SEC Investigates Sprint Over Allegations It Failed To Properly Collect Sales Tax

Back in April, the New York Attorney General’s office filed a lawsuit against Sprint, alleging the wireless provider deliberately under-collected sales tax in an effort to remain competitive. Now, Sprint has revealed that it is under investigation by the Securities and Exchange Commission over these same allegations.

Reuters reports that the investigation came to light today in Sprint’s quarterly filing with the SEC. The filing reveals that the SEC issued its order for investigation on July 23.

Sprint says it is cooperating with investigators and does not expect that the SEC’s prying eyes will have a material adverse effect on its financial position.

Maybe not, but if the New York AG’s suit is successful, it could take a sizable $300 million chunk out the Sprint coffers.

That lawsuit alleges that Sprint, in violation of a 2002 New York law, deliberately failed to collect sales tax on customers’ full phone bills, choosing instead to tax only a smaller portion of the bills. The lawsuit claims that this was not an accounting error but a conscious attempt to keep customers’ bills low in an effort to maintain market share and remain competitive.

This resulted, according to the lawsuit, in about $30,000/day in taxes that went uncollected over a seven-year period.

The state is suing to collect that allegedly under-reported tax, plus a mountain of penalties. If victorious, the AG also wants that money collected in such a way that it comes out of Sprint’s coffers and not customers’ checking accounts.

Sprint has denied any wrongdoing in the matter.