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.