Supreme Court: Sprint Must Face $300M Lawsuit Over Uncollected Sales Tax

Image courtesy of Jeepers Media

Four years after New York sued Sprint for allegedly failing to collect more than $100 million in sales tax in the state, the U.S. Supreme Court has shot down the wireless carrier’s effort to avoid liability.

This morning, the Supremes denied Sprint’s petition without comment, meaning an Oct. 2015 ruling by New York’s highest court stands. That decision only dealt with the state’s ability to even bring the case against Sprint. The issue of whether or not the company failed to collect taxes is still to be determined.

The company argued that the New York Attorney General’s Office based its case on state laws that were trumped by federal communication laws and that it was ignoring the financial implications for its taxpayers in pursuit of state tax revenue.

According to the Attorney General’s case [PDF], which was originally filed in 2012, Sprint deliberately failed to collect more than $100 million in sales tax from customers in New York in order to keep costs low in an effort to maintain market share and remain competitive.

New York AG Eric Schneiderman said at the time that the company continued to under-collect on taxes even after the company was told it was breaking the law. His office estimated that the wireless company’s bad behavior resulted 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.”

In October 2015, a New York Court of Appeals rejected Sprint’s claim that a 2002 state law imposing sales taxes on interstate mobile phone services violated the U.S. Constitution.

Sprint has said the 2002 state law being cited by the AG’s office was preempted by the federal Mobile Telecommunications Sourcing Act that regulates state taxation of mobile telecommunications services.

The Court of Appeals decision allowed the state to continue pursuing the lawsuit, which currently seeks triple the amount of taxes that allegedly weren’t collected.

U.S. top court rejects Sprint appeal in $300 million N.Y. tax case [Reuters]