still has to pay tax on the full $10

  9. gman863 says:

    In many states, the Comptroller or Attorney General has the right to seize a company’s assets for non-payment of sales tax.

    It’ll be interesting to see if company-owned Sprint stores end up closed with the locks changed and a legal notice posted in the front door advertising an upcoming sheriff’s auction.

  10. AllanG54 says:

    I’m sure that if these are legitimate amounts that are owed the cost will be passed on to the people that have been with Sprint and are still using them since they should have been paid to begin with. As for the others that went to other companies, I would think it would be harder to collect from them.

  11. mbz32190 says:

    unrelated but….about to ditch my Sprint plan once I’m out of contract next month. Only paying $30 now (SERO), but to upgrade to a 4g phone would be $20 more a month, not including taxes and fees…that is just crazy. I’m switching to T-Mobile/Walmart’s $30 prepaid plan ($30 flat…no taxes and B.S., even less if you buy the refills on a site using a coupon code) and can get a 4G phone for under $200 on Amazon. Only bummer is only 100 minutes/mo (but unlimited txt and data), but I hardly use any of the minutes I have now.

    • momof2kids says:

      Take a look at Virgin Mobile’s Beyond Talk Plans. I get unlimited everything except voice minutes (300 per month of those) for $35 a month. And they use the Sprint towers so if you have had good Sprint reception where you need it in the past, you know you are good to go.

      • neilb says:

        I will miss the Sprint Wimax service, but I have a feeling that I will be moving my whole family over to this service once the contracts are up later this year. Prices have gone up considerably for Sprint since I started the contract (and service has gotten slower). It is tolerable, but not for the price we pay now! $35 is amazing. I will either do this or republic wireless (which would work well for us at only $20 a month!).

  12. VashTS says:

    Just forget Sprint, use Metro PCS. I mean sure their phones are has dashing as Sprint/ATT/T-MOBIE but price is awesome. How many men really need all those phone functions. Be a man, no one should walk and text. So annoying.

  13. karlmarx says:

    this lawsuit would probably force Sprint into bankruptcy.. What about prosecuting all the crooks on Wallstreet.

  14. MalcoveMagnesia says:

    Judging by the long list of itemized government mandated surcharges & fees on my Sprint bill, I suspect Sprint is collecting everything (and then some) from their California-based customers.

  15. GrandizerGo says:

    So is this only in NY or is there now 49 other AG’s looking over Sprint tax records???